What's Left

July 22, 2003

Yikes! Should old-style socialism be on the agenda?

By Stephen Gowans

Germany has the world's highest wages, which, were the Wall Street Journal to be believed, should leave Germans hanging their heads in shame. Words like "soft," "mollycoddled," "spoilt," and "uncompetitive," come to mind.

Of course, had Germany the world's highest profits, most handsome dividends, or greatest number of millionaires per capita, Germans would be told to hold their heads high, though one can hardly imagine why. Since most Germans are wage earners, not CEOs, millionaires, or dividend collectors, you'd think it would be high wages, not high profits, that would give them boasting rights. And seeing as how high profits often come at the expense of high wages, cheering because your country boasts high profits is kind of like cheering for the executioner at your hanging.

If employers had their druthers, they'd much rather pay lower wages. Less for employees means more for employers, which means more generous profits, bigger dividends, and the approbation of the Wall Street Journal.

And employers have choices. They can relocate production elsewhere, where wages are lower.

Some people, like journalists at the Wall Street Journal, say that German firms relocating production to low-wage countries is the reason Germany has a persistently high unemployment rate. Officially, 11 percent of German workers are out of work.

If wages were lower, they say, firms would employ German workers, rather than seeking out workers in other countries who are willing to live with lower wages (thereby allowing German employers to enjoy higher profits.)

And were the unemployment insurance benefits and other income supports the German government pays the jobless less generous, the lash of desperation would force the unemployed to take low-paying jobs, reducing the jobless rate (and, with it, the average wage.)

This all seems to point in one direction for governments looking to stimulate a slumping economy and bring down the unemployment rate -- whittle down wages, by whatever means necessary, including cutting social programs that are supported by subsidies embedded in wage costs. That's good for employers, and it can be palmed off as good for employees too, who can be told lower wages will re-ignite a sputtering economy and create a bonanza of jobs.

(Employees are never told that an economy that sputters at regular intervals is an inevitable feature of capitalism, not of wages that are too high or social programs that are too generous.)

So it is that Germany's government (a coalition of social democrats and Greens) has "hammered out a deal with the political opposition to modernize the nation's costly health-care system," ("Germany targets health care," The Wall Street Journal, July 22, 2003), a move that will lower the country's wage costs. "Modernize" is Wall Street-speak for starting down the road to taking apart a publicly-provided service that employers fund.

One of the reasons Germany's wage costs are high is because employers are required to subsidize the country's robust social programs. Over 40 percent of wage costs go to social programs, like health care.

The deal will see the number of health care services provided by the public program, such as dentures and sick pay, rolled backed (opening the door to private insurance companies), while user fees will be imposed for services that remain under the umbrella of the public program. The changes won't affect the cost of providing health care (hence, the "costly" program will not become less costly); they'll simply change who picks up the tab, with more and more of the expense shifted from businesses to employees themselves.

And on top of the health care changes, the government will cut unemployment insurance benefits, and make it easier for firms to fire employees. It will also accelerate planned tax cuts.

Many social democratic governments, Germany's included, argue that generous social programs are impossible without a robust economy (that is, one capable of sustaining attractive returns on investment.) On the other hand, one of the ways of sustaining attractive returns on investment is by minimizing social programs and ratcheting up the desperation factor by cutting income supports.

It's a contradiction. We can't have strong public health care without a strong economy. But we can't have a strong economy with strong public health care.

Social democratic parties have long ago given up trying to resolve the contradiction, wholly capitulating to capital, which they have little choice but to do. Capitalism, which social democrats accept as inevitable, even desirable, operates by its own internal logic, part of which says anything that stands in the way of higher profits (like high wage costs and subsidizing strong social programs) must fall away.

And ever since capitalism emerged supreme with the collapse of Communism, an alternative economic system that tempered capitalism's boldness, that internal logic has been more and more on display.

Many progressives in North America have looked to Western Europe, with its strong tradition of social democracy, as a model, but Western Europe is inexorably moving toward the North American, and particularly, the American model, with its anemic social programs, ubiquitous insecurity, and massive inequality. At the same time, the US is retreating even further from what business newspapers dismiss as the creaky Western European model.

In recent times, social democrats have presented themselves as humane trustees of capitalism, but capitalism, by its very nature, is hardly humane, and its stewardship by social democrats hasn't made it so. More and more, these lite-socialists have sought to distinguish themselves from conservative parties by championing socially liberal causes, while accepting the trampling of the welfare state under foot by the ineluctable logic of capitalism. They offer social equality--between the races, between the sexes, between gays and straights--but have departed the arena of struggle toward economic equality and a materially secure existence for all. That remains the purview of those seeking to overcome the internal logic of capitalism, which means overcoming capitalism itself.

Capitalism isn't in the business of delivering strong health care systems, robust public programs, and material security for all. Nor are social democrats. Which means anyone interested in these things would be well-advised to look beyond capitalism, and social democrats, to attain them.

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