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Commentary :: Social Welfare
Democracy and the Social State
03 Oct 2016
Finance capitalism and Citizens United have turned life, language, and democracy upside down as the $150 million given by Wall Street to Hillary Clinton fall under the rubric "social engagement." These theses show the social state is the foundation of democracy, the great facilitator, the fate corrector and the key to the regulation of capitalism.

By Franz Segbers

[This essay published on April 24, 2010, is translated abridged from the German on the Interne, HTTP://$C3$BCrnberg_24.4.2010.pdf. Franz Segbers is a Protestant professor of theology in Marburg.]

THESIS 1: The financial- and economic crisis and the social crisis that poverty and unemployment persist in a rich country are two sides of the same coin.

THESIS 2: We need a renewal of social state discourse. The social state is the key to regulating capitalism.

THESIS 3: Justice is the standard for reform policy. The strength of a people is measured by the well-being of the weak.

THESIS 4: The social state is more than an alms state for the needy. The social state promotes social balance and relies on the output of the economy.

THESIS 5: Reforms of the social state must strengthen the social foundation of democracy. The current social state expects too little solidarity from citizens. A different reform policy that expands solidarity is necessary.

THESIS 6: Reforms build the social state foundation of democracy. A new start beyond finance capitalism seems the proper answer to the crisis, not mere repair of the damages.

Here is a thought game. What if the eight million Hartz recipients did not exist? Are these unemployed needed? Guido Westerwelle seems convinced these are superfluous persons who only cost money. Shouldn't they clear the snow away at least?

Whoever says this endangers democracy. As a constitutional state is undermined when courts are dismantled, democracy is undermined when the social foundation of democracy is dismantled. Thus the democratic and social state is at risk. We do not only face problems of the unemployed or income support recipients. Democracy is at an end when the social foundation is absent.

THESIS 1: We have a bundle of crises – the financial crisis, the economic crisis, the environmental crisis, the social state crisis and a crisis of reasonable work, not only the financial- and economic crisis.

These crises have one thing in common: they are the results of a misguided policy oriented in neoliberal principles. The financial- and economic crisis and the social crisis that poverty and unemployment exist in a rich country are two sides of the same coin. We stand before a shipwreck. The neoliberal market fundamentalism that marked politics and determined thinking for two decades has failed. However, this does not mean it is at its end because the last years were a golden time for many.

A whole system dances around the Golden Calf. More than greedy individual bankers are involved. For years, the Novartis CEO Daniel Vasella described a 25% profit as the minimum. The Bayer CEO Werner Wenning set 24% as his operative profit goal for 2007 and declared the margin would be raised to 28% for the health sector. Porsche's 2008 profit exceeded its sales. A new radicalism of management appears. Why be satisfied with 15% capital profitability when 25% is possible through outsourcing or work condensation? Reaching these profit goals will only be possible if pressure is exerted on employees, social standards, taxes etc. Every fifth employee works in low wages; working hours are extended and men working 42.7 hours are at the same position as 1982. Hartz IV is the state-prescribed under-provision for poor persons (as explained later, Hartz IV is a drastic German welfare reform combining unemployment benefits and income support and radically reducing the duration of benefits. The German Constitutional Court ruled that Hartz IV violated citizens' basic rights to life and health.). Good, family-supporting work, a developed social state, adequate financing of social services and services for human welfare appear as costs deducted from the profits of businesses.


The state gives the economy the freedom that it uses. The state promotes finance market capitalism. The former German Central bank president Hans Tietmeyer said: "Most politicians are still not clear how much they are under the control of the financial markets and are even ruled by them." If the financial markets, shareholders, and investors determine the direction of politics, that means lower wages, lower non-wage labor costs, and lower taxes. The result is that the number of asset-millionaires doubled to 800,000 since 1998.

The governments were not strong enough or willing to resist this pressure of the international financial markets. In May 2008, the President of the German Republic Kohler spoke clearly about the financial crisis: "Every responsible person must now recognize that the international financial markets have developed into a monster that must be put in its place or cut down to size." The market for innovative financial products in Germany was actively prepared by a coalition of the SPD, the Greens, CDU, and the FDP. Those security businesses soon became black holes on the balance sheets of the regional banks. That state-owned business exhibited a similar risk structure was not an accident since the ministry of finance and economics had massively promoted the German state banks. The financial crisis in no way broke over us like a thunderstorm from the US. Rather the German government was enormously involved in the causes like

the fourth financial market promotion law (2001)

the investment modernization law of the German government that allowed hedge funds in Germany

the securities market advanced tremendously by the government with its "Asset-Backed Securities" (ABS) that was a kind of fire accelerator of the financial crisis

liberation of the conduits from the commercial- and sales tax

the coalition agreement (2005): "An internationally competitive financial center Germany is one of the most important prerequisites for a growth of the economy and employment. The German financial market has a great potential that should be developed further in the coming legislative period. (…) Product innovations and new marketing processes must be supported energetically. To that end, we want to create framing conditions for new investment classes in Germany. This includes the development of the securities market – the expansion of investment possibilities for public-private partnerships." A financial market monitoring "with a sense of distance" is desirable.

The entrepreneurial freedoms of capital market actors were legally expanded. The backside of increasing income- and wealth concentration was stagnating mass income. In Germany, the real incomes of employees do not rise anymore in the upswing. High incomes and wealth were managed according to the taxes. The partial privatization of social security systems and vital necessities widened the investment spectrum to the financial markets. Unions were weakened through the political deregulation and precariousness of the labor market.

Like the Great Depression in the US, the current worldwide economic crisis can only be overcome when citizens join forces for a halfway fair economic system and social state. The pendulum that moved in one direction with the victory of neoliberalism and "activating" social reforms must now swing back again! Such a political change of course can be spelled out differently in the individual countries – in the US, perhaps through an introduction of health insurance as Obama brought forward, in Germany by building the social state and strengthening unions so the social wealth can be distributed justly and does not only flow to the owners of capital.

THESIS 2: We need a renewal of social state discourse. The social state is the key to the regulation of capitalism.

The present crisis is not a purely economic crisis. It is also a crisis of the long-dominant ideology and politics. This crisis offers a historical chance for civilizing unfettered capitalism in reform policy through the social state. This historical crisis is a historical chance for a social and ecological reform policy. We need a social embedding of the economy. Therefore the civil society powers and unions must be strengthened so a democratic appropriation of finance market capitalism can be organized.

In his little volume, Meinhard Miegel tries to say the truth. He speaks of a capitulation in all social state countries… Politics veils its true intentions when it speaks of reorganizing the social state. "The experts know this term only enables traditionalists and social policy makers to save face and play down an epochal change. In truth, there is a partial demolition… This can be called reconstruction but it should be clear to all actors that the familiar social state does not exist anymore today and something else is taking its place."

The crucial question is: where should we orient ourselves so a core of the old building does not come out of the reorganization of the social state? We urgently need a renewal of social state discourse. The reforms of the last years have blocked the view to the real fields of reform and relevant future questions. Agenda 2010 and Hartz IV have not solved any of the problems. Unemployment was not banished. Poverty rose and more and more people worked and were poor. This was a reform spectacle.

The core question of a democratic society that reflects on its own future is: how do we want to live? It is not: what is good for businesses and economic growth? What is good for businesses is a secondary question because a community must first agree on the criteria for a good life. The question what an individual and the economy can contribute to this good life has to be answered first.

How do we want to live? The nature of pluralist societies is that particular interests and social interests are balanced. This consensus is damaged when the particular interests of a social group like a business decide the issues. When reform projects are only seen economically, the view wanders to bankruptcy records, mass unemployment, and non-wage labor costs and does not focus on the increasing chasm between poor and rich, low wage-earners and the ecological damages of our way of life and economic style. If this is considered, we get a completely different answer to the core question.

How do we want to live? We want to live in an intact environment, in a more peaceful world where prosperity is distributed as justly as possible and benefits everyone. We want people to have an income that can be a good basis for successful interpersonal relations. We need more social security in view of a flexible capitalism. In short, Germany is a place where people live and not an investment site organized as profitably as possible. We must speak about the well-being of people and not only about the optimal location conditions for businesses.

THESIS 3: Justice is the standard for reform policy. The strength of a people is measured by the well-being of the weak.

Since the Hartz IV judgment of the German Constitutional Court, Guido Westerwelle presents himself as the only politician who openly speaks the truth. He believes he has discovered "new territory" with intolerable exaggerations and loutish behavior against the poor. Consequently, public attention is directed at whether the social state must be fundamentally reformed.

The social state is one of the most precious treasures that this republic has created. The social state is the roof that protects people from the thunderstorms and hail of capitalism. Only one who does not need a roof can criticize this. Life cannot go well when more and more people are excluded, when German society becomes a class society again and when an increasing number of children grow up in poverty. Social rights are rights to participation. These rights should protect the cohesion within society and preserve society from dissolution. The social state must be established so it can hold its ground to the storms, protects, and does not let the rain through.

We need the social state because life begins unjustly, ends unjustly and happens unjustly. One is born with a silver spoon and another in a high-rise project. One grows up with books and others with drugs. One hits the jackpot in the lottery of nature and another draws a blank. One is healthy all life long and another is born with a serious disability. Fate is distributed unjustly. Nature is a justice risk. The social state is needed so this lottery does not determine the whole life. Thus the social state is a fate corrector.

That a needy person has a right or claim to a humane subsistence level is part of the social state… The Karlsruhe judgment assigns an energetic task to the social state. A social state is not automatically a good social state when it spends enormous money for the social, the court said. It must have a clear underlying concept that considers the isolated case. The highest judges criticized the policy that culpably prescribed the legislation where children were mired in poor conditions. If the state cannot ensure that all children are born in orderly conditions, it must at least ensure they get the promotion they need. The social state is a fate corrector.

This judgment was the contribution of the highest German court to the "European Year against Poverty and Social Exclusion." This EU Year 2010 runs under the motto "With New Courage." The courage of the German government cannot consist in seeking ways of dodging the Karlsruhe decision and minimizing basic security so tax gifts can be given to the well-to-do. Seldom has a judgment of the German Supreme Court turned round the political discussion as the Hartz IV judgment. Guido Westerwelle roundly criticized Hartz IV recipients as lazybones seeking "effortless wealth." The insulted lack work, social recognition, and also lack the strength to resist and organize. There are Hartzers who have established themselves somehow in social dissolution and view the state as a spigot. The worst reaction to that is when annoyance is poured on all Hartz IV recipients.

Poverty in Germany is different than in the 19th century. There is no poor class anymore that can join forces combatively as unions and social democracy did in the 19th and 20th centuries. The megaphone that unions once provided for the working class is lacking the poor of today. Pride, self-confidence, and the feeling of solidarity are lacking to them. Everyone is only for himself and is relatively poor.

Poverty has many faces today. There is the unemployed academic, the casual laborer, and the skilled worked rationalized away. There is the single mother who cannot take the leap into vocational life anymore. There is the supermarket cashier working by the hour. There are the long-term unemployed. There are the persons always cut short at the edge of society. There are the immigrant children who cannot escape the ghetto. The German Constitutional Court wrote its judgment for all of them.

The judgment of Karlsruhe that rehabilitated the social state is the long-version of a sentence in the preamble of the 1999 Swiss constitution: "The strength of a people is measured in the well-being of the weak." That is a very courageous sentence because this strength is measured by very different factors. Some measure the strength of the people and the state by growth, the gross domestic product, and the export surplus. Others speak of the strong state in urging more police, more criminal justice, and more prisons. Too few speak of the strength of a people in enforcing humane minimum wages. Too few speak of the strong state in repairing social inequality, doing something against long-term unemployment and connecting social- and educational policy.

A reform policy should be oriented in the social state, as the judges reminded us again. Improving the quality of life of all people is the task of the social state. Reforms are for the sake of people, as Bishop Huber, the EKD (Evangelical; Church in Germany) chairperson, titled his programmatic address on reform policy. "The goal is making human life more secure and giving people confidence for their future and for the common future." Therefore reforms must be measured by this goal whether they give people more future certainty, life security, and chances of freedom.

It is by no means a matter of course when a state does its utmost for humane living conditions and commits itself to a "balance of social oppositions" and to the production of "a just social order." This commitment of the state to a social balance, solidarity and social justice marks the European social model and distinguishes it from the American-Anglo-Saxon concept. A creeping changeover in European policy is clear since the 1990s.

THESIS 4: The social state is more than an alms state for the needy. The social state relies on social balance through state action and depends on the output of the economy.

The social state aims at dismantling the structural causes of discrimination and does not only set up tables or soup kitchens. Thus it is not exhausted in caring for underprivileged persons. It extends a hand to those needing a helping hand. It is the great facilitator. It gives the poor a way out of poverty and not only a bed and a roof. The free unfolding of the personality of every individual is the concern of middle-class freedom rights, not the free unfolding of capital. Therefore middle-class freedom rights and social rights are connected. A redistribution from top to bottom for the basic social security of all citizens and for approximately equal chances and living conditions is a democratic right that the state supports, not a socialist remainder or a social fuss. The social state and democracy belong together and form a unity.

What are the prerequisites of the social state? The basic conviction underlying this conception of human life and cooperation is a certainty that has deeply marked Europe. It goes back to biblical and Christian thinking. Therefore the social philosopher Hauke Brunkhorst in his book "Solidarity: From Citizen Friendship to Global Legal Cooperatives" said: "Europe began in Jerusalem. But what began there? – Brotherliness and sisterliness – I would say in a somewhat long-winded way – express the hope in a form of human cooperation where people are respected as persons without preconditions or advance concessions, without distinctions of race, class or origin and have rights. Whether someone is poor, enslaved, captive or foreign as a foreigner, slave or poor person, he is always a brother and therefore in the same legal position. Brotherliness or sisterliness is not mercy and solidarity is not grace but a right. If this basic conviction is lost, there is no motive that justifies the social state anymore.

These basic ideas had consequences. Through an active formative social policy, the social state emphasizes social balance and lays claim on the output of the economy for financing the social state and grants an important role as bearer of social state tasks to welfare associations.

THESIS 5: Reforms of the social state must strengthen the social foundation of democracy. The present social state expects much too little solidarity from citizens. Another reform policy is necessary that expands solidarity.

Westerwelle wants to reinvent the social state. This can be understood as a threat. The last "re-invention" of the social state by German chancellor Gerhard Schroeder led to more poverty and greater annoyance, not to anything better or more just or to cost savings. The social state must be reorganized and recalculated, not re-invented. The judgment of the Constitutional Court is a good plan for that reorganization. That judgment finds today's weak spots without "inventing" anything.

The weak spot insisted on by Guido Westerwelle could be added to the others. It is also a problem of the social state when unemployed persons receive more money than those who work. It is a problem when work is not worthwhile anymore. Westerwelle & Co. think the excessive social benefits are to blame, not the low pay. But the downward spiral into distress cannot be stopped by cutting the social benefits for those without work. That does not make low-income earners richer but encourages employers to reduce the low pay again. What will happen then?

Employers will obviously save costs – and the state will be relieved because it must lower his social benefits (according to the logic that the one who works must have more than the one who doesn't work). All this ends in anti-social behavior. Only the way taken by twenty member EU states leads out of this poverty trap: the introduction of minimum wages that guarantee a distance between the low wages and the state-guaranteed subsistence level. Democracy and the social state belong together. Citizens in a democracy need education and livelihood; they need a reasonably secured existence. Life begins unjustly and will end unjustly. The social state exists so life happens somewhat justly.

A society assures its essential solidarity in social policy. Thus reforms do not serve the goal of organizing the functional systems more securely or stabilizing the pension system or the health system. Rather reforms must show that the health reform or the pension reform make life more secure.

Under this perspective, the main problem of the social state crisis is that the real existing social state integrates too few people in solidarity. To guarantee this, citizens must be assured equal rights and the material prerequisites to realize their equal rights. As they "need" the constitutional state to guarantee equal rights, they "need" the social state to ensure these material presuppositions. Thus the democratic social state is an instrument of solidarity between citizens to promote their participation in equal rights.

Expanding the foundations of solidarity will be central. The social state needs a democratic justification – in a double sense. The democratic social state gives all citizens the right to social state support – and in a countermove obligates all of them in financing its projects. Therefore the state has both the right and the duty to provide the funds for the social state projects through taxes. Compared to 2000, the state renounced on 80 billion euros of revenue through its tax cutting policy. Compared to France, the public authority has a shortfall in receipts of 131 billion euros. Thus expanding solidarity means businesses and citizens sharing justly and fairly in financing the social state. The social state task to counteract the distribution disparities that have increased drastically according to the German government's second Poverty and Wealth report to be published in the next weeks.

The great man of catholic social teaching, Oswald von Neil-Breuning, pointed to this inner constitution of the social state and emphasized that a value-oriented action is necessary: "If the statement the economy exists for people and not the person for the well-being of the economy should not be a meaningless empty phrase, the satisfaction of need should not only mean the generation active in the economy. Those not active or no longer active are not "costs" that narrow the profit of the economy or its achievement but fulfill the intention of the economy… The question what our social state "costs" can only refer to whether it is worth what it costs… This ethical value-standard of solidarity is the only common standard in which the expense and results are measured and compared with each other. The social state and the question what it "costs" are senseless for anyone without this standard." (1982)

THESIS 6: Regarding the reforms, a new start beyond finance capitalism seems the proper answer to the crisis, not the mere repair of the crisis damage. Building the social state foundation of democracy is central.

Very different questions are raised in building the social state foundation of democracy.

How can social security be developed further so it is no longer only bound to the employee status but does justice to the fact that the gainful situation of people has become fragile and they need a security in this situation? The IG metal union has brought an insurance of employed persons into the debate. Women experience that security outside the assumed normal existence of the family and continuous gainful activity. The risks of precarious gainful developments must be covered by basic security models. The great social security systems must be rebuilt into an insurance of citizens or employed persons. The social state of the future needs a well-balanced relation of flexibility, social security, and training. Minimum wage, protection from unlawful termination, and high wage compensations ensure a minimum in income- and employment-stability. Therefore this perspective must be in force: everyone must be able to live in dignity from work and even without work. But what would a social security look like that is no longer and exclusively bound to paid labor? To that end, we need a minimum wage and a subsistence-level basic income for victims of the labor market crisis.

How can the work- and social system be reformed to push back the overpowering access of the world of work on the whole lifestyle and grant more autonomy to people? Reduced working hours is vital.

How can the close connection of work and income be loosened so life chances are not only decided by acce4ss to the scarce good paid labor? Health and unemployment arise in the same act. As a consequence, people become superfluous. The economy of the future needs the computer – not people. Today's reforms press people on labor markets that do not have sufficient jobs. They force them to accept work at any price. The future of work is work in service of people. However, this cannot be offered as residual work like a service at low wages while the winners of rationalization appropriate the largest share of the gross domestic product. Unfinished tasks are crucial for a community. How should we deal with seniors, the sick, disabled and social minorities? Employment conditions that are satisfying for workers and profitable for the community must be created. Social services should be developed…

A modern social state must rely on prevention, training, and reeducation instead of the unimaginative pressure through transfer cuts and intensified exactions. A publically promoted employment sector is the alternative to passively financing long-term unemployment. Profit- and asset revenue must be taxed more robustly to finance the future social state.

A stronger future social state will only arise with a far-reaching democratization of society. Now is the moment to continue the strong economic democracy tradition of German unions and to further develop this tradition. More economic democracy means more joint-determination, a democratic self-government of the economy, plural forms of ownership, better regulation, and a macro-economic control. By strengthening the barriers against a marketing or commercialization of labor, namely individual labor law and collective bargaining, a well-balanced even distribution of economic value-creation can be realized and social cohesion restored.

The crucial imperative of a new start beyond finance capitalism is regaining a macro-economic policy with the following aspects:

an active employment policy,

an employment-oriented monetary policy,

an income- and wage-policy referring to productivity and a financial policy that taxes all income recipients and owners of wealth according to ability.

Changing direction is necessary. Germany is a rich country. The financial possibilities for real reforms that could contribute to a more just and future-friendly society exist. The political will to take up necessary reforms is lacking. In a democratic society, citizens are mutually connected to each other so no one is excluded. The right to political participation is in force for all citizens. Social security is the foundation of freedom. The president of the German republic at that time Gustav Heinemann had this in mind when he said on the 25th jubilee of the Basic Law:

"The experiences of Weimar have taught that we must join both together – the constitutional state and care. The second foundation is indispensable for democracy… Social security is part of the basic equipment of all citizens in industrial society as a visible proof of practiced solidarity."
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