Unemployment
in Germany increased in January by 263,000 to 3.13 million, the
country's Federal Employment Agency says. (file photo)
Washington
DC, February 25, 2014 – Around the world, dissatisfaction is growing
with the Anglo-American economic model, which presents itself as a
system of free markets and free trade. There is also growing
dissatisfaction with the extreme disparities of individual income this
model has created.
Not surprisingly, many observers
have seen an attractive alternative in the German social market economy,
featuring a highly regulated system in which small and medium
export-oriented companies are prominent, and in which trade unions play
an integral part, both in factory councils and by placing
representatives on corporate boards.
But a closer look at Germany reveals that the social market economy
of earlier decades now includes a vast low-wage sector of workers who
have become second-class citizens, receiving much the same status which
undocumented Hispanic immigrants in the United States would occupy under
plans put forward by the Republican Party and supported by many
Democrats. The German low-wage sub-economy has a name: it is called
Hartz IV, named after the former personnel boss of the Volkswagen
concern, and enacted into law under the auspices of the former Social
Democratic Chancellor Gerhard Schröder -- with massive complicity from
the neo-corporatist German trade unions -- and successively amended
several times, thus accounting for the IV. German working people have
just completed their eleventh year under the yoke of Hartz, which came
into full effect in January 2003, and has been expanded and perfected by
Europe’s reigning austerity enforcer, Christian Democratic Chancellor
Angela Merkel.
The various Hartz plans started as a response to the permanently
high levels of unemployment which have prevailed in West Germany and
then in reunified Germany, since the early 1980s. These high jobless
levels are themselves a reflection of the slowing of world economic
progress in the decade after the demolition of the highly successful
1944 Bretton Woods system, which was terminated by Nixon and Kissinger
on August 15, 1971. During the 1980s and 1990s, Germany was afflicted by
unemployment in the neighborhood of 3 million, 4 million, and then 5
million workers.
Hartz wanted to prevent these millions of
unemployed workers from collecting their full jobless benefits over an
indefinite period, as was often the case before 2003. His response was
to design a system which shunted unemployed workers off the unemployment
insurance rolls and onto the welfare rolls after about one or two
years, depending on their age, and to impose a stringent low-wage
workfare requirement on these welfare recipients. Workfare means that
welfare victims are required to work for their benefits, often
functioning as strikebreakers, and always contributing to a race to the
bottom in labor conditions. The workfare requirement, in the opinion of
some, amounted to the institution of a kind of slave labor.
The pre-Hartz system included unemployment insurance benefits for
workers who had been employed for a certain number of years. For
others, there were social welfare benefits. Now, these two categories
have in effect been merged for the long-term unemployed, with a workfare
requirement -- the compulsion to accept jobs at submarket wages as a
condition for further benefits -- having been added.
Desperate jobless preyed on by labor brokers, low-wage subcontractors
As Hartz IV currently functions, even a unionized worker making a
decent wage of €30-€40 per hour will, if laid off, within one to two
years find himself or herself as a social welfare (Sozialhilfe) case,
and therefore no longer counted among the unemployed. At this point,
the worker in question is, if single, eligible to receive a monthly
basic payment of €391 per month. But this allowance is means-tested,
and requires proving that personal assets are below a mere €3,100. In
addition, between €200 and €300 in housing allowances may also be
available.
In exchange for these meager payments, the unemployed worker comes
under the control of the local Agentur für Arbeit or labor agency.
These labor agencies, unlike the old Arbeitsämter or employment offices
are no longer primarily government institutions, but now represent
for-profit private companies functioning as what could be called labor
brokers. The Hartz IV recipient is, within certain limitations,
required to take any job which the labor broker demands be filled. If
the recipient refuses, this can lead to a total denial of future
benefits. The labor broker can also demand that the recipient do
certain things to become more marketable, such as taking training
courses to acquire certain salable skills. Jobs obtained in this way
are not likely to be permanent employment, but are rather more
frequently so-called mini-jobs or midi-jobs. Any wages arising from
such substandard employment are partially subtracted from the basic
monthly maintenance payment, and are also subjected to taxes and
insurance payments. In any case, these wages are likely to be very
low. Incredibly enough, Germany still has no law establishing a minimum
wage.
These profit-driven labor brokers work closely with the
Werkleistungsfirmen, which are low-wage subcontractors of the corporate
sector. These subcontractors have entered into agreements with private
corporations to provide certain services. The subcontractors work for
the famous names of German export industry like Volkswagen, Mercedes
Benz, BMW, Siemens, and many others. Sometimes these subcontractors
occupy specially designated spaces inside the plants of the larger
corporations, and these special low-wage areas are often marked off by a
yellow line. This is doubly ironic, since yellow is associated in many
European languages with scab labor and other antiunion tactics.
Workers inside these yellow zones are not represented by trade unions,
and are more or less at the mercy of whatever the subcontractor wants to
demand. It might be more accurate to say that the inmates of the
yellow zones have been abandoned by the trade unions.
This arrangement often leads to a situation along the lines of the
following hypothetical example. Let us assume that a famous German
company pays its unionized workers €40 per hour. At the same time, this
company contracts with Hartz IV subcontractors on the basis of €20 per
hour for the labor of Hartz IV recipients. The subcontractor deducts a
commission of five euros per hour from this €20 per hour fee. The labor
broker then deducts another five euros of commission. The Hartz IV
worker is then left with €10 per hour, from which applicable taxes and
various fees then have to be deducted. To complete the cycle of
exploitation, whatever the Hartz IV worker is paid results in a
reduction of the €391 basic monthly payment.
Hartz and the successive governments who have implemented this
program have been careful to camouflage this Dickensian system of
exploitation using trendy Anglo-American labels. The jargon of Hartz IV
includes such foreign expressions as "Jobcenter," "Personal Service
Agentur," "Mini-Job," “Midi-Job,” and "Bridge System." Much of this
verbiage is incomprehensible to the average German.
Obviously, one of the effects of this system is to provide German
corporations with low-wage labor by people whose survival is subsidized
by government and the taxpayer. In the United States, this has long
been associated with the Walmart business model, in which many low-wage
workers depend on food stamps, heating subsidies, and other assistance
from the federal government. In Germany, the same basic dynamic has
been fully worked out and institutionalized under oppressive laws. In
turn, Hartz IV allows us to see what the United States would be like if
11 million undocumented foreign workers, largely of Hispanic origin,
were turned into second-class citizens earning inferior wages and thus
exerting a downward pull on all pay scales in the way we can see in
Germany today.
Hartz IV: Merkel’s human junk heap
This Hartz IV system must be condemned as a process of brutal
exploitation which is forcing millions of Germans into a life of
low-wage, dead-end jobs and low-wage temporary jobs. Hartz VI
represents a human junk heap to which victims are consigned with Kantian
thoroughness.
One of the great benefits of Hartz IV for the German political class
of Eurogarchs and Eurocrats is that it has become practically impossible
to determine the real level of unemployment. When workers enter the
Hartz system, they drop off the unemployment rolls. Even within Hartz,
the statistics are highly fragmented. Some workers become on-the-job
trainees. Other workers are shunted off into German language courses and
other classes. The presence of many Turkish, Romanian, Bulgarian,
Albanian, gypsy, and other foreign workers within various Hartz IV
programs has tended to shield the entire system against criticism by the
politically correct left. According to Merkel’s propaganda, a Greek
living in Greece is considered a lazy bum. But a Greek guest worker who
has taken a job under the auspices of Hartz IV is a diligent person who
is contributing to German society -- meaning ultimately to the profits
of the derivatives-riddled Deutsche Bank.
According to unofficial estimates, the total yearly cost of Hartz IV
for the Berlin government is about €25 billion, which some reactionaries
attack as excessive. But this compares with estimated yearly support
of €300 billion-€400 billion dished out in various forms to the German
zombie banks. In this light, the €25 billion for Hartz IV appear as a
cynical insurance policy by German financiers to neutralize the
explosive revolutionary potential of so many million unemployed.
Some unemployed workers become self-employed through the institution
of the so-called “Ich AG” or “Me, Incorporated,” for which they may
receive a microcredit. But these self-employed unemployed are then
subject to a long series of compulsory contributions, ranging from
pension insurance and health insurance to local Chamber of Commerce
dues.
Between eleven million and eighteen million Hartz victims?
According to the most recent statistics for early 2014, the German
unemployment rate is officially about 5.1%. This is great public
relations, but it is also completely deceptive. The simple fact is that
no one really knows how many of those who are actually unemployed and
underemployed have simply disappeared into the Kafkaesque labyrinth of
Hartz IV. Estimates from knowledgeable observers gathered by the
present writer range from 11,000,000 to 18,000,000 victims of Hartz IV.
This is Merkel’s Gulag.
Given the immense size of the Hartz
IV human junk heap, it is not surprising that this system has
contributed much to the pessimism, despair, and anger which have played
an increasing role in German politics. Hartz IV has distorted German
society in ways which will not be easy to roll back. One area of
long-lasting damage is the sharp increase in income inequality and
disparity of economic incomes, a question which is in the center of
public attention in many countries right now. An April 2012 OECD report
found that "Germany is the only [EU] country that has seen an increase
in labor earnings inequality from the mid 1990s to the end 2000s driven
by increasing inequality in the bottom half of the distribution."
The long-term impoverishment of German society has a number of
causes, but 11 years of Hartz looting have certainly played a major
role. Twenty years ago, Germany was notable for its highly developed
system of regional infrastructure, including post offices, local public
transportation, and schools. The post office has now been privatized,
local transportation networks have been gutted, and kindergarten classes
have ceased to exist in many areas.
In the former German Democratic Republic (East Germany), many towns
have simply never recovered from the post unification economic collapse
of two decades ago. The landscape east of the Elbe River and especially
along the East German Baltic coast is now dotted with virtual ghost
towns where very few inhabitants and almost no economic activity
remain. Numerous abandoned buildings are falling into ruins, as in
Detroit.
The right wing extremists who have just come to power in Ukraine
loudly proclaim their desire to join Europe. If they are granted any
rapprochement with Europe, it is likely to be on the Greek path of
killer austerity dictated by the International Monetary Fund. But even
joining Europe on the supposedly preferable German model turns out to be
a process of exploitation, looting, and despair. Merkel’s Europe of
austerity dictated by the banks and cartels is not viable. Five hundred
million Europeans deserve an end to the financier yoke and a new era of
full employment and rising standards of living.
HRB/HRB
