Corona - Learning from the crisis!
Alternatives to economic policy
Short version
Table of contents
1 The crisis is international
2. the economic situation in Germany in 2020
3. learning from the pandemic: a different society
4. ways out of the crisis lead via a state capable of acting
5. the challenge of the climate crisis
6. pension policy: securing living standards, preventing poverty in old age
7. political outlook
The world is in the stranglehold of the pandemic. Throughout much of 2020 and into 2021, the entire public, social and economic life was massively restricted in important areas. And not just in Germany, but in many countries in Europe and around the world. The worst pandemic in recent history was the Spanish flu, which began in 1918 and was largely erased from the collective memory.
The consequences of the current situation are manifold and incalculable. In the spring of last year, many had hoped that all that was needed was a short-term, short-lived, vigorous social effort to overcome the situation. There is now certainty that Covid19 represents a major and protracted challenge. Important statements can already be found in the Alternative Economic Policy Working Group in its SPECIAL MEMORANDUM "Solidarity Pact for crisis management" of April 2020.
In this SPECIAL MEMORANDUM, it is pointed out that the economic crisis resulting from the pandemic cannot be compared to the classical economic pattern. It is the consequence of, at its core, unavoidable government shutdown measures to combat the spread of infection. Globalization, with its great mobility contributed significantly to the spread of the pandemic. The aggressive globalization of the economy, in addition to the depletion of natural resources and the destruction of biodiversity, is very likely to drive the emergence of zoonotic diseases.
The Corona crisis currently overrides all other issues: the ecological crisis, the distributional/social crisis, and the crisis of democracy. The ecological crisis continues to worsen, and the temporary relief provided by the crisis create little relief and certainly no solution. The social crisis and the crisis of democracy are currently being exacerbated. The attempt to merely turn back the clock now and to overcome only the pandemic is pointless and doomed to failure. This multiple crise requires an integrated, common solution.
"We want to return to a state as it was before the pandemic." These were the words of German Economics Minister Altmaier on January 26, 2021, at the presentation of his annual economic report. He missed the point of the problem: There must be no return to the outdated pre-pandemic development and growth path.
For many years, the Alternative Economic Policy Working Group has been calling for a societal socioecological transformation and a democratization of the economy. The old power structures must be broken through. This requires an active state that steers and drives this transformation toward democratically agreed-upon goals and drives it forward. Only such an agenda provides the conditions to overcome the Corona crisis and its consequences. At the same time, the crisis offers many new experiences, for example, in the area of vaccine development. Without the extensive public research funding and without substantial government guarantees of purchase, their rapid development would hardly have taken place. And without the huge financial interventions to stabilize the economy, there would have been an unprecedented global economic crisis.
1. the crisis is international Global solidarity is needed
The pandemic is hitting a world in which poverty and wealth are extremely unequally distributed. This is true between countries, but above all within individual countries. Extreme poverty is particularly
widespread in the global south. The gap between rich and poor is widening in the pandemic; the Corona virus can be described as an "inequality virus" (Oxfam). Above all, the wealth of the super-rich does not suffer from the crisis. "The wealth of the (as of December 2020) ten richest men in the world has increased since February 2019 - despite the Pandemic - has increased by almost half a trillion US dollars to $1.12 trillion" (Oxfam).
On the other hand, poverty and hunger are on the rise again worldwide. The pandemic has hit many countries in the global south particularly hard. In India, economic output fell by eight percent in 2020
Brazil by 4.5 percent, Mexico by 8.5 percent and South Mexico by 8.5 percent and in South Africa by 7.5 percent. This has had a particularly severe impact on the social situation of the poorer sections of the population. Infectious diseases such as swine flu and Zika fever had already widened inequality in the affected countries. However, Covid-19 has even more serious effects.
Poor people are particularly vulnerable in the pandemic. They live in cramped housing conditions, have no medical care and often do not even have access to clean water. It is precisely for these people that protection through vaccination would be particularly important. This is the claim of international policy. "Access to vaccination must be be possible and affordable for all countries," said Angela Merkel, for example, at the end of November 2020 in her video message to the G20 summit. For the implementation, the World Health Organization (WHO) established the COVAX Facility (Covid-19 Vaccines Global Access) was established. Financed by countries and aid organizations, it is intended to provide countries with low and middle incomes with vaccines at low or no cost.
So far, however, the noble goals have not been put into practice. In principle, poor countries fall by the wayside when it comes to vaccination. "Thus in 130 countries with a population of 2.5 billion people
not a single vaccination has been administered. Three quarters of the vaccinations to date have been administered in the ten countries that account for 60 percent of global economic output. Rich countries could secure more than 50 percent of the vaccine available in 2021, said Cornelia Füllkrug-Weitzel (President of Bread for the World) in February 2021.
Global vaccination is not only a question of question of international solidarity. If the virus can continue to multiply in large parts of the world, it will
If the virus can continue to multiply in large parts of the world, it will form mutations against which the existing vaccines may not be effective. Also
even if the financial situation has improved as a result of the U.S. joining COVAX in February 2021, the Alternative Economic Policy Working Group calls for an immediate increase in funding for the COVAX campaign.
EU - between Pandemic and Green Deal
Financial crisis, euro crisis, debt crisis, social crisis, Brexit, climate crisis, and now the Covid 19 pandemic dominate the agenda of the European Union. The Corona crisis has added to the already existing problem areas of social and economic development in the individual member states, and in the EU as a whole.
Even before the Covid 19 pandemic dominated everyday life and the politics of the day, the EU had already launched a so-called European Green Deal, an investment program for climate protection.
This package of measures sets the overriding goal of making Europe - or more precisely the EU - to become a climate-neutral continent. The Green Deal relies primarily on technological progress - and hardly on radical or even conscious renunciation or a change in the economic system.
In the wake of the pandemic, nearly every country enforced a temporary shutdown. In essence, in all countries, the everyday life of people and the personal service sector were severely restricted by infection control programs. The pandemic-related economic slump has affected the individual EU member states with varying degrees of impact. In the euro zone, the range is from plus 3 percent in Ireland to minus 11 percent in Spain. In many EU member states, the economic slump will be much more severe than in Germany (2020: -5 percent). Overall, the crash in the EU will be significantly more severe than in the USA (-3.6 percent) or Japan (-5.4 percent). For China even under pandemic conditions, economic growth of 2.3 percent year-on-year is forecast for China in 2020.
Crises and disasters require the primacy of politics. They can best be managed collectively. This realization seems to be increasingly gaining ground at the EU level. Consequently the EU is respondingas it did to the previous crises - with a deepening of the Union and, ultimately with an increase in the power of the EU as an institution vis-à-vis the individual member states. For the EU level, the member states agreed on the following in addition to the national programs a common, EU-wide development plan (Next Generation EU) with a total volume of 750 billion euros. With the creation of the reconstruction fund, the EU has taken an important step toward a common financial and economic policy. The resources of the reconstruction fund will be individual member states in the form of transfers and as a loan. The loan portion is to be repaid by the Member States by 2058. Measured by their economic strength, the former transition countries receive the largest amounts from the fund. The
resources from the reconstruction fund are intended not only to stimulate demand at national level as an economic stimulus package, but also to contribute to the long demanded ecological structural change.
Another pillar of the EU programs to combat the crisis is the so-called SURE program. It has a volume of 100 billion euros and finances short-term work in the individual member states. Its term is limited until 2022. Under the SURE program, member states have now been approved for funding of around 90 billion euros have been approved; 31 billion euros have been paid out so far (as of January 2021). In many EU countries, short-term work has been introduced to cushion the social consequences of the pandemic.
The package of measures is being financed via the EU budget. However, according to the EU treaties, the budget is very narrow. Therefore the financing of the reconstruction fund must be secured in a different way. Payments by the member countries according to their economic strength, as well as EU-wide taxes on plastics, CO2 and for digital companies are starting points. What is essential, however, is the EU bonds as a central component of the financing strategy. This is because much of the crisis spending must be financed by borrowing. This is a first: By allowing the EU as an institution to borrow on a large scale these papers come close to the Eurobonds that have been hotly debated for years.
Apparently, the EU wants to issue bonds totaling up to 900 billion euros by 2026. This change in the EU's joint borrowing policy may usher in a new era for the international financial market, and also for the EU as a community of states. This is not a foregone conclusion. Many want it to remain a one-time debt issue.
If we take all the member states of the euro zone together, the level of public-sector debt in 2020 is 101.7 percent of gross domestic product (GDP). This represents an increase of around 16 percentage points compared with 2019. The debt level of public budgets measured as a percentage of GDP differs considerably between the EU member states. The front-runner is Greece with more than 207 percent, followed by Italy (just under 160 percent). Germany is far below the EU average in this ranking at 71.2 percent. Estonia has the lowest debt ratio at 17 percent. The years of consolidation policy pursued by many countries in the euro zone in the wake of the international financial crisis has been reduced to absurdity by the pandemic. This is particularly evident in the countries particularly hard hit by the pandemic. Italy and Spain have shown that the bleeding of the public sector is causing additional costs, especially in times of crisis. The healthcare sector is on the verge of collapse.
The consolidation orientation enforced by the fiscal pact seems all the more absurd as government bonds have been available on the market at good to very favorable conditions on the market. The interest rate on ten-year government bonds (AAA rating) in the euro area was minus 0.54 percent in January 2021! A turnaround in interest rates is currently not in sight. The European Central Bank is fulfilling its stabilizing task responsibly. It is leaving the key interest rate at a historically low level and is providing a considerable amount of liquidity through bond purchases.
Overall, the financial markets are brimming with liquidity. This is not only due to the loose monetary policy monetary policy of the ECB in recent years. Rather, the increasingly unequal distribution of wealth
and the steady growth in private pension provisions are also creating excess liquidity. Financial capital is looking for safe investments. This applies even more so in uncertain times.
There is hope that the era of radical market liberalism within the EU may be over. The costs to society as a whole of these neoliberal legacies have become abundantly clear in the pandemic period. The expenditures of the reconstruction fund are to be increased up to 2023 (so far, however, the program has not even started) and is thus supposed to cushion the pandemic-related macroeconomic spending.
The spending program associated with the European Green Deal will run until 2024. The core of the Green Deal is an investment program of 100 billion euros. The EU Commission is hoping in the medium and long term for follow-up investments from the private sector in the order of magnitude of one trillion euros. The areas of health, education and social policy are hardly addressed in the program.
Together, the two action plans would have the unique opportunity to actually generate a change toward a sustainable society through massive funding.
sustainable society. The goal must be a socio-ecological transformation of the EU.
2 The economic situation in Germany in the year 2020
The fight against the Corona pandemic has led to severe economic upheavals. This is not an economic crisis. To avoid a potentially catastrophic escalation of the pandemic and deaths, the state has used the shutdown to largely shut down the economic life and private contacts. With the first shutdown in March 2020, many sectors of the economy were closed by law (food service, culture, brick-and-mortar retail without food), while others were unable to continue their activities, or only to a limited extent, as a result of this supply shock and the subsequent demand shock. Temporary border closures had disrupted supply chains. This led in the second quarter of 2020, this led to a historic slump in real (price-adjusted) economic output by 11.3 percent compared with the previous year and by 9.7 percent compared to the first quarter. This is the largest slump in a single quarter since the Great Depression of the early 1930s.
With the easing of measures, there was a surprisingly rapid and strong pick-up in economic output in the summer. The GDP rose by 8.5 percent compared with the second quarter, but was still a long way from returning to the previous year's level. With the second wave of the pandemic and the shutdown in November, which was then intensified in December, this economic revival came to a halt in the fourth quarter. For the year as a whole, economic output contracted by 4.9 percent in 2020. This was slightly less than during the economic and financial crisis of 2009, when GDP fell by 5.7 percent.
Due to the international crisis dimension, German exports fell disproportionately by 9.3 percent. The decline was evenly distributed between the EU and third countries. Exports to EU countries all developed negatively, while worldwide the trend varied widely. Exports of goods to China increased by 5.6 percent, while those to the USA fell by 12.5 percent.
Imports also fell during the crisis, 7.1 percent, but not as sharply as exports. This resulted in a slightly lower foreign trade surplus of 179.1 billion euros (in 2019 it was still 224 billion euros).
Because German travel activities were weaker under Corona conditions, the services balance was almost balanced. In 2019 it had still been -21.7 billion euros. The current account surplus shrank only slightly to to 236.2 billion euros (in 2019 it was 244.8 billion euros). The continuing high current account surplus shows that even in this severe crisis, the German economy remains strongly geared to foreign trade.
However, the external balance (exports minus imports) had a negative growth effect of 0.9 percentage points. The effects were even stronger for gross capital formation, which contributed 1.5 percentage points to the contributed to the economic slump. Uncertainty is the biggest obstacle to investment. Only government consumer spending counteracted the economic slump and led to a positive contribution to growth of 0.7 percentage points. Compared to the overall decline in GDP of 4.9 percent, however, even this stimulus was not very pronounced. The main factor in the sharp decline in economic output was consumer spending, which made a negative contribution to growth of 3.2 percentage points.
Under the pandemic conditions, however, consumer behavior was completely different than in "normal" times. In Germany, where the savings rate has been relatively stable at around 10 percent for many years, private consumption depends directly on the development of incomes, especially mass incomes.
Surprisingly, the Federal Statistical Office shows an increase of 0.7 percent in disposable income of private households (Fachserie 18, Reihe 1.2, February 2021). According to this, mass incomes have even increased by 2.6 percent. Mass income is defined as net wages and salaries plus monetary social benefits less taxes on social benefits and consumption-related taxes. It is the money available to the broad mass of the population. Disposable income includes income from profits and property.
The contraction in private consumption therefore had other reasons. Overall, the consumer confidence index indicates a sharp decline, even in January 2021 (see chart on next page). According to the surveys, income expectations were broken. Uncertainty in the pandemic is high: How long will I be still on shorttime work? Will I be unemployed? Do I have to give up as a solo self-employed person? Under these uncertain conditions, the propensity to consume is low; people hold back their money. In addition,
consumption was limited at times through the shutdown rules, because stores were closed, longdistance travel was not possible and car registration offices were closed. Consequently, the reduced propensity to consume is reflected in the savings rate, which in 2020 was an extraordinary 16.2 percent.
Another special feature of the crisis year 2020 was the extremely varied impact of the crisis on individual sectors and people. This can be seen, for example, at the level of economic sectors: the collective category Other service providers experienced a decline in real gross value added of 11.4 percent and the manufacturing sector by 10.5 percent. Real estate fell by only 0.5 percent and only 0.2 percent with financial and insurance service providers. In the construction industry, gross value added even increased by 2.8 percent. However, even these differences do not adequately capture the trend, as there were also major differences within the various sectors.
Air traffic was hit particularly hard by the crisis. . According to information from the International Air Transport Association (IATA), global passenger volumes fell by 66 percent in 2020. Travel service providers were affected as much as the aerospace industry. Other industrial sectors such as such as data processing, electronics, optics and medical technology, on the other hand, were virtually booming. The arts and culture industry and event management, on the other hand, had been virtually idle since March 2020. The retail sector, on the other hand, even achieved a further increase in sales overall. However, only online retail and grocery stores benefited from this. The other areas suffered from the Corona measures and recorded a sharp drop in sales.
The latter in particular shows that the consequences of the pandemic go far beyond the significance of economic key figures and loss of income. The crisis in the retail sector - which began long before Corona, has been massively exacerbated by the crisis - is a crisis of increasingly desolate downtowns. Even more extreme are the consequences caused by the current lack of cultural events. It is still unclear how
the cultural landscape will look like after the crisis. These are consequences that have a massive impact on our quality of life and on the question of how we want to live together.
The Alternative Economic Policy Working Group predicts an increase in the number of insolvencies in 2021. This will cost jobs. In contrast, share prices on the stock exchanges are performing well. Speculators want to profit from the crisis.
The labor market in 2020
The crisis is having an impact on the labor markets. The number of people in work declined for the first time in many years. Even in the crisis of 2008/09, the number had still increased slightly. In the year 2020, it fell by 1.1 percent to 44.8 million. The number of employees also fell by 0.8 percent. On average, in Germany in 2020 there were 2,695,000 people registered as employed. There were 429,000 without a job or 19 percent more than a year ago.
If one correctly takes not only the registered unemployment figures as a basis, but also includes underemployment according to the definition of the Federal Employment Agency (excluding short-time work), the average number of unemployed persons in average of around 3,519,000 people were out of work in 2020. This was an increase of 319,000 or by ten percent. The unemployment rate (in relation to the dependent civilian labor force) rose from 5.5 to 6.5 percent. In western Germany 6.1 percent in western Germany and 8.1 percent in eastern Germany. The number of long-term unemployed also increased for the first time in years. On average for the year, it rose by 12 percent to 817,000. But since the crisis did not begin until March 2020, the annual figure is not very meaningful. December 2020 shows an increase in long-term unemployment by one-third compared with December 2019.
Even before the crisis, Germany had more than two million registered unemployed. Germany already had a massive social problem. Now there are already half a million more unemployed. The rise in unemployment would have been much more severe if it had not been had it not been curbed to an unprecedented extent. This subsidization of the reduction in working hours is undoubtedly the most most important economic and labor market policy instrument for containing the crisis. Entire industries were stabilized in this way.
Those on short-term work receive 60 percent (single) or 67 percent (with children). With the statutory measures to combat the crisis, temporary top-up arrangements were adopted in the summer of 2020.
From the fourth month onwards 70 and 77 percent, respectively, and from the 80 and 87 percent, respectively, from the seventh month. There are also topping-up arrangements in various collective bargaining agreements and company agreements. According to a survey by the Hans Böckler Foundation just over 40 percent of short-time workers benefit from such top-up arrangements. The companies are reimbursed for the corresponding social security contributions for the short-time workers. At
The bottom line is that there is still a loss of income for the short-time workers.
With the shutdown and the corresponding crisis, the number of short-time workers has literally exploded. On average in 2019, there were 145,000 short-time workers. As early as March 2020
the total number had already risen to 2.8 million, and in April, it reached its highest level at 6 million. level. In May and June, it then fell to 5.7 and 4.5 million respectively, and in July to 3.3 million, 4.5 million, and in July to 3.3 million. More recent figures from the German Federal Employment
are not yet available. A historical comparison shows the dimension of this policy: in the first oil price crisis in 1973/74, there were 700,000 short-time workers and in the economic and and financial crisis of 2009, there were 1.4 million. According to an estimate by the German Federal Employment Agency, the use of short-time work relieved the labor market of 1.1 million full-time jobs in 2020. The number of unemployed could have taken on completely different dimensions.
One reason for the extremely high use of the instrument lies in the broad economic scope of its use. Even in the crisis of 2009, short-time work was largely used in industry. This was different in 2020. At least in the second quarter, industry had applied for above-average amounts of short-time working applications. But over the course of the year, the situation changed. According to the aforementioned survey by the Hans Böckler Foundation, in November 2020, half of the employees in the hospitality industry will be on short-time work. This was by far the highest usage. In the economy as a whole, it was 8.3 percent, In industry, 9.4 percent.
The top-up benefits of short-time work stabilize incomes. However, this does not mean, this money will be enough to live on. Just under half of all short-time workers feel that their financial situation is extremely burdensome. 44 percent had to fall back on their savings in order to finance their current living costs. Once they are short-time workers, they are more likely to see their job in jeopardy. 44 percent are afraid of unemployment. Among employees subject to social insurance contributions, the figure is only 10 percent (all data Hans Böckler Foundation).
The short-time allowance is financed by the Federal Employment Agency - at least in in principle. For the year 2020, the agency's funds were far from sufficient, and it had to be supplemented from tax revenues. Short-time allowance is linked to employment subject to social insurance contributions. Many employees are therefore left out of the excluded: self-employed and mini-jobbers. They have been hit particularly hard by the crisis. In June 2020, the number of mini-jobbers had decreased by 850,000 or 12 percent compared to June 2019. As a rule, mini-jobbers belong to the low-wage sector and are therefore particularly affected by income losses. The working group Alternative Economic Policy has been calling for the abolition of mini-jobs for years. All employees should benefit from the full coverage of the social security system.
Special burdens under Pandemic conditions
Especially in the second shutdown starting in November 2020, the closure of schools and childcare facilities as well as hybrid forms of teaching have caused enormous stress among students, parents (especially single parents) and teachers.
Parents were often in the home office and had to simultaneously care for the children and, if necessary, school them at the same time. Especially in cramped living conditions, this poses a tremendous challenge. Significant difficulties arose in appropriately balancing family and work in situations where work in the home office was not possible, e.g., in the health care. The temporary extension from 10 to 20 working days per child (for single parents from 20 to 40 working days per child) helps to cushion financial hardships, but can only slightly reduce the actual burden of additional care work.
In the vast majority of cases, it was mothers who were unable to work at all or only to a very limited extent due to the problem of reconciliation. These conditions have pushed many mothers to the limit.
Fathers have more often avoided this situation.
For children, the periods without schooling or with classes in their own homes were completely inadequate. Technical equipment was very stressful for the children. The missing educational content will be difficult to make up for. Many children also suffer mentally from the uncertain outlook. In addition, young people have to pass their school-leaving exams under difficult conditions, and the transition to an apprenticeship or the transition to an apprenticeship or university school leavers face special, additional challenges.
There is no end in sight to the crisis. Anti-crisis policy remains necessary at all levels
The German government has responded quickly and intensively with fiscal policy to combat the crisis. An almost unmanageable number of individual measures were adopted. The most important were:
- ▪ Liquidity assistance for companies through tax deferrals, loss carryforwards and reductions in of advance payments;
- ▪ various bridging aids and the extension of short-time working arrangements;
- ▪ an economic stimulus package with the reduction of the value-added tax in the second half of 2020 and additional public and publicly funded investments;
- ▪ a loan guarantee program and the Establishment of an economic stabilization fund with additional guarantees and investments.
Altogether, the programs add up to substantial funds. The German Institute for Economic Research (DIW) estimated the total volume in September 2020 at around 1.4 trillion euros. This figure did not include the bridging aid III (November aid). The largest item by far is the provision of loans and guarantees. This alone accounts for around one trillion euros. These programs are supplemented by the EU programs and liquidity funds from the ECB's expansionary monetary policy.
The use of fiscal policy was and is necessary; it has contributed significantly to the economic stabilization of the situation. The economic incursion would have been much greater without these programs.
This is also true when taking into account the fact that many programs have only been used to a very small extent. The massive use of fiscal policy is the right thing to do, even if individual points are open to criticism. Despite the large amount of aid, the coverage was and is not complete, and some groups of groups of people fall through the cracks of the measures and fall by the wayside. The reduction in valueadded tax was a hardly effective measure that had only a very small multiplier effect.
These funds could have been targeted through other measures. For example, a study by the Macroeconomic and Institute for Macroeconomic and Business Cycle Research (IMK) showed that the macroeconomic effects of an increased child bonus would have been much stronger. These criticisms by the Alternative Economic Policy Working Group do not, however, change the fundamentally positive assessment. The current crisis once again shows that such emergencies are difficult without substantial state intervention and that neoliberal dogmas are quickly are quickly thrown overboard when things get serious.
However, the active anti-crisis policy does not change the fact that the end of the crisis is not in sight. Even in normal times, economic forecasts are prone to considerable error. The current crisis is determined by the pandemic, the course of which cannot be predicted. However, it is clear that the pandemic is not over. The current vaccination campaign gives hope that it will soon be under control. However, the numerous mutations of the virus call into question any short-term confidence.
What does this mean for economic and financial policy? First of all, it is imperative that the current programs must be continued and, if necessary, supplemented and readjusted. Anything else would lead to severe economic setbacks. In the opinion of the Alternative Economic Policy Working Group, the focus should be more on the medium term, beyond the current crisis. Society must be restructured in such a way that it can better cope with pandemics and can use the enormous resources available to the socio-ecological transformation. Social security must be expanded in this way and economic aid disbursed.
23 billion euros have been allocated for various emergency measures and bridging aid.
For the aid from spring 2020, these are final figures, as the application deadlines are long over. deadlines are long over. For the current aid since November 2020, the figures will still increase, because the programs have not yet programs have not yet expired and payments rather sluggish. One of the reasons for
the underutilization of funding are bureaucratic delays and obstacles. The Economic Stabilization Fund has so far used 8.36 billion euros. Added to this are commitments for guarantees for 2.68 billion euros. The guarantee banks have additionally issued federal guarantees of 1.25 billion euros. The special measures Corona aid for companies from KfW have so far a volume of 47.42 billion euros.
The marginalized of this crisis should be picked up again and the social cohesion of society strengthened. society is strengthened. International solidarity must not remain a cliché, but must be translated into concrete policies. The distribution of income and wealth must not be allowed to fall further apart, but must be equalized.
Ecological restructuring must be intensified. All the necessary programs must be developed in a broad social debate in order to stop the erosion of democratic legitimacy.
3. learning from the pandemic: A different society
Preventing pandemics and living with pandemics
The pandemic threat will not be overcome if Covid-19 is eventually defeated. New pandemics will emerge, and this is a direct consequence of the current economic and living conditions in the context of unleashed capitalist globalization. Scientists have long warned that the world community is on the threshold of an age of pandemics. The consequences of the climate crisis and the loss of biodiversity and the consequences of the loss of biodiversity are interrelated. Global warming is leading to climate zones, which brings tropical diseases to Central Europe and puts people under considerable stress. Industrial agriculture with its monocultures and pesticides and antibiotics, the risk of developing zoonoses, i.e. the transmission of pathogens from animals to humans. At the same time, habitats for many wild animals are shrinking. This inevitably brings them closer and closer to humans. Until the current pandemic, these were seen as dangers that were far away - Ebola in Africa, Zika in the United States, and so on. Ebola in Africa, Zika in South America, MERS et al. in South Korea. Now, however, it is also hitting the highly developed Western societies.
Political intervention is necessary to deal with the problem. At the EU level, the Biodiversity Strategy 2030 has been launched with ambitious targets, such as reducing pesticide use in agriculture by 50 percent. However, the necessary expenditure of 20 billion euros annually lacks any financial basis.
Production and consumption must be organized so that ecological crises remain controllable and pandemics do not break out at ever shorter intervals.
The working group Alternative Economic Policy demands concrete measures to preserve biodiversity and natural habitats and to limit climate change. Nevertheless, the increased occurrence of pandemics cannot be prevented in the short term. The Corona virus will not disappear but, like the influenza virus, will remain a constant companion of mankind. A short-term option for action against pandemics is not
always a shutdown with its disastrous economic and social consequences. Society must be restructured in such a way that it is more resistant to such threats.
Strengthening health care
A key enabler of greater resilience is the healthcare system. The World Health Organization (WHO) has the lead in the field of global health, but it suffers from structural problems and the consequences of chronic underfunding. For its 2018/19 biennial budget, the WHO had financial resources of only about 5.84 billion US dollars (around 4.8 billion euros). But that is not enough. It is now 80 percent dependent on voluntary contributions. This dependence enables external actors to influence the direction of the WHO.
Nationally, pandemic preparedness and efficient pandemic management are needed. Not only the stockpiling of protective materials and technical equipment and the provision of a buffer of health care capacities are necessary. Sufficient testing and tracking of contacts of infected persons and genetic monitoring of the pathogen and its mutants are vital. However, the prerequisites for this are not in place. Only a few public health departments have been brought up to the technical and staffing level of the challenges. The development and approval of several vaccines were accomplished in an unprecedented record pace. However, this raises fundamental questions: if effective and safe vaccines are to be a global public good, do are the business interests of private pharmaceutical companies take precedence over the common good?
The pandemic exposes some of the fundamental weaknesses in the structure, governance, functioning and financing of the German health and care system. The problems are not new, but now call for political responses. In the MEMORANDUMs of the past few years, the Alternative Economic Policy Working Group has repeatedly critically examined the mismanagement of the system and made concrete demands. The core of the problems is that there is too little public planning and active design in the financing, service provision, control and too much market. Meaningful data are needed to adequately assess the pandemic and draw the right conclusions for necessary changes to the health and care systems after the virus has been conquered.
. They must not only be based on the knowledge needs of virologists, epidemiologists and health economists, but must also cover questions from the field of nursing and social science. Relevant are characteristics of socio-structural distribution according to professions/formal qualification levels and income classes as well as the differentiated recording of outbreak locations.
Health care can only be considered part of public services if policymakers and the state have the knowledge needed to establish an active policy model. It is time to draw consequences. During the first wave of the Covid 19 pandemic, the public acknowledged the use of the nursing staff with applause. Suddenly, many were aware of the the important role of those who provide services directly to people.
After all - and this is expressly welcomed by the Alternative Economic Policy Working Group - Verdi and the DBB succeeded in achieving a result in the fall of 2020 in the collective bargaining which means a respectable increase in income for employees in the health offices as well as the municipal hospitals and care facilities. For employees in the health care offices, who are all part of the
public sector, the result will be very noticeable. In the case of hospitals, however, there is a need to cut back, since only a minority of the nursing staff work in hospitals that are covered by the public pay scale. For long-term care, the collective agreement is of little significance.
Only around five percent of nursing staff for the elderly work for public providers. The commercial service providers that dominate nursing care for the elderly are largely not bound by collective bargaining agreements and therefore often work in the low-wage sector.
Without the implementation of a nationwide collective agreement that is based at least prospectively on the collective agreement for the public sector (TVöD), nursing care for the elderly will remain trapped in the low-wage sector. At the same time, there is a great shortage of personnel in the care sector. In hospital care, there is a shortage of at least 100,000 full-time staff, and the gap is even greater in longterm care. If we include outpatient services, there will be a shortage of more than 500,000 full-time employees.
The existing hospital financing system based on diagnosis-related per-case flat rates proved its unsuitability in the Corona crisis. A system change is needed. The focus must be on the needs and situation of the individual hospital. The Alternative Economic Policy Working Group makes proposals for this (MEMORANDUM 2020, page 258ff.).
The importance of well-functioning health authorities in a pandemic, which track and contain virus outbreaks and contain virus outbreaks in such a way that the incidence of infection remains controllable was demonstrated to the the population during the past year.
At the same time, it became clear what a deplorable state the underfunded and understaffed local and regional facilities are in. The window of opportunity provided by the pandemic must be used to put the long-term funding on a reliable basis.
Economic and social measures
A society's resilience does not come from better health care alone. For that, more profound changes are are necessary. The fundamental systemic question "What and how much globalization do we want?" is more concretely than before. This concerns the externalization of unsustainable patterns of production and consumption, the destruction of patterns of production and consumption, the destruction of natural habitats and the exploitation of resources in the global South. The global extension chains and the relocation of production to low-wage countries are just as much under scrutiny as the hyper-sensitive differentiation of a "just in time" product or of "just in time" production. This is not about national isolation or "de-globalization," but the intensity of multinational networking must be put to the test. The Supply Chain Act will also place stricter limits on the abuse of international linkages.
In detail, a lot can be done to reduce the reduce the spread of infections. Constrained housing and living is always a particular risk factor. Collective housing must therefore be banned. It does not matter whether we are talking about workers (not only meat processing is affected), homeless people or asylum seekers. Here decentralized accommodations must always be organized. Work must be
organized in such a way that it does not does not endanger health. Home office should be made possible wherever it is feasible in terms of the work process. However, no one may be forced to work from home. In all other places, effective hygiene concepts must be developed and implemented. Isolated spot checks show massive deficits here, especially in companies. Sufficient controls and penalties for noncompliance are necessary. School education needs a graduated concept. This begins with sanitary facilities, well-ventilated rooms and smaller classes and extends to distance and hygiene concepts for incipient pandemic situations. Meaningful digital requires adequate technical and personnel and staffing. Homeschooling must not lead to parents, especially mothers, being overburdened. Individual support is even more much more necessary in times of crisis, so that differences in performance do not become even more entrenched. Technical possibilities for all public spaces must be fully exploited. This ranges from Hepa air filters in public transport and public spaces to public spaces to UV disinfection of the handrails of public escalators.
An important point is to strengthen the social cohesion of society. This can help to remove some of the ground from obscure conspiracy theories. Only if people do not feel socially disconnected will they consistently implement measures that have been decided on. This means that in pandemic situations, restrictions can remain at a lower level and do not immediately lead to a complete shutdown of of all social life.
The Alternative Economic Policy Working Group demands:
- ▪ Reduction of the risk for the emergence of pandemics, through the consistent implementation of the EU Biodiversity Strategy 2030 with a financial volume of 20 billion euros annually.
- ▪ Strengthening the WHO. The contributions of the member states must increase accordingly.
- ▪ Functioning public structures for testing, contact tracing, and ongoing ongoing virus monitoring.
- ▪ Overarching data collected according to uniform criteria. They are available in the German health care system.
- ▪ Enforcement of a nationwide collective agreement for geriatric care.
- ▪ Sufficient provision of personnel and improvement of working conditions in nursing care.
- ▪ The hospital landscape should be reorganized as part of the critical infrastructure so it is prepared for health crises. A dovetailing with outpatient care and health centers should be sought.
- ▪ The public health service must be be included in the common tasks of the of the Basic Law.
4 Ways out of the crisis lead via a state capable of acting
Consolidation pressure from the debt brake
The German government - like all governments - responded to the crisis with an extensive spending program to support economic development. This approach is supported by a broad social consensus.
A net new debt of 130 billion euros for the federal government alone was justified under Article 115 of the Basic Law with the reference to an "exceptional emergency situation,” which is beyond the control of the state". Yet the same constitutional article requires, "within a reasonable period of time," the "repayment of borrowed loans" via a repayment plan.
Such a repayment plan would place a severe burden on future economic development. Therefore, suspending the debt brake in the short term is not enough. In this context, the Alternative Economic Policy Working Group has from the outset opposed the debt brake as a nonsensical instrument. Even beyond the special Corona situation of 2021, the debt brake is an unsuitable and harmful instrument. This has been pointed out in past MEMORANDUMS (most recently 2020, pp. 167ff.) explained in detail.
The greatest conflict of the next years, which is essentially a distribution conflict, will lie here. In 2021, the debt brake is to be suspended once again but after that it will be time for the redemption phase.
Shortly after the Bundestag elections, this threatens to cut public spending. Not only economic recovery, public investment, social security and the performance of public institutions will inevitably be in jeopardy. In the municipalities, which are at the bottom of the financial food chain, cutback budgets are already being passed everywhere.
Although the debt brake has lost support in recent years, there is strong pressure to consolidate. "Following the sharp increase of debt in 2020, the consolidation of public finances is also moving consolidation of public finances is coming back into focus" (German Council of Economic Experts, Annual of Macroeconomic Development, Annual Report 2020/2021, p. 85). The SVR does indeed advocate for stretching out consolidation over time. It leaves no doubt (at least in its majority opinion) that it advocates consolidation via spending cuts.
Even the proposal by the head of the Chancellor's Office, Helge Braun to provide in the Basic Law for "a reliable degressive corridor for new debt" (i.e., the debt brake, as it were), (in other words, to give the debt brake a pause, so to speak) has led to an outcry from conservative politicians. The aim of this was to prevent a softening of the debt brake.
But Germany does not have a debt problem, even under crisis conditions; it has a problem with the debt brake. In 1992, the debt ratio (government debt as a percentage of GDP) was 41 percent and the share of interest payments in tax revenue (interest-tax ratio) was 14 percent. In 2020, the debt ratio was 71.6 percent, the interest-tax ratio was only three percent due to low interest rates, the interest-tax ratio was only three percent. The sustainability of government debt is without qualification.
The argument is often put forward that the debt brake has created the financial capacity to act in the crisis. A look at the USA also dispels this position: The USA does not have a debt brake, it had a debt level of 108.7 percent. Nevertheless, it was easily possible for the United States was easily able to pursue an even more committed anti-crisis policy and to achieve a negative net lending/borrowing of 15.3 percent (Germany: -4.8 percent).
Sharing burdens fairly: Wealth tax,
Wealth tax, corporate taxation
If the debt brake is to be continued, there is no way around a different distribution of burdens. In order to avoid plunging public budgets into a consolidation disaster, the financing of the consequences of the crisis by means of a one-time wealth tax is necessary. This must be a Corona burden sharing that includes the borrowing of the federal states (SPECIAL MEMORANDUM 2020, p. 8).
But it is not just about the burdens of the crisis. The state needs a full employment policy for ecological change, public investment, social balance and an efficient public sector. The state needs a broader financial basis. This requires a tax policy that ensures higher tax revenues and distributes the burden more fairly. The comprehensive tax concept of the Working Group Alternative Economic Policy has been presented repeatedly in the MEMORANDUMs of recent years. Only two aspects will be discussed here: the wealth tax and corporate taxation.
In addition to a one-time wealth tax, a permanent taxation of large fortunes is necessary. The Alternative Economic Policy Working Group calls for the revival of the wealth tax, which has not been levied since 1997 but is still anchored in the Basic Law. This tax should be on assets of more than one million euros (in the case of joint taxation of spouses, double that amount until the spousal splitting system is phased out). For each child, an allowance of 200,000 euros should be applied. The tax scale should be linear-progressive and start at a rate of one percent. From 100 million euros, a tax rate of two percent applies.
International, high-profit companies are - along with wealthy individuals - the biggest beneficiaries of tax loopholes. It is estimated that the loss of revenue from tax evasion and avoidance is between 6 billion and 20 billion euros a year. Nevertheless, with reference to international tax competition, business associations are calling for tax cuts to stimulate the economy - especially in the case of corporate income tax.
A clear correlation between the level of corporate taxes and growth cannot be established. In the event of a reduction in the tax rate, there is a risk of an increase in the inequity of taxation and a further restriction of the fiscal room for maneuver. The Alternative Economic Policy Working Group rejects a reform aimed at lowering the corporate tax burden. What is needed is a reform that contributes to greater tax fairness and tax revenue.
Core elements of such a reform are:
1. effective measures to combat tax evasion and tax avoidance, coupled with a transparent monitoring:
Despite the OECD action plan adopted some time ago, internationally operating companies in particular continue to succeed in shifting sources of income to low-tax countries. The OECD has made proposals that go beyond all previous models in the area of income shifting from digital businesses. The idea is to introduce a formula-based distribution of profit shares and a global minimum taxation.
The concrete design is not yet clear. On the one hand, it is to be feared that the USA will
grant itself extensive special rights, and secondly, that the minimum tax rate will be below 15 percent. Moreover, the regulations are very complicated and contain a large number of exceptions, so that the approaches are more likely to have a symbolic effect. If it should come to nothing more than a symbolic policy, Germany would be called upon to introduce a unilateral minimum taxation.
2. effective, efficient and transparent enforcement:
The tax administration is not adequately equipped in terms of technology and personnel. Procedures take too long, available data cannot be effectively evaluated and are withheld from the public. Tax data, especially on cross-border tax arrangements, must be available to the public. The administration must improve the fairness of enforcement.
3 A fair trade tax:
The trade tax is based on value added and is systematically justified as a special tax on entrepreneurial income for the above-average use of public infrastructure. Compared to corporate income tax, which is much more volatile in cyclical terms, it is much more stable because it contains elements that are independent of profits.
The Alternative Economic Policy Working Group rejects the integration of the trade tax into the corporate income tax, because this means the abandonment of the value-added orientation. Instead of abolishing the trade tax, the existing inequities should be eliminated.
The exemptions for the self-employed and freelancers are outdated and should be abolished. The minimum assessment rate should be 80 percent of the average rate of the previous year; complicated regulations must be replaced by simplified flat rates. Such a reformed trade tax would not only increase revenue but also ensure greater tax fairness and a more even distribution of the revenue among different cities and municipalities.
Investment program more urgent than ever
The investment crisis in the public sector has often been described and lamented, including in various various MEMORANDUMs. It is no longer disputed by anyone. In recent years, there have been tentative progress, and since 2015 the sum of real public investment has risen by 4.3 percent on an annual average. As a share of GDP, public investment increased from 2.1 to 2.4 percent between 2015 and 2019. In 2020, it reached a share of 2.7 percent. However, the recent increase is due more to the decline in GDP than to a surge in investment. In the coming years, with economic output rising again and the economic stimulus program coming to an end at the same time, this figure will fall again.
In view of the huge pent-up demand (for a long time net investments were even negative) and the the huge challenges of ecological transformation - at the same time, a society that is more resistant to pandemics also requires new investments. The still investment backlog is clearly evident in the municipalities. For the municipal sector, the KfW municipal panel shows an investment deficit of 147 billion euros for 2019.
The additional spending program called for years by the Alternative Economic Policy Working Group for years remains urgently needed. Especially in the education sector in particular, the pandemic situation situation could have been better managed if the necessary spending had been made in previous years.
For the necessary socio-ecological restructuring of society, the Alternative Economic Policy calls for an investment and spending program of an additional 120 billion euros per year. This is to be distributed among the following areas: education (25 billion euros), transportation infrastructure and digitization (15 billion euros), municipal spending (20 billion euros), energy-efficient building refurbishment and social housing (20 billion euros), local care infrastructure (20 billion euros) and additional spending on the labor market and training (20 billion euros, including funds for an increase in Hartz IV rates). In this context, a readjustment of the program and its volumes will be necessary when the consequences of the pandemic can be assessed.
Economic structure and industrial policy requirements
Even before the current crisis, the German economy had already been shaken by huge structural disruptions. The decarbonization and digitization of industry, the phasing out of nuclear power and and lignite, and the transition to electric automobility are important keywords here. The pandemic situation and the crisis have intensified or accelerated many of these upheavals. It is precisely in the case of such structural breaks that an active state is called for. If they are left to the free market forces, the social consequences are often very high. Entire regions can become deserted, and cultural diversity can be lost. Jobs are lost without new employment prospects and social security. In the past many subsidy programs have been launched in recent years, especially to digital transformation at the German and European levels. Many of them have a useful steering effect. However, it is not enough to simply distribute subsidies. This alone will not be enough to meet the enormous challenges. Moreover there is always the risk that costs are communitized and later profits are privatized.
The Alternative Economic Policy Working Group calls for:
- The abolition of the debt brake.
Should this fail due to the high constitutional hurdles, at least reforms are needed to enable sufficient and countercyclical financing of public budgets. The catching-up process after the Corona slump must not be considered a boom in the sense of the debt
- If the debt brake is maintained, the financing of the crisis burdens via a one-time wealth levy as Corona burden equalization is necessary.
- A fairer tax system with higher revenue to finance public spending. This includes a wealth tax and the prevention of tax evasion and corporate tax structuring.
- A comprehensive investment and spending program for education, transport infrastructure, digitization, municipal spending, energy-efficient building refurbishment, social housing, local care infrastructure and for the labor market and qualification.
- An economic structure and industrial policy with active state involvement and a comprehensive qualification offensive.
5. the challenge of the climate crisis
Environmental and climate crisis even more devastating than the pandemic
As if under a burning glass, and with incredible speed, the Corona Crisis has globally highlighted previously existing political, economic, social and cultural weaknesses, conflicting interests and inequalities. It has also brought the global systemic interdependencies and the economic vulnerability of the "One World" to everyday life.
Models that provide for participation in companies only make sense if they also invest in socially relevant activities.
the socially relevant activities of companies include
- ▪ the orientation of the corporate strategy,
- ▪ the preservation of jobs,
- ▪ the expansion of employee co-determination,
- ▪ the observance of collective bargaining agreements,
- ▪ the prevention of tax evasion
- ▪ and the prevention of discrimination.
In the case of the Economic Stabilization Fund, the German government has expressly refrained from taking an active involvement in the fund, where it is once again acting only as a pure provider of funds. Such a policy only secures the returns of the owners and is resolutely and is firmly rejected by the Alternative Economic Policy Working Group.
Regional policy must be expanded or restored so that alternative jobs can be created and spaces revived. A large-scale qualification offensive is also necessary to cope with structural change. With the Hartz reforms at the beginning of the 2000s, qualification measures were largely small-scale, often meaningless modules (keyword: applicant training).
Comprehensive training, continuing education and retraining for employees affected by structural change must be organized on a large scale. In the case of longer programs, this also includes adequate funding for the livelihood of those of those involved.
Addressing the Corona pandemic must not lead to ignoring environmental degradation and climate change. Here, society is running into a crisis that will be even more apocalyptic in its dimensions than the current pandemic and will be even more costly to combat. One important difference between these crises is the time factor of the measures to combat the crisis.
At present, it can be assumed that between the between the onset of the Corona pandemic and economic recovery, depending on the assumptions about the pandemic with further waves, there could be a time span of several years.
The situation is quite different for climate protection: Because of the time lag between the emission of greenhouse gases (GHGs) and the global temperature increase (for CO2 at least a decade) and the decades-long investment cycles for power plants investment cycles, e.g., for power plants, buildings and transport infrastructures, a climate-effective, economically and socially compatible to a largely decarbonized economy will take several decades.
A "hot age" is very likely if climate change continues unchecked and is associated with catastrophic, unimaginable consequences. But these future catastrophes - e.g., extreme heat waves, an enormous rise in sea level and drastic weather anomalies - still seem a long way off and are "only" probable from today's perspective. However, in April 2020, even in wealthy New York, many people died from Covid-19 due to a lack of ventilators in a trade fair center that had been converted into a hospital.
Crisis policy as an introduction to ecological transformation
Ambitious climate and resource protection (a focus of this year's MEMORANDUM) may be expensive at first, but doing without them or postponing them to the future costs much more later and could become unaffordable. The vision for the future must therefore be "With ecology out of the crisis.”
The green portion of the 2020 economic stimulus package is estimated at around 30 billion euros. However, the necessary sustainable course cannot be set. For the near future, the German government should craft a real future investment program for innovation, climate protection and sustainable development. Such investments, focused on technical and social innovations as well as sustainable investment areas (e.g., green business fields in the area of sustainable mobility), pave the way for the socio-ecological transformation and at the same time create new jobs.
"A good life for all is only possible if planetary boundaries are respected.”
Planetary boundaries concerns biodiversity, acidification, biodiversity, and overfishing of the oceans, the destruction of soils and of arable land, the dramatic plastic pollution and especially the most threatening cross-cutting crisis, climate change. It is therefore fundamental justify, through responsible science, why why, for whom, and how crisis prevention and mitigation are "worthwhile" in terms of money and capital.
The mitigation of climate change is a good example of how massive investments in climate protection can also lead to a more rapid overcoming of the pandemic-related economic crisis.
Transport turnaround
The transformation of transport is at the heart of a socio-ecological transformation, both in the direction of sustainability as well as in terms of crisis resilience. The understanding of "turnaround" in the case of transport has a deeply societal and only secondarily a technological dimension (e.g., a shift toward electric mobility) in contrast to the electricity turnaround. The German Climate Protection Act stipulates that emissions in the transport sector be reduced by 40 percent by the year 2030. This is an ambitious goal, given the stagnation of recent years and the far too hesitant measures taken in the present. And yet this target is not ambitious enough to sufficiently limit climate change. The CO2-reduction must be achieved - also in conjunction with the new EU climate protection target (emissions reduction of 55 percent for 2030 compared to 1990) – that is even more ambitious.
In this context, there are major challenges to transport transition, increase energy efficiency and reduce greenhouse gas emissions without restricting mobility. The alternatives to fossil-fuel-powered motorized individual transportation are incomplete. Network and frequency public transport often do not offer an equivalent alternative to cities often do not offer an equivalent alternative to the a safe cycling infrastructure is lacking, and alternatively powered vehicles are only gradually becoming competitive.
Bottleneck-related delays make rail freight competitive with truck unattractive in competition with trucking. The lack of intermodal networks prevents convenient and fast door-to-door passenger and freight transport from door to door.
To remedy these and other deficiencies, high initial investments are necessary to overcome the historically created path dependence on automobility. The specific costs of energy and greenhouse gas savings are therefore comparatively high in the transport sector. However, as shown above, they are offset by considerable social benefits and the avoidance of exorbitant "external costs".
It is not only the climate that benefits from a transport turnaround: Less noise, fewer pollutants and fewer accidents are good for health; public space that is occupied by cars will be available for people, and children and the elderly can once again move around independently on the streets.
For reasons of social acceptance, all measures must provide more traffic justice and social and economic structural flanking measures.
The Alternative Economic Policy Working Group calls for a traffic turnaround:
- ▪ Within the framework of the European Green Deal the EU should introduce a more climatecompatible amendment of the fleet consumption
- ▪ A price increase path until the year 2030 for gasoline and diesel, respectively (plus 47.7 cents per liter and 54.1 cents per liter, respectively) should be introduced and accompanied by social compensation.
- ▪ Introduction of a bonus/malus scheme as an incentive to convert the vehicle fleet (downsizing). A malus of up to 20,000 euros (at least equal to the of the French regulation of 10,500 Euro) makes the purchase of particularly high-horsepower and heavy vehicles.
- ▪ The tax deductibility of company cars must be severely restricted.
- ▪ A speed limit of 120 km/h on highways and 80 km/h on federal roads should be introduced.
- ▪ The promotion of the environmental alliance (cycling, rail, public transport) should be expanded financially and regionally.
- ▪ The distance allowance should be replaced by a mobility allowance that is independent of income
- ▪ Extension of 30 km/h zones in built-up areas.
- Reduce the number of public parking spaces on streets and make them more expensive.
up to completely parking-free traffic zones and relocation to existing parking garages/underground
6. pension policy: secure standard of living, prevent poverty in old age
Pension policy is a central social issue in this society - and at the same time - one of the most hotly contested fields. If the pension level is to be lowered further, if the retirement age is to be increased age - even at the cost of increasing old-age poverty and a standard of living that is no longer secure in old age?
Or should the statutory pension system be reformed in such a way that the standard of living is largely secured in old age and can keep pace with income development?
In addition to the level of income, the decisive factor is the ongoing adjustment of retirement incomes to the general development of incomes and prosperity. The level of individual pensions is largely determined by the employment biographies, the level of wages and salaries and by conditions on labor markets (equivalence principle). A good old-age provision policy therefore starts with a good labor market policy.
However, those who have been able to earn a living from their wages need a pension that is povertyproof. The claim that the standard of living in old age can only be secured by further expanding private pension provision on the capital market is wrong. There are no pension products on the market that are comparable in terms of their range of benefits (monthly pension, social compensation, surviving dependents' pensions, disability pensions, rehabilitation), their dynamics and their security with the statutory pension insurance (GRV). Also, a disadvantage of the younger generation in favor of the older generation in the GRV cannot be ascertained. The very crisis-proof and social pay-as-you-go system of statutory pension insurance faces challenges. However, demographic developments and the precariousness of the labor market must be managed in terms of pension policy and, at the same time as social and economic policy changes. Furthermore, women are still disadvantaged despite increasing social modernization processes. Care work is not yet shared equally between the sexes.
The equivalence principle of the pension system, however, continues to make it necessary for working life to be as uninterrupted as possible. These challenges have created social uncertainties that have made it possible for interested parties to exert influence in the interests of the reform policies of partial privatization according to the logic of the "three-pillar model".
Privatization served above all the reduction of wage (ancillary) costs and the creation of subsidized business segments in the insurance industry. Despite its impressive failure - which can be seen in the number of Riester contracts.
which also reflects the development of interest rates and the
and the developments on the financial markets - such interested reform politicians continue to rely on the sufficiently known, recommendations: a further increase in the retirement age, a further reduction in the level of benefits provided by the SPS, and more far-reaching proposals for privatization, some of which are now to be implemented. Already now there is a massive increase in old-age poverty, for which this policy is responsible.
Politics was forced in recent years to take various measures (basic pension, introduction of a lowering lowering limit for the pension level, etc.) to correct this misguided approach.
The pay-as-you-go pension system, on the other hand, is both crisis-proof and socially responsible. However, it is faced with major challenges: Demographic developments must be managed. The labor market must be regulated in such a way that it provides stable and well-paid jobs.
Gainful employment and care work must be reconciled. Women should participate in working life on an equal footing.
The Alternative Economic Policy Working Group has developed a general line of important pension policy measures that must be urgently addressed: The pension level must not be lowered below 48 percent under any circumstances; it would make sense to raise it again to at least 50 percent. The SPS must be expanded to include civil servants and the self-employed. Stronger higher incomes contribute more to pension contributions without acquiring corresponding entitlements. The standard age limit must not be raised further.
The current age limit must be cushioned by political measures so that employees with health problems can retire early without having to make deductions from their pension. The financing of contributions and tax subsidies to the SPS must not be subject to predefined upper limits. We know that the proposals put forward by the Alternative Economic Policy will lead to higher financing requirements. But a democratic society should reduce the social divide. The life risk of old age must not be passed on to the disadvantaged as an individual risk through further privatization policies. It is a task for society.
The Alternative Economic Policy Working Group demands:
- ▪ No further privatizations in the statutory pension insurance, especially no mandatory private supplementary insurance.
- ▪ Measures against precarization in the world of work, also in order to obtain a solid funding basis for the statutory pension.
- ▪ No further increase in the standard retirement age. Measures to cushion the impact on people who will not be able to reach the current standard age limit.
- ▪ No further lowering of the security level of the statutory pension insurance; it makes sense to raise it to at least 50 percent of the last net wage.
- ▪ Introduction of an employment insurance scheme into which all employed persons pay.
In this way, they contribute to the financing of old-age provision and are protected in old age.
7 Political outlooks
A new Bundestag will be elected this fall. In the coming legislative period, fundamental decisions will have to be made for the future. Will the ecological turnaround succeed? Is full employment finally on the agenda? Will the social divide in society be overcome?
The answers to these questions have long defined the future viability of our society, the pandemic and the economic crisis. The phrase "crisis as an opportunity" is used. But the challenges are enormous. Without a fundamental transformation of society, they cannot be overcome, and the opportunities will remain untapped.
But the crisis has also widened the scope for action. Just over a year ago, no one would have expected what is possible when action is needed to defeat the pandemic.
This gives hope for the challenges ahead. When it comes to climate protection, the imperative to action is no less urgent. A "night watchman state," as the economic classics and neoclassics always wished for, is farther away than it has been for a long time. But crisis intervention is not enough; the hardships have to be conquered. At the same time, it is clear that the old power structures remain in capitalist society. Short-time work and unemployment squeeze the incomes of many people. On the other hand, real estate prices and share prices have continued to rise.
Alternative economic policy stands for a community in which people work in solidarity and
and together for their interests and a future worth living. This is the only way to overcome the crises. This is not possible with a "business as usual" approach, with unbridled market forces or with directives from above. The demands of the Alternative Economic Policy Working Group are on the table. For a truly socio-ecological restructuring, full employment policy and a reduction in working hours, a fairer tax system tax system and a pension from which one can live in old age!
The future federal government will have to be judged on this.
