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German economy a process of brutal exploitation

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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.

Press TV

16 Comments on "German economy a process of brutal exploitation"

  1. MSN on Thu, 27th Feb 2014 12:43 am 

    “new era of full employment and rising standards of living”
    Well now, a leftie. How quaint.
    Maybe that leftie will notice how it is through such ideas as “full employment” that has lead to a massive bureaucratic nightmare…civil servants… everywhere. All financed for by credit.

    “Rising standards of living” let me guess, every man women and child should have access to car ownership, all the material goods in the world etc… (American way of life)
    Now perhaps suppose….The planet is limited… and we keep increasing population….hmmm.

    Therefore I posit these ideas are stupid, but look around, a stupid idea is far more electable than a clever one.

  2. Davy, Hermann, MO on Thu, 27th Feb 2014 1:15 am 

    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.

    I would agree but what is not understood is this Anglo-American model has morphed into the complex global interconnect economic model we have today. The other misunderstanding is big money knows no borders. Big money has connection and the revolving door patronage of industry and politics. This is the new normal for all the important global players. This new economic reality will not be de managed back to the old normal capitalism of the late 20th century. The next stage is de-industrialization. This process will leap frog in reverse back to a period of human labor and agriculture. Gone will be the manufacturing, service workers, and professional. There will still be some but the process is heading towards a turn of the 20th century list of employment statistics. This will happen very quickly whereas the growth of the economic system during and through the industrial revolution took many years.

  3. Yeti on Thu, 27th Feb 2014 1:45 am 

    The source of this piece being Iranian, I’d love to see some of their pieces on their own economy.
    “Everything is Great! But we would like to remind our viewers that surfing the internet through proxy-servers is quite naughty.”

  4. Makati1 on Thu, 27th Feb 2014 2:21 am 

    Yeti, I too look at the source, but in today’s world, sources outside the Western MSN, and especially the US MSN, are more likely to be factual and honest. You have to read from many sources to get a more true picture of events. And then use your own powers of reasoning to come to a conclusion.

    Germany will soon be supporting all of the EU and then it will break apart. I think any part of the Ukraine joining the EU is far away and is not likely to happen. Russia is not going to give up without a fight, a major fight that it can easily supply materials for. That’s my take from my readings and knowledge.

  5. Arthur on Thu, 27th Feb 2014 6:39 am 

    Indeed, I curse these EU politicians who are ruining the relationship with Russia by going to Maindan and make absolutely empty promisses. All what they want is expand and what they get is civil war in the Ukraine.

  6. DC on Thu, 27th Feb 2014 8:54 am 

    Like I keep saying Arthur, if you Europeans intend to declare your independence from the Us, you better do it soon. The uS isn’t going to fold up its tent and go home. They will see the world in flames before they allow that to happen. Not so good is it? The EU turned into a wholly owned subsidiary of the the Us Empire (inc). Trust me, I know what its like to have a zionist corporate dictator that loves amerika, probably more than his own family, and certainly more than the country he pretends to represent. Amerika would happily drag Europe into another war-hopefully one that ruins Russia, and so weakens the EU that the idea of being independent from the uS the is gone forever.

    Remember, amerika LOVES fightings ITS wars, on other peoples territory. They have been poisoning the well, as it were, for a long time. Why hasnt Russia been able to have normal above board relations, on about any matter? You know why….

    Over here in NorthAm, the anti-Putin\Russia hate machine has been more or less in high gear for a while now.

    Want to see a sample? Try this typical example of lies, propaganda, mis-characterization, and outright fabrication. This is how most people are being taught to regard Russia, and the regime-change there. You may take some comfort the large number of posters that aren’t buying the party line-but they aren’t the gov’t are they? Anyhow, have a gander-see for yourself..

  7. J-Gav on Thu, 27th Feb 2014 9:08 am 

    Tarpley’s right to the extent that the much-touted ‘German model’ isn’t what it’s cracked up to be. No model is. But he just can’t keep himself from coming up with some weird stuff: “The right-wing extremists who have just come to power in Ukraine …”

    I guess he missed a chapter – i.e. NOBODY is in power yet in Ukraine.

  8. Davy, Hermann, MO on Thu, 27th Feb 2014 10:41 am 

    @Makati said:
    Yeti, I too look at the source, but in today’s world, sources outside the Western MSN, and especially the US MSN, are more likely to be factual and honest. You have to read from many sources to get a more true picture of events. And then use your own powers of reasoning to come to a conclusion.

    Damn Makati someone pulled the wool over your eyes.

    @Gav said:
    I guess he missed a chapter – i.e. NOBODY is in power yet in Ukraine.

    Good one Gav!

    @DC said
    Read whole post

    DC is showing off his time spent in North Korean as an exchange student in the North Korean school of propaganda and western distortions.

  9. kervennic on Thu, 27th Feb 2014 11:52 am 

    This model will be smashed. The last demonstration in France have been violent, both on the left (anti airport) and right side (anti tax and gay wedding).

    Government in Europe are hugely impopular and because of the huge amount of date that was transferred from US market to europe, the high level of corruption and the ever increasing taxes supposed to pay those fictitious debts.

    The spread of income and the rise of poverty while oil is still flowing and fortune are made is clearly beginnning to cause unrest. There is little chance that government can follow this trend.

    They have two option, one still unlikely that people will get more share in the economic decision.I think we are not there, but it might come here and there as companies also suffer (not their owner, they have put their money in the bank, just like rex exxon).

    The other is a return of authoritharian oligarchy, with a pinch of social warfare, just like Putine replaced eltsine.

    On the economic agenda both non governmental left and right agree: given the level of poverty, there is not much to lose into smashing globalization and trading more directly with producing countries. That meens stopping playing by the global market rule (there are already gas contract between europe, russia or algeria for instance…).

  10. kervennic on Thu, 27th Feb 2014 12:03 pm 

    “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.”

    What a piece of crap.
    Ukainian do not give a damn shit about the IMF threat. They are ready to die and do show it.
    They are not shitting in their pants like the fat mollah and american banksters that are terrorized at the mere thought that they might have to work (and they are damn right !)

  11. Makati1 on Thu, 27th Feb 2014 12:26 pm 

    @Davy, the US Ministry of Propaganda, i.e. the MSN, is exactly as I said, BS. Ditto for the EU version. You can read the newspapers of almost every country in the world online. Maybe you need to get out of the MO ‘news’ sources occasionally?

    I don’t need NBC, etc. to put the government spin on reality. ^_^

  12. Davy, Hermann, MO on Thu, 27th Feb 2014 12:41 pm 

    Makati, Don’t watch much MSM other than to know if anything of substance to the GP is popping up. I hardly watch TV except for decent documentaries. I generally follow several specialized net sources for news on a particular area of interest.
    Your characterizations of other world MSM as truthful and honest and the US MSM as not is a distortion in my book. They are all limited in getting the full picture. They need to be followed superficially to see what a significant part of the population is being force fed. This opinion is just more of your usual anti-western and anti-US propaganda. You and others here that insist on political statements are finding yourselves boxed in with your ability to cover subtleties of event and topics. You become your own worst enemies in the quest for truth and balance.

  13. Makati1 on Thu, 27th Feb 2014 2:44 pm 

    Davy, I probably read a wider scope of ‘news’ than you do and do it daily. The US deserves any put-down it gets. Yes, I am negative but I have the right to be. My family in North America precedes the US war of independence and I have seen what is being done to it by the banking cartel and greed. It is the world’s biggest terrorist organization bar none. It is also going to suffer a war on it’s home ground before long if it keeps prodding Russia and China.

    Russia is moving to build military bases all around the US as in Cuba, and several South American countries. Remember the Cuban Missile Crises? Will it be a rerun where the Russians don’t back down? We shall see.

    Being stuck in the US behind censored walls is going to dim the view of the real world for many Americans. What country is the ‘terrorist’ of the month? Russia? China? Iran? What happened to Syria? Oh yeah, Obama backed down there didn’t he when Putin told him to. Ditto for Iran. He knows when he is out of his league. The US cannot afford anymore Iraqs or Afghanistans. It is broke.

    So, whether my observations are correct or not, only time will tell.

  14. Boat on Thu, 27th Feb 2014 4:56 pm 

    Makatil, Thinking Obama backed down because Putin told him to suggests you could use a wider scope of news. The mess in Iraq and Afghanistan as perceived by Americans is driving the policy in Iran and Syria. Our debt being another reason to galvanize the American opinion against war. I see no war with China or Russia because of economic ties being to strong and any modern war would be to devastating to all sides.

  15. ulenspiegel on Thu, 27th Feb 2014 6:49 pm 

    The author should learn the basics of socialistic dialectic, then come back.
    As starter I recommened some episodes of “Der schwarze Kanal”.

    In the current form the article is piss poor, sorry. Good propaganda does not make so many factual errors in a few sentences. 🙂

  16. Makati1 on Fri, 28th Feb 2014 1:55 am 

    Sorry Boat, but he did back down when Putin told him to. What ever the reason you think, it was because he thought he would not be opposed and had the usual backing and found out that he had opposition instead, including the UK. The sheeple here didn’t change his mind. Not at all. He is still the corporate owned dictator he was. He knows he owns you. Or at least the 100 million plus of you who rely on government handouts.

    AS for ‘economic ties’: China is dumping dollars and the US is not their biggest customer anymore. Russia is not going to let itself be surrounded by the Empire and is in the process of building bases in Cuba, Central and South America. Did you know that?

    And look into the history of WW1 and tell me economic ties count.

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