Economists are very important to our country

Growing inequality leaves economists cold

For centuries, socio-economic inequality has been accepted as natural or willed by God and has seldom been questioned. Since the European Enlightenment, the bourgeois revolutions and the overthrow of numerous monarchies, inequality has required political legitimation, provided that it is neither natural nor factual, for example through differences in training, knowledge and skills between certain (groups of) people. Previously, structures of inequality were accepted by those negatively affected, essentially without any collective resistance. Even at that time, only specially educated minorities began looking for the causes of economic, social and political inequality, which was widespread and extremely pronounced.

From the origin of inequality

In 1754, Jean-Jacques Rousseau took part in a call for tenders from the Académie des Dijon, the question of which was the origin of the inequality among people and whether it was authorized by natural law. Without winning the gold medal worth 30 pistols, Rousseau gave the following, now classic answer: “The first who had fenced in a piece of land and thought of saying: This is mine and the people thought who were simple-minded enough to believe him was the real founder of bourgeois society. How many crimes, wars, murders, how much hardship and misery and how many horrors would he have spared the human race who tore out the stakes or filled the ditch and called out to his fellow men: 'Be careful not to listen to this deceiver; you are lost if you forget that the fruits belong to everyone and the earth to none. ‘“ 1

No one has ever more succinctly characterized the negative effect of private property (on land), based on a natural state of social equality for all people, than Rousseau. The economic sociologist Johannes Berger claimed 250 years later that by problematizing the land acquisition, Rousseau directed his main attention to the market-like limitation of the land, which (in contrast to capital) cannot be increased. Accordingly, Rousseau would have recognized that inequality is based on enclosures, i.e. on access restrictions: “It would therefore be a mistake to blame the exact opposite of access restrictions, free competition, for the emergence, persistence and increase of economic inequalities, however popular these are View may be today. ”2

Rousseau attributed all manifestations of inequality (rank, power, personal merit and wealth) to wealth as the first stage or archetype of inequality.3 Rousseau apparently considered the distribution of income and wealth to be the central criterion for assessing social equality in a country and the contrast between rich and poor as the crucial dividing line in any private property-based society. If you also consider that Rousseau lived in the ancien regime, not in a capitalist industrial society, his focus on land grabbing and private land ownership as sources of socio-economic inequality was more than understandable. Marx's criticism of political economy followed on from this roughly 100 years later, blaming the social division of labor, private ownership of the means of production and the appropriation of the surplus product by a privileged minority for the class division.

Poverty in abundance

Georg Friedrich Wilhelm Hegel already considered social inequality to be a key issue in social theory. In his legal philosophy, published in 1820, he did not treat poverty and wealth as structural opposites, but as poles that belong together and unite civil society. Even then, with a view to the working class, Hegel used the concept of class to characterize it as a population group that embodied the negative result of inequality. Hegel lamented the concentration of wealth in a few hands.4 For the Berlin philosopher as the leading thinker of his time, the poor only became a “mob” through internal outrage towards the rich, society and the government, as he criticized their work reluctance and urge to assert subsistence as a right: “No man can assert a right against nature, but in the state of society the deficiency immediately takes on the form of an injustice, which is done to this or that class. The important question of how to alleviate poverty is one that moves and torments modern societies in particular. ”5 Hegel also stated at the same point that“ with the excess of wealth, bourgeois society is not rich enough; H. in which their peculiar ability does not have enough to control the excesses of poverty and the generation of the mob. "

Shortly after the turn of the millennium, the sociologist Oskar Negt, referring to Hegel, thematized the growing contradiction that modern capitalism produces an excess of resources without being able to eliminate social inequality, and in this context stated in relation to the present: “If a labor and A business society that produces wealth at an accelerated pace and cannot cope with the problem of poverty, then this is a sign that a historically established distribution system is out of date. ”6

The German "normality of inequality"

In the “old” Federal Republic of Germany, well-known sociologists such as Helmut Schelsky, Ralf Dahrendorf or Ulrich Beck tried to replace the terms “class” or “class society”, which were frowned upon as Marxist signal terms, with less controversial categories, to defuse their literal meaning or to ideologically use them in another way dispose of.7 On the other hand, the leading representatives of economics mostly left out the topic of “inequality” entirely. "Most economists do not care about inequality because it arises from 'marginal productivity' or investment in human capital: a supposedly equitable and inevitable result of economic growth." 8 Only heterodox economists see social inequality as a relevant problem and strive to reduce it, by redistributing private wealth through state intervention. Heiner Flassbeck and Paul Steinhardt consider the increasing inequality in most countries to be “the great social challenge of our time” 9, the root of which they see in industrial relations Income shapes how this can be prevented politically and why it has to be prevented for economic reasons. ”10

The economic mainstream legitimizes the increasing inequality by stylizing it as a necessary prerequisite for a productive economic and social system or as a driving force for scientific and technical advances in knowledge. In a market society that is characterized by the economization, privatization and commercialization of almost all areas of life, economic and social inequality is considered normal. Representatives of the classical and neoclassical economics even declared them mostly useful and necessary so that the economy, which is regarded as a “business location”, can be successful. “Economists have primarily dealt with the question of how a society can increase its prosperity. On the other hand, they considered the question of distributive justice to be of secondary importance. ”11 Examples of this are luminaries in the field such as Adam Smith, Friedrich August von Hayek and Milton Friedman.12 Of course, the question is what good it is for the poor to live in a rich country that they have with alms. Social inequality is explained by individual performance differences, which is why poor people have to justify their low income and lack of wealth. Reinhard Kreckel described the ideology of achievement as the most important means of legitimizing social inequality in advanced state societies and problematized the “meritocratic triad” 13 of educational qualifications, professional rank and monetary income - in that order. It is a meritocratic myth that is now less and less believed that wealth is based on achievement and poverty on refusal to perform.

Kuznets was wrong

Simon Kuznets' thesis, according to which socio-economic inequality first rises during the development of a country and then falls again, had an extremely reassuring effect.14 The famous Kuznets curve runs in an arc from bottom to top and back again, as it describes what Harvard does -Professor of Eastern European origin believed to have discovered on the basis of his meticulous longitudinal examination of income tax returns and his estimate of the respective national income. In the meantime, however, the fascination emanating from Kuznet's inverted and flattened “U” has faded, as has the hope that income inequality will decrease in the rich countries of the global north. Economists from all over the world are now criticizing the growing distributional imbalance in income and wealth. The economist Branko Milanović stated in 2016: "The undeniable increase in inequality in the United States, Great Britain and even in some fairly egalitarian countries like Sweden and Germany is simply incompatible with the Kuznets hypothesis." 15 French economist Thomas Piketty explained the Socio-economic inequality has increased again in most industrialized countries since the 1980s, with the return on investment (r) exceeding the growth rate of economy and income (g) for a long period of time. With his formula r> g, Piketty did not discover a generally valid distribution law, but made an important statement about tendencies. According to Piketty, this results in a strong driving force of modern capitalism towards growing inequality, which led him to the following prognosis under the same political framework conditions: “If the return on investment is consistently higher than the growth rate of production and income, which was the case up to the 19th century and threatens to become the rule again in the 21st century, capitalism automatically creates unacceptable and arbitrary inequalities that radically call into question the merit on which our democratic societies are based. ”16

The British economic historian Richard Wilkinson and the epidemiologist Kate Pickett have shown on the basis of a wealth of empirical data from many countries that the members of a society are healthier the more equally their material wealth is distributed among them.17 Well-known German economists, however, still create inequality ignored, negated or naturalized. At the turn of the millennium, when market radicalism was rampant, inequality advanced to become an economic remedy from which Germany, at that time erroneously referred to as the “sick man of Europe”, was supposed to recover. Klaus Methfessel and Jörg Winterberg stated that more employment could only be achieved with more inequality.18 At the same point, the two journalists complained about the alleged "equality mania of the two people's parties", but overlooked or completely suppressed the fact that all federal governments under the leadership of the CDU / CSU and the SPD have systematically promoted socio-economic inequality through targeted relief of the rich19 on the one hand and greater burden on the poor (rising VAT) on the other. As the federal government itself documented in the Fourth Report on Poverty and Wealth, the richest 10% of the population owned 45% of net private wealth in 1998, when the book by Methfessel and Winterberg was published; In 2003 it was 49% and in 2008 it was almost 53%. In contrast, the poorer half of the population had to be content with 3% from 1998 to 2003 and only 1% in 2008.20 These social polarization tendencies were less due to the growing dynamism of the world market than to privatization and deregulation decisions, globalization, modernization and individualization flanked and forced. A neoliberal understanding of politics promoted polarization.

Market belief instead of social criticism

At the turn of the millennium, Hans-Werner Sinn, President of the Ifo Institute for Economic Research, advocated a wage cut of up to a third and a reduction in capital and profit taxes, but did not mention the inevitably resulting greater inequality.21 Few people care Economists in this country about inequality tend to neglect this topic, as DIW President Marcel Fratzscher rightly criticizes.22 Fratzscher, who called his book “Distribution Struggle”, shies away from the logical conclusion of a redistribution of private wealth and limits himself to it Basically on the demand for a better education system. It should enable more equality of opportunity, which Hans-Olaf Henkel has long since realized in all seriousness: "Everyone can become an entrepreneur, and every entrepreneur, if he does badly, can become a Hartz IV recipient in no time at all." 23

Friedrich Merz, former chairman of the CDU / CSU parliamentary group and (still) chairman of the supervisory board of the asset manager BlackRock in Germany, declared the material inequality to be useful and rejected its reduction because the market economy lives from it and it necessarily “from free competition for the best Ideas, Innovations and Products ”24 emerge. Merz therefore considered the call for more equality to be irresponsible and, as a result, even totalitarian: "It is the demand for ever more material equality that, taken seriously, leads to a planned economy and socialist dictatorship." 25 Totalitarian, however, is more the doctrinal exclusion of society Development alternatives that, in terms of distribution policy, mean perpetuating the concentration of wealth in a few hands. Those who hypostatize material inequality in this way and do not even dare to think about equality cement the socio-economic status quo and thus act against that part of the population that has no significant wealth but a high risk of poverty.

Economists glorify inequality

While philosophy, theology and all other social sciences today are largely committed to the ideal of equality, the economy with the coexistence of mass poverty and a wealth concentrated in a few hands accepts a form of inequality that its leading representatives even as a prerequisite for freedom glorify. Inequality is attributed to nature, justified with it and declared an anthropological constant. Typical of this is the position of Michael Hüther and Thomas Straubhaar, who simply dismiss socio-economic injustice as a subjective feeling of a misguided majority of the population.26 The former Bundesbanker and Berlin Senator for Finance Thilo Sarrazin also presented inequality as an inevitable result of different genetic makeup of individuals. In his bestseller “Germany abolishes itself” he starts from the idea that social inequality is based on different characteristics, abilities and skills of people: “Those who are beautiful or intelligent have different opportunities than someone who is ugly or stupid. And this unequal starting position produces incessantly results that are even more unequal. ”27

Of course, people are neither biologically nor socially the same, but rather differ in age, gender, height, weight, physique, skin, hair and eye color as well as physiognomy - by just a few phenotypic or somatic identifying features - but also with regard to their genetic dispositions, abilities and skills as well as with regard to where they live, what type of household and what type of family they live in, what occupation they do, whether they have hobbies, whether they regularly play sports etc. The latter characteristics of individuals are mostly based on personal decisions that they have made more or less voluntarily. These are specific forms of inequality that are not predetermined by fate or conditioned by nature, but are individually and self-chosen.

The widespread inequality with which this text is concerned, on the other hand, is systemically justified, economically determined and socially structured in the form of large population groups, strata or classes; It is therefore neither at one's own discretion, nor is it due to a natural inequality of the persons affected by it.Rather, it is a form of inequality that is politically organized, legitimized and perpetuated, but which is restructured or destroyed in the event of a fundamental change or change in the system.

Needs or performance-based?

Whereas in the past, fairness of needs and distribution were at the center of the discussion as constitutive guiding values, today terms such as “fairness of performance”, “fairness of participation”, “fairness of opportunity” and “fairness between generations” determine the public debate. They also contribute to socio-economic inequality being seen and accepted as normal by most citizens. If the above-mentioned processes of disintegration are to be counteracted, poverty is to be combated and wealth restricted, not only must the social structure be changed, but also awareness of polarization tendencies and the social problems associated with them and the resulting lack of justice.

Economic inequality explains distortions of various kinds, because it has an impact on other areas of society. Inequality is never a purely economic problem. Rather, there are manifold interactions between the different areas of life. Economic inequality manifests itself mainly in social inequality. Since the two are difficult to separate from each other, the term “socio-economic inequality” is the more precise alternative. Economic and social inequality inevitably also lead to political inequality, even if it is not a plutocracy or a presidential democracy with plutocratic features - as in the USA, where great political influence and high state offices are now mainly reserved for extremely wealthy people.

Economists would like to see equality restricted to the political sphere, but keep it as far away as possible from their own subject area - the economy and society. One can therefore call economics the science of inequality. Perhaps, however, one should speak of a market ideology or of a market fundamentalism rather than a science, if alternatives such as equality and inequality are not even conceptually admitted but dogmatically excluded.

Attempts at glossing over and appeasing

When economic, social, ecological and political problems increase, the desire grows in every society to turn a blind eye to the dangers associated with them and to gloss over the debacle. Ironically, in the run-up to severe economic or ecological crises and in situations of social upheaval, the literature of whitewashing and appeasement is really booming. She is currently addressing climate change as well as the topic of “right-wing extremism and violence” or the problem area “poverty and socio-economic inequality”. The sociologist Martin Schröder, for example, claims that “almost without exception” inequality in Germany is “rated much higher than it actually is.” 28 However, as Schröder did, the socio-economic inequality was based on the different high incomes of the poor and the rich a fallacy and resembled a statistical sleight of hand. Because although one can equate poverty with a low income, wealth must not be reduced to a high income. Rather, wealth always includes, and first and foremost, a large (capital) fortune.

Schröder accuses Karl Marx of a “culturally pessimistic view” because he predicted an impoverishment of the proletariat in the Communist Manifesto. When you see under what working conditions and at what wages transnational corporations have the inhabitants of countries of the so-called Third and Fourth World produce cheap, mass-produced goods for the temples of consumption in the global North, then exactly what Marx and Engels feared happened in their day To this extent hardly imaginable enrichment of a small class of capital owners or major shareholders through brutal exploitation and impoverishment of a huge crowd of defenseless industrial workers. The fact that decades of struggles between workers and trade unionists were necessary to prevent conditions similar to those that still exist in countries of the global south in Western post-war capitalism is not mentioned by Schröder, even though the living conditions of millions of workers in the modern precarious economy, parcel couriers, bicycle couriers and employees in German slaughterhouses, remember this.

Inequality is systematically underestimated

The economist and former Caritas Secretary General Georg Cremer laments the alleged "decline discourse" and claims that Germany is more just than we think. To justify his book title, he mainly cites the “labor market policy that has been successful since 2005” and the increased social spending. In the five years before and in the first two years after the economic and financial crisis of 2008/2009, the latter actually fell in relation to the development of gross domestic product and, given their record level during the economic downturn, could just as easily be seen as an indication of growing social problems. “A lot of money for social policy - that is primarily a sign of poverty.” 29 Incidentally, several EU countries (France, Denmark, Austria, Italy and Sweden) spent more on social issues.

For at least two reasons, Germany is even more unjust than Cremer would like to believe and most citizens are likely to assume: Firstly, the non-utilization rate, i.e. the proportion of those people who, due to their poverty situation, could apply for state transfer payments but do not do so, is very high. It amounts to approx. 50% for the basic security for jobseekers (Hartz IV) and for the basic security for old age up to 68% .30 Of two possible recipients of the unemployment benefit II, one does not apply and two of three poor senior citizens waive what they are entitled to Transfer payments. Those affected often simply do not know that these social transfers exist or that they are entitled to them. Some are too proud, ashamed or shy away from having to deal with paperwork with an authority. Still others fear that they will have to rely on their relatives for maintenance.

Second, the concentration of wealth in Germany is systematically underestimated because of general problems with wealth data and particularly inadequate information on the upper marginal area. The available data sources also record the highest incomes either - like the income and consumption sample of the Federal Statistical Office - due to a "cut-off limit" or are rather imprecise, especially in the upper range, due to the concealment tactics of top earners. DIW employees have found that studies on the distribution relationships based on population surveys also tend to underestimate wealth inequality in Germany.31 Finally, one cannot fall back on official figures from the state on the distribution of private wealth, because the state itself no longer has any data. since he ended the collection of wealth tax on January 1, 1997 and converted the capital gains tax into a flat-rate withholding tax of 25% on January 1, 2009, levied by the (custodian) banks and without a personal assessment of the taxpayer to the tax authorities is forwarded.

The more system-conform sociology and the more market-focused the economy in Germany becomes, the less capable these two sciences “responsible” for the problem of inequality are able to decipher the social structure of society. Their genuine function as specialist disciplines only committed to truth is not the production of ideology, but the demystification of the existing relationships of distribution, power and domination. Only on the surface are the citizens of democratic states equal, be it in terms of their rights and political influence or in terms of their educational and social advancement opportunities. If you take a closer look, you will discover blatant forms of inequality that continue to materialize in classes and strata, even though the social structure is more differentiated, more complex and more complicated to understand today than it was in Marx's lifetime

  • 1 yr. Rousseau: Discourse on Inequality / Discours sur l’inégalité. Critical edition of the integral text, Paderborn 2019, p. 173.
  • 2 J. Berger: About the origin of inequality among people. On the past and present of a key sociological question, in: Zeitschrift für Soziologie, 33rd vol. (2004), no. 5, p. 356.
  • 3 See J.-J. Rousseau, op. a. O., p. 255; J. Berger, loc. a. Cit., P. 358.
  • 4 “By generalizing the connection of people through their needs and the ways of preparing and bringing about the means for them, the accumulation of riches increases - for the greatest profit is drawn from this doubled generality - on the one hand, as on on the other hand, the isolation and limitation of the particular work and thus the dependence and hardship of the class bound to this work, with which the inability to feel and enjoy the further freedoms and especially the intellectual advantages of bourgeois society is connected. "GFW Hegel: Grundlinien der Philosophy of Law, in: ders .: Werke, Bd. 7, Frankfurt a. M. 1970, p. 389.
  • 5 Ibid, p. 390.
  • 6 O. Negt: Work and Human Dignity, Göttingen 2001, p. 240.
  • 7 Cf. on this C. Butterwegge: Die zerrissene Republik. Economic, social and political inequality in Germany, Weinheim, Basel 2020, p. 67 ff.
  • 8 M. Burawoy: Public Sociology. Public sociology against market fundamentalism and global inequality, Weinheim, Basel 2015, p. 191.
  • 9 H. Flassbeck, P. Steinhardt: Failed globalization. Inequality, Money and the Renaissance of the State, Berlin 2018, p. 151 f.
  • 10 Ibid.
  • 11 K. Methfessel, J. M. Winterberg: The price of equality. How Germany is gambling away the opportunities of globalization, Düsseldorf, Munich 1998, p. 79.
  • 12 Cf. C. Butterwegge, B. Lösch, R. Ptak: Critique of Neoliberalism, Wiesbaden 2017.
  • 13 “The qualification of an individual should be convertible into a corresponding professional position, the professional position should be equipped with an income appropriate to it - this is what the achievement ideology wants.” Cf. R. Kreckel: Politische Soziologie der Sozial Inequality, Frankfurt a. M., New York 2004, p. 97.
  • 14 Cf. S. Kuznets: Economic Growth and Income Inequality, in: The American Economic Review, Volume 45 (1955), no. 1, p. 1 ff.
  • 15 B. Milanović: The unequal world. Migration, the one percent and the future of the middle class, Berlin 2016, p. 56.
  • 16 T. Piketty: Capital in the 21st Century, Munich 2014, p. 13 f.
  • 17 “Unequal distribution leads to lower life expectancy, it also leads to lower birth weight and higher infant mortality.” Cf. R. Wilkinson, K. Pickett: Equality is happiness. Why just societies are better for everyone, Berlin 2010, p. 101.
  • 18 “The international comparison makes it clear that there are only two alternatives: either greater inequality in wages and more jobs or greater equality and more unemployed.” Cf. K. Methfessel, J. M. Winterberg. a. a. Cit., P. 77.
  • 19 These include the abolition of stock market turnover tax and trade capital tax, waiver of the levying of wealth tax, multiple reductions in the top tax rate and corporation tax as well as the introduction of the withholding tax on investment income and increasingly generous exemptions for company heirs from inheritance tax.
  • 20 Cf. Federal Ministry of Labor and Social Affairs (Ed.): Lebenslagen in Deutschland. The Fourth Report on Poverty and Wealth of the Federal Government, Bonn, March 2013, p. 465.
  • 21 Cf. H.-W. Sinn: Can Germany still be saved? Munich 2003.
  • 22 Cf. M. Fratzscher: Distribution Struggle. Why Germany is becoming more and more unequal, Munich 2016, p. 249.
  • 23 H.-O. Henkel: The fight for the middle. My commitment to the bourgeoisie, Munich 2007, p. 174.
  • 24Vgl. F. Merz: Dare to do more capitalism. Paths to a Just Society, Munich, Zurich 2008, p. 28 f.
  • 25 Ibid, p. 30.
  • 26 “Inequality is an expression of the diversity of people in terms of their abilities, talents and preferences. Wanting to level this inequality can only dare to be ideologically uptight, even totalitarian. ”Cf. M. Hüther, T. Straubhaar: Die gefühlte injustice. Why we have to endure inequality if we want freedom, Berlin 2009, p. 322.
  • 27 T. Sarrazin: Germany is abolishing itself. How we are putting our country at risk, Munich 2010, p. 129.
  • 28 Cf. M. Schröder: Why the social sciences do not provide a realistic view of the world, in: Society - Economy - Politics (GWP), 68th vol. (2019), no. 2, p. 237.
  • 29 R. Dillmann, A. Schiffer-Nasserie: The social state. On useful poverty and its administration, Hamburg 2018, p. 250.
  • 30 Cf. I. Becker: Financial minimum income and neediness in old age, in: Zeitschrift für Sozialreform, 58th year (2012), no. 2, p. 123; J. Friedrichsen, R. Schmacker: The fear of stigmatization prevents people from making use of transfer payments, in: DIW-Wochenbericht, 86th year (2019), no. 26, p. 456.
  • 31 Cf. C. Westermeier, M. M. Grabka: Great statistical uncertainty in the proportion of the top wealthy in Germany, in: DIW weekly report, 82nd year (2015), no. 7, p. 123 ff.
  • 32 See for more details C. Butterwegge, op. a. Cit., P. 217 ff.

Title: Economists Show Increasing Inequality the Cold Shoulder

Abstract: For some time now, growing inequality has been the cardinal problem of our society, if not of all humanity. While on a global scale this results in crises and wars, leading in turn to major migratory movements, in this country it has led to a threat to cohesion and representative democracy. Nevertheless, most German economists have never seriously addressed the problem of inequality and have never looked for ways to solve it. Rather, they have ignored the problem or negated or relativized its significance.

JEL Classification: B10, B20, D63