Democracy Can’t Survive Without the Welfare State

Wherever we see rising tides of authoritarianism, we can link it to the systematic destruction of the welfare state.

Maya Razmadze interviews Claus Offe Jacobin Dec 16, 2018

Claus Offe is one of the most famous sociologists and political scientists in Germany. His research on the structural problems of late capitalism and his recent interventions in European politics have been touchstones for critical social research and the Left. In this interview, Maya Razmadze spoke with him about the future of work, the instability inherent to even the strongest economies, and why the development of the welfare state has been crucial to democracy.


 

Maya Razmadze (MR):

One of the most well-known attempts to define work goes back to the philosopher Hannah Arendt. She illustrated that the modern era began when work was elevated to the level of a fundamental human activity. However, over the last century, this led to the total transformation of society into a “work society,” in which work itself became synonymous with gainful employment. What are the characteristics of such a society?

Claus Offe (CO):

A positive contractual relationship is one that is formally entered into by free choice, rather than, for example, one that occurs under feudalist-type relations of dependency that one is born into. Yet in fact, the weaker party doesn’t have the option of simply not entering into such contracts.

Technically speaking, a contract is a mutual declaration of intent and can be cancelled as soon as the intent behind it no longer exists; and when that is extrapolated to the macro level, unemployment must be seen either as the result of contracts that never came into existence or contracts that were cancelled.

But what I’m interested in, and what becomes clear in Marx, is that formally free contracts are in fact based on power relationships. A power relationship is a relationship in which one party is more dependent than the other. What we see, then, counter to the freedom to enter into a contract, is the emergence of an asymmetrical dependency.

Another peculiarity of contracts is that they contain a dual claim to ownership: the buyer of labor power has a claim to extract profit from labor, insofar as it constitutes a profitable activity. Yet labor power belongs to the workers who contribute their physical or intellectual ability. Workers don’t just have to work, they also have to want to work. When they don’t, they have to be sanctioned — and this means that within workplaces there is a power relationship between employers and employees.

This is expressed through the relationship of command, or in other words, through the fact that employers have the right to order around their employees. There’s a power relationship on the labor market and a power relationship in the way work is organized. This is why I speak of a dual power relationship: first, the boss tells the employee what work needs to be done today. The boss doesn’t know what this will be in advance; rather, it’s determined by what orders need to be fulfilled. Additionally, there is an obligation to contract (a legal requirement that contracts be completed). This is the basic setup.

The political situation is such that both sides — the boss on one side, and on the other, the union as the collective organ of those selling their labor power — attempt to eliminate this power relationship. Unions attempt this by rolling back the disempowerment of the weaker party and changing its terms. This tug-of-war, which is constantly unfolding on both the micro and macro level, involves the use of resources such as collective bargaining, appeals to normative ideas of fairness and humanity, and so on.

Here, we can grasp the dynamic of class struggle. This was described not only by Marx but also by Max Weber with his term Berufsmenschentum [“professional humanity;” when your profession becomes the basis of your subjectivity]. The Berufsmensch [“professional human”] needs to conscientiously fulfill the responsibilities of the employment contract.

In the process, the human spirit becomes subjected to, in Weber’s words, a complete “fellahization” — an insipid and senseless routine of executing work tasks, and a complete loss of meaning. This recalls Adam Smith’s pin factory example — the complete loss of meaning in this Berufsmenschentum, in which one has to fulfil a function and has no option to do otherwise. On this point, the Weberian formulation has a lot in common with the Marxian one.

MR:

There you describe a loss of meaning. But how can we explain the fact that gainful employment remains so central to our society, and that the fixation on the relationship involved therein is so persistent?

CO:

Naturally, it is also a source of discipline. All those who benefit from this relationship seek to maintain it and to establish it as the only possible relationship. In advanced capitalism, people who don’t achieve or participate in gainful employment are literally inferior — they can’t afford an equal share in what society produces.

Whoever isn’t gainfully employed ends up in a relationship of dependency on a spouse or other family members, which can only be overcome by entering into a gainful employment relationship. Family work, schoolwork, raising children, and so on, are also forms of work, but they aren’t gainful employment. These activities aren’t paid and don’t yield income. Nobilization, i.e., the valorization of gainful employment, is a common cultural thread in our society.

This commitment to gainful employment would be all well and good if everyone genuinely had the chance, at any point in time, to become gainfully employed with all the due safety and security that that entails — if everyone could become an active worker or take on the role of employer. However, this isn’t the case because economic trends and the dynamics that stem from them have made it increasingly uncertain that people can indeed work for money.

Their ability to do so depends on circumstances that employees can’t themselves reliably control. Even if a potential employee does everything to gain qualifications and become as attractive as possible to potential contract partners, others are also doing the same. As one saying aptly puts it: “When everyone is standing on tiptoes, no one can see better.”

Three kinds of competitive relationships exist, here. First, there’s the competitive relationship between employees trying to better themselves, which can be partially cancelled out by collective bargaining agreements. Second, there’s the competitive relationship between employers who want to enlist better workers.

And then, of course, there’s the competitive relationship between capital and labor. Profit and security for the one side means a loss of profit opportunities for the other. No one has portrayed this better than Max Weber. It’s become a basic cultural assumption that fully functional human beings are Berufsmenschen who by necessity pursue a professional activity throughout their lives — a professional activity that unfolds within the framework of employment contracts.

MR:

It makes sense, here, to touch upon the welfare state. Work served as the basis for its emergence and expansion, particularly after World War II. In your earlier writings you argue against a narrow conception of the welfare state as simply a provider of particular social policies, services, and outcomes. But today the socialist states’ version of welfare no longer exists, and in the capitalist West the welfare state has been subjected to several attempts at marketization and liberalization. What is the welfare state’s meaning and function, and in what condition is it in today?

The welfare state is a system of institutions whose full extent almost no one grasps. It is unbelievably complex and in constant transformation; it is a watershed achievement in the history of societal development. It can be seen like the structure of a building that has a basement, a first floor, a second floor, and so on.

In the basement is care for poor people as it existed in pre-modern times, which often took place on the community level and tended to involve providing goods and services directly. On the first floor is the licensing of unions that are legally empowered to strike. Then on the second floor are the various forms of insurance — people pay so-called joint contributions and then obtain benefits in old age, when sick, and (in more recent times) when unemployed, and more recently still when in need of long-term care. On the third floor are benefits that are relatively new and not tied to work, such as child allowances. Also included here are services, such as those provided by the public education system, that are tied not to a person’s work but to their role as a citizen.

The welfare state’s functionality and feasibility depend on all of these systems, all of which are constantly being renovated. The roof of this building may or may not be leak-proof. This means that there must exist something approaching full employment. Full employment isn’t just important because the wealth of the nation, so to speak, must be secured through the prior spending of as much labor power as possible; it’s also important because the finances of the welfare state itself are, to a large extent, based on social insurance contributions and, to a lesser extent, on taxes.

The contributions can only be produced if there exists something like full employment. If it doesn’t, and we do not have continuously growing real income from full employment, problems arise. Therefore, we can say that the welfare state is a corrective to capitalist work society but is also dependent on its functioning.

A competitive relationship decisive for the emergence and development of the welfare state after World War II was the so-called rivalry among political systems [Systemkonkurrenz]. We would not have had a welfare stare in West Germany if Konrad Adenauer, the first postwar chancellor, had not falsely hypothesized that life over in the East might become more attractive in terms of both income and social security.

He claimed that the Communists could build a preferable society and that we had to be prepared for that and act accordingly. He had no idea of the Communists’ lack of control over their own system’s efficiency. His misconception was the driving force behind the welfare state.

In Germany in 1957 something happened that was unheard of, namely an adjustment of pensions. Pensions were no longer just calculated according to years worked and past income earned; they were also calculated according to presently earned income. This policy allowed Adenauer to win the 1957 election with an absolute majority. After the fall of Communism, pension adjustments ceased.

The expansive phase of the welfare state in postwar Germany lasted approximately thirty years, specifically from 1949–1974. This first phase was dominated by the idea of the social market economy in the name of justice: well-being for all, but also security for all against the backdrop of the Cold War. Then came a second phase in which capital and the conservative governments that became hegemonic in the United States and United Kingdom concluded that the system was getting too expensive for them.

Subsequently there was a development that was labelled as social investment policy. Here, the aim was no longer to serve social justice but rather to make investments that would pay off later such as investments in education, but also in other areas like housing and job creation. In social investment policy, “investment” means that social policy doesn’t aim at providing for the needy but rather at generally increasing the efficiency of the national economy.

The third phase of the development of the welfare state began after the end of state socialism. It was said that we, too, couldn’t afford welfare anymore and instead had to get the needy involved in providing their own security. “Activation” [Aktivierung] was the keyword, here. An extreme neoliberal author, Lawrence Mead, claimed that humans had five duties as “state and economic citizens,” and that when they didn’t fulfill these, they might as well perish. The softer variant of this idea is that citizens are responsible not only for the maintenance and preservation of their own earning capacity but also for their own security — in other words, they need to save.

You can’t rely on a pension because pensions are fixed at 40 percent of your income; the rest needs to come from savings, family, inheritance, and so on. What came next were health insurance deductibles, school and university fees, and even fees for kindergarten — a secondary commodification, i.e., a commodification of all of the services that the state had previously provided as benefits. In order to access these now, you have to pay up. That is what the term “activation” expresses. “You have to protect yourself,” “You have to establish your own ability to work.”

Such were the three phases of the postwar development of the welfare state, and the third phase was essentially driven by the end of state socialism. The Adenauerian fear that the rivalry among political systems would put us at a disadvantage is no longer there. Instead, state socialist thinking has lost all hegemonic potential. Capitalist welfare state thinking holds that work comes first, and that once someone has worked, they’ll be insured against unemployment, which was a big problem at the end of the 1920s.

State socialism has a completely different logic, viewing this sequence in reverse: first someone is made into a worker by receiving education, an apartment, and so on from the state. This happens without employment contracts; workers are employed by the state. Then they are formed politically and morally so that they become a loyal to the fatherland and the party. In other words, they’ll go along with the party’s decisions: the party looks after you, and for that you have to do something in exchange.

MR

You’d say that the socialist state was essential to the fact that a welfare state emerged and developed in the West?

CO

Yes, and historians agree. However, this shouldn’t be overemphasized, since from the 1930s onward the trappings of welfare already existed in Scandinavia. In the United States, there was the New Deal. All this existed before the Cold War, but the Cold War was the driving force for the construction and expansion of the Western welfare state.

MR

Today, there are a lot of divergent opinions on the recent reforms to welfare and the labor market. These reforms were the basis of a significant switch from a welfare state that supports self-dependence to one that demands it. They also emphasized both individual and collective “competitiveness.”

CO

We talk about “support and demand.” But it’s now being said that we need to place more value on demand than we’ve done up to now.

MR

Some tend to associate this group of reforms in Germany, generally known as Hartz IV, with a decrease in living standards for the long-term unemployed and a deregulation of the labor market. But others view this as a necessary and appropriate measure in order to get a handle on growing unemployment, to make the economy and the labor market competitive through “activation” policies, and to create the financial basis for pensions.

Germany is doing much better economically than many of its European neighbors and this is cited as evidence that these reforms were the right move after all — the current unemployment rate is 5.2 percent, there’s an urgent need for skilled workers, and the German economy is on the upturn. What were the consequences of the reforms, not only in terms of economic data points, but in terms of society, the individual, and culture?

CO

I was pretty skeptical of the reforms and remain so today. What has generally been portrayed as a positive development in the labor market is justified as such by the fact, among other things, that, within the span of ten years, we’ve increased the gainfully employed population — that is, the number of people participating in professional life and wanting to do so.

Up from 38 million to 44.7 million, more than half of the residential population is gainfully employed. Fantastic! You could also say: pathological! This is nothing other than Berufsmenschentum marginalizing all the other ways of life and spheres of activity that aren’t restricted to gainful employment. There are no housewives anymore, since they all instead appear to be gainfully employed.

Yet this is no reason to celebrate. First, it needs to be established that tomorrow’s economic situation could look completely different. Indeed, its cyclical nature means there’s a certain built-in amount of insecurity that doesn’t go away just because unemployment is currently down.

Second, it has to be said that in spite of this high figure of forty-four million, the amount of hours worked — fifty-eight trillion per year — has remained constant. This means that individual workers are working a lower number of hours because part-time employment, marginal employment, and so on have become more common.

Third, a precarization of work has taken place in which workers have been forced to become more flexible in terms of where they work, what their tasks are, what working conditions they’re faced with, when they work, and so on. Many people literally have no idea what they’ll be doing in two months’ time, what their livelihood will be. This is a stress factor that has socio-medical effects. And work is extremely unevenly distributed. Many people are in a state of permanent stress because they don’t know what they should or will do tomorrow.

It also has to be added that the Federal Republic of Germany has an export surplus in contrast to all others EU member states because it’s advantaged by the euro. If Germany still had the Deutschmark with its current economy, then the exchange rate would render inconceivable the success that its export sector currently enjoys.

Since the euro is a single currency, exporting is much cheaper for the German economy than it would be otherwise. And a substantial portion of jobs are dependent on this. If Trump keeps doing what he’s currently doing and stifling international trade, then Germany will be highly vulnerable. So, so much for the so-called jobs miracle and Hartz IV. These are very unique circumstances.

I think the German economic policy of fueling growth through export rather than through internal demand is extremely risky. It’s not only immoral because the profits are made off the weaknesses of others, it’s also highly dangerous. And there is another failure, here: the Hartz IV legislation imagined that when people are subject to a state that “supports and demands” they’ll be hard-working and disciplined, get up early in the morning, pay for night school out of pocket to keep their skillset as up to date as possible, and one day find a job in the primary labor market with social security contributions.

But the transition from the secondary to the primary labor market is so feeble that only a marginal number of Hartz IV recipients ever make it into the primary labor market. There are two labor markets that are basically segregated from each other.

MR

We’re currently witnessing contradictory developments in the working world. On the one hand, IG Metall, the dominant metalworkers’ union in Germany, recently won the right to a twenty-eight-hour work week and a wage increase for workers in the metal and electronics industry. On the other, we’re seeing an increase in precarious, insecure work that doesn’t provide a stable living. At the same time, new forms of work are emerging.

CO

Yes, on the one hand there’s IG Metall, which is such a strong negotiating partner because it helps create so many export-dependent jobs in sectors like the auto industry, which certainly does practice wage restraint. It could have done much better for itself, but it doesn’t because it realizes that would drive up the costs of German products, which would put profit margins at risk on the American market and so on. Union demands that don’t directly cause increased costs are generally very popular.

To go off topic, I want to say one more thing that’s very important to me because I’ve spent a lot of time working on it: you can compensate work either by paying higher wages, or, as was classically envisioned by Marx and Keynes, you can do so by reducing the amount of time people spend engaged in gainful employment.

You can pay workers with money, with time, or with some combination of the two. Surprisingly, right now it’s becoming clear that workers don’t place as much value on having more time as they do on money. The temporal compensation of labor, i.e., the second-best option, is not particularly attractive.

Why is this the case? There are three reasons. First, because you can’t save time like that: twenty minutes today and twenty tomorrow don’t add up to forty minutes on the weekend. Time is “sticky,” so to speak. Second, time in itself is only attractive when you have the money to do something interesting with it, to get away, go to a restaurant, and so forth. You always need money for that. So, the combination of money and time is appealing. Third, if you distinguish between chronometry and chronology, then the value of time varies at different points in time. Wednesday morning is less valuable because everyone else is working, which makes things boring, whereas time during the weekend is much more valuable. The union says, we want more time, and the workers say, we want more money.

The most successful political slogan in the history of Germany was a poster with a worker and a little girl holding hands with the little girl saying: “On Saturdays, dad belongs to me!” That is the invention of the weekend! By now, the politics of time have led larger companies to give employees the option of reducing work hours. But money is the medium of choice. Keynes wrote an essay in 1930 titled “Economic Possibilities for Our Grandchildren” in which he envisioned a fifteen-hour work week. This is no longer up to date.

At the same time, a platform economy is emerging, especially in America but also increasingly here in Germany. Say a wall must be painted in a garage, or a roof shingled — simple construction tasks. These are publicly advertised, and people pay for individual services through what’s known as a service contract. And exactly this is now happening via platform. When you need money, you can find where there’s work to be done and what it is.

This is an extreme form of gainful employment, enabled by a digital platform, that exists without an employment contract. When the work is done, our contractual relationship ends. Every day you can look for what you want. What we’re seeing daily with, for example, the means of transport we use, taxis, Ubers, window cleaning, food delivery, even the commodification of home work — these are the new working conditions we face, and typically they’re not great. They are precarious and indeed characteristic for people at a certain stage in their lives. For IG Metall, to achieve their collective bargaining agreement was a big success.

MR

Now I’d like us to expand our gaze towards Eastern European societies. You recently stated in a lecture that “Only a strong state can be a democratic state. A state that determines nothing beyond units of measurement and names of streets cannot be democratic.” Is there a connection between democracy and the welfare state? Could the weakness of the welfare state or even its absence be a potential cause of Eastern European societies time and again falling back into nationalism and authoritarianism?

After all, there’s nothing else to push back against the recommodification — the market pressure — that you mentioned, to correct market failure, or generally to concern itself with producing social cohesion. In many cases, disappointments, frustrations, worries, and fears are channeled precisely into the emergence of right-wing, antidemocratic tendencies.

CO

Yes, that is correct. As it happens, all theories of Western liberal democracies’ socio-historical development are divided into three stages: the eighteenth century was the century in which the idea of constitutional democracy — the subjugation of the authority of the state to the constitution — emerged. This had to do with the French and American Revolutions. Then in the nineteenth century, democracy was invented, that is, it became possible for an increasing majority of the population to take part in the formation of the political will and to take responsibility for national politics. In the twentieth century, the welfare state was invented.

This is a cumulative development. The result is that constitutionally democratic states are capable administrative states. They are states with administrative apparatuses whose employees have learned what they do through formal education and are competent and incorruptible. These are the conditions of a rational bureaucracy as described by Max Weber. In Eastern Europe, in the post-Communist societies, none of these three stages has taken place.

Additionally, one of state socialism’s decisive failings was the impossibility of society engaging in introspection and self-evaluation. These are important functions of constitutional rights and democracy. Freedom of the press is a means of societal introspection. The press reports, journalists report, and no one can stop them from doing so. In a different way, so, too, scholarship fulfils this function. Art does this. Even accounting does this. And in the state-socialist countries none of this existed.

On the other hand, the entire process of democratization and liberalization in post-socialist societies in Central and Eastern Europe was based on a fantastic neoliberal misunderstanding, namely that everything would simply take a turn for the better through the introduction of the market economy.

A colleague from Frankfurt an der Oder once described this as a caricature of a “grab and run capitalism”: grab what you can, make a profit, get out. The competition needed a constitutional-democratic framing. People simply thought that when we had the market, everything would work out. If they also introduced democracy with party competition and parliamentary legislation like we have in the West, then this would lead to prosperity.

This was far from the case! The resistance against the state and the state bureaucracy, and against the important political achievements of the state-socialist constitutions, came to a head under the auspices of neoliberalism. This process played out by way of oligarchs, through corruption, through family ties — in other words, everything that stands opposite to Weberian bureaucratic rationality.

The disastrous result was that no one sticks to the rules. Some people got extremely rich, but the satisfaction of the population — with both the economic and the democratic developments that have taken place — continues to fall, like recently in Armenia. The people are justifiably angry because false promises weren’t fulfilled and because they don’t have solid statehood.

To get back to the topic: we’re seeing the same phenomenon in Western Europe. There, too, the state could do more than just name streets and determine units of measurement. Yet in Berlin, they can’t even build an airport! We also don’t have statehood on the European level. Corruption is to Eastern Europe what the ambiguous constitutional situation is to Western Europe.

In the East and West, we share the similarity of having a weak state — a helpless, clueless, and increasingly passive state. If we want to solve the migration crisis, we’d need a national decision-making body. Instead we have this muddle between Seehofer, Merkel, and Macron, and no one knows what’s going on. The regulated norms and procedures of the state should include a reliable system of rule formation. Someone has to decide how we want to proceed with migrants in the future and how we will cope with our domestic population in light of the situation — how things will be financed, and so on. My point is that no decisions can be made on the most important questions.

MR

My final question has to do with the future of work. In your view, what does the future of the “work society” look like?

CO

It’s safe to say that we’re never again going to have full employment understood as professional activity that is permanent, secure, full-time, and remunerated according to existing standards. We might even have up to 20 percent unemployment because production is happening elsewhere.

The numbers are interesting, no? Germany is over-industrialized: far too many people are spending time manufacturing products, one-fifth of the workforce. In the United Kingdom and in the United States that figure is 10 percent. Production is occurring elsewhere. 50 percent of economic growth from 2011 has happened in India and China. That’s where production is happening, and they can produce more cheaply and with the same level of technological sophistication. This is something we have to accept.

80 percent of this foreseeable deviation from the normality of gainful employment is a result of the fact that we have artificial intelligence and automation — that we can implement labor-saving technological changes. To name just one example: in half of the states in the United States, the single most common job is driver. If there are self-driving cars, all drivers will become unemployed and traffic safety will increase, if everything goes well. This is no longer a distant reality! We have labor-saving technology. The technological possibilities for replacing labor are massive.

And at the same time we’re in a phase of economic stagnation. The richer the national economies get, the lower their growth in the future. This means that the distribution of societal resources through employment contracts and wages is a model that is no longer sufficient. Therefore, we need another model, namely, one involving basic income, benefits, national dividends — in other words, the distribution of the productivities and yields of entire national economies to citizens, and similar measures. It needs to be citizens who are paid instead of employers and employees. This is the conviction at which I’ve arrived.

MR

So you’re in favor of enhancing the social status of and politically stabilizing alternative forms of works that don’t count as gainful employment, and whose goal isn’t to yield income, but are useful activities?

CO

Yes, absolutely. To some extent this is happening with the “sharing economy.” Instead of buying cars or drills, people are renting and sharing them. Bad news for the auto industry! But a good thing from an ecological perspective, using fewer materials. But it is quite difficult to convince people that everything they do be done with and for other people, to convince them to rent rather than own.

When someone is cooking dinner for a family, they could be cooking dinner for three families without much more effort, and then they only need to cook every third day, which gives them more free time. It’s worth thinking about informal economies like this that consist not of gainful employment but rather of autonomous forms of work. At the moment there’s considerable movement on this front.

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