European crisis: Germany and the role of the trade unions

November 10, 2012

Germany is usually presented in the mainstream media as having successfully weathered Europe’s vast economic crisis. German Chancellor Angel Merkel from the Christian Democratic Union (CDU) has gained enormous influence on the European political and financial scene.

By contrast, in protests across Greece, Spain and other countries hit hardest by the crisis, references about Germany as the “Fourth Reich” are increasingly being voiced.

Inside the country, ordinary working people are made to think that their taxes are paying for the debts of the southern European countries, caused, according to the tabloid media, by lazy Mediterranean workers who never meet their tax obligations.

What role, if any, have Germany’s unions played in fighting these myths of Merkel, the CDU and the German gutter press?

Capital 5, Labour 0

In 2000-01, at the time of the financial crisis, the first coalition government of the Social-Democratic Party (SPD) and Greens (the so called Red-Green coalition) was in office.

In the context of that crisis and of revelations about the “ineffectiveness” of the social security system, the government set up a commission, led by former Volkswagen AG human resources director Peter Hartz, to develop recommendations for changes that would help halve the 4 million registered unemployed within four years.

At the time, the unemployment rate in Germany was 10.8%, made up of 8.5% in the western states and 19.2% in the eastern states. By June this year, it was 6.6%, with an additional 8.8% of under-employed people, covering unemployed people engaged in compulsory “one euro job” schemes and those who are unemployed but enrolled in further education programs.

The Hartz commission consisted of representatives from Germany’s big corporations, such as DaimlerChrysler, Volkswagen, BASF and Deutsche Bank, along with two union representatives. It recommended a four-step implementation of its recommendations, starting from January 1, 2003.

The recommendations included the extension of limited work contracts and labour hire, the expansion of options for subcontracting and so called “mini-jobs” (up to 400 euro a month), cuts to the unemployment benefit and nearly unpaid, forced work (at one euro an hour) for the long-term unemployed.

The re-election of the Red-Green coalition in September 2002 guaranteed the implementation of the Hartz recommendations, with some minor amendments but with an enormous impact on working people.

Now dubbed Agenda 2010 and announced by SPD chancellor Gerhard Schroeder in March 2003, the Hartz package set in motion the “wage dumping” that has allowed German capital to gain enormous strength over the past nine years. (It should be noted that the German Greens endorsed these reforms by a majority of 90% at their special congress in June 2003.)

By December 2010, the result of the Hartz “reforms” was 7.4 million people working in jobs limited to €400 a month and the doubling to 780,000 of workers on temporary contracts.

It was also estimated that more than 2 million people were working for less than €6 an hour. (There is no minimum wage in Germany, while the minimum wage in France is €9.22.)

The Friedrich Ebert Foundation, a think-tank aligned with the SPD, said there has been no wage compensation for inflation since 2004 and in most years real income fell.

In terms of real-wage growth between 2000 and 2009, Germany fared worst of all European states as the wage share in German national income fell, from 72% to 63.6% (2007).

Driven by the goal of bolstering the position of German finance capital and raising the competitiveness of industrial capital, the Red-Green coalition government also initiated further wealth distribution reforms, including a rise in the pension age to 67, cuts to health entitlements, and a cut in the top income tax bracket from 48.5% to 42%.

At the same time, bailout measures undertaken during the course of the financial and economic crisis have pushed private debts and liabilities onto the government balance sheets. This has significantly raised the public debt of German local councils and states, resulting in cuts to social services while private wealth has increased.

The most recent report commissioned by the German government on poverty and wealth found that while the net assets of the German state declined between the start of 1992 and 2012 by more than €800 billion, the net assets of private households nearly doubled, from about €4.6 trillion to close to €10 trillion.

The report also confirmed the growing gap between rich and poor. In 2010, private wealth in Germany was €10.1 trillion, of which €4.9 trillion was cash wealth and €5.2 trillion held in assets. The richest 1% of the German population owns about 40% of this wealth while half of the German population owns less than 1%.

Union servility

What has been the role of German organised labour during this huge advance of capital?

Since 1945, the trade unions have by and large been organised by industry following the principle of one company, one union. They are not nominally aligned to any given political ideology, receive no funds from political parties, but have historically been close to the SPD.

The specifically German relationship between capital and organised labour can be dated back to 1952 with the enactment of the work-constitution act, which legislated a dual representation of labour interests.

On the company level, labour has been represented by workers councils elected by employees, although this is not compulsory. On the industry level, labour has been represented by trade unions.

This model has been referred to as a social partnership or “co-determination”. Essentially, it institutionalised workplace conflict subject to negotiations or determination by the courts.

On the surface, hand in hand with the expansion of the welfare state this relationship appeared to be working in the interest of labour as long as the post-war economy expanded. Both represented concessions to working people in a context of Cold War competition from “communism”.

However, a system that seemed to work for labour during the boom became a rope around its neck after a period of more frequent and deeper crises began.

By the end of 2010, union membership had shrank by about 5% over the previous ten years, down to 19% of workers or roughly 8.1 million people.

A key moment in this retreat was the early election held in September 2005, which produced the second post-war coalition government of the CDU and SPD (traditionally the two largest political parties). Since then Merkel has been the face of German politics, with the SPD once again in opposition after the 2009 election.

During this time, the German trade unions, subservient to the SPD, accepted the “need” to prop up and boost the competitiveness of German capital at the cost of working conditions, rights and wages. It was claimed that these concessions had to be made to maintain job security.

Some rhetorical opposition was voiced at times by the peak German Trade Union Confederation (DGB), but this was never backed up by any campaigns.

That has been explained in part by the fact that the original Hartz “reforms” were pushed by an SPD-led government rather than by a conservative one. However, the unions also accepted the argument that production in Germany was “too expensive”, robbing them of any confidence to mobilise working people against the coalition government’s offensive on behalf of big capital.

When the trade unions referred to the need to maintain Germany as a place of production and to increase competitiveness they argued that this would maintain job security. However, the continual rise in the casual employment sector has contradicted the validity of this argument.

What the unions really referred to when they talked about job security was that of a particular section of the organised working class, essentially in large-scale export-oriented enterprises covered by the same industry awards, like the car industry.

In Germany, the best-organised workers are still in the metal and electrical industry, especially among the large car makers.

Also well organised are workers in the now relatively small steel industry, some areas of the public service and parts of the formerly state-owned post office and railways. The private retail sector is uneven and numerically not strong in terms of union membership.

The same applies to banks and insurance companies, hotels, restaurants and security firms. Craft trades also have below average levels of trade union organisation.

Thus the reality of life in Germany for working people as a whole has been far from good. However, the effect of the attacks on working conditions and the redistribution of wealth to the top has allowed the export industry to undermine European competitors and contributed to the exacerbation of the economic crisis in other countries.

Also, German finance capital has benefited from high interest repayments made by these countries.

Here again the German unions have sided with German capital. In September last year, the DGB chairperson together with the president of the main employer association called for the Bundestag to not block the creation of the European Financial Stability Facility.

This was despite this bailout fund moving taxpayers’ money into private financial institutions, including German banks.

New coalition

However, the robbery of labour and the poor in which most union leaders have acquiesced cannot go on forever. Most recently, a nationwide coalition has been formed to tackle the growing income and wealth gap.

The coalition is made up of non-government organisations, social service peak bodies and the largest two unions, IG Metall and ver.di (union for the service industry, including parts of the public service). The coalition aims at wealth redistribution within Germany, but it also includes European-wide demands.

Its first mass mobilisation took place on September 29 and attracted about 40,000 people across Germany. Similar protests were held in other European cities.

Will the bulk of German unions start to change their position and begin an offensive strategy for lost wages and conditions for German workers, while also engaging actively in solidarity with other European workers? That is the key struggle for German labour today.

[Sibylle Kaczorek is a member of the Australian Socialist Alliance and based in Berlin.]

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