Background

The sober diagnosis for Europe, 2020, in a word: A wealthy but shaken giant. An abundance of money in the elegant and luxurious metropolitan centers, surrounded by the ugly faces of misery and crime. Twenty years after the millennium, the paradise promised by eloquent politicians has not yet arrived. How has it come to this? Why can the welthiest region of the world not rid itself of poverty and unemployment? Can anything be done to resolve the roiling conflicts now prevailing?

Let us look closer. Over the last 25 years, three factors led to the doubling of labor productivity, and thus of available wealth: by more efficient technologies within individual firms; increased electronically mediated communication between them; and accompanying organizational changes. EDI (Electronic Data Interchange), CSCW (Computer-Supported Cooperative Work), and to some extent TC (Tele-Conferencing) have become common methods to overcome differences in space and time. Euronet, the European broadband electronic network, connects more than 95 percent of the enterprises and about two-thirds of the homes. Human resources are mobilized and integrated into a worldwide network of production and distribution - from nearly every point of the earth - whenever they are needed. And this is the crucial point. The demand for workers in relation to supply is met only by chance. And here the dark side of the market appears. The competitive striving for increased market share and higher profits, for new products and production processes, split the enterprises and their workers and employees into winners and losers. Although labor productivity rises, and the efficiency of production is increased, by the very process the number of redundant individuals is also growing. Although growth is flourishing, wealth produced is not available to all to more or less the same extent. Well paid and long-lasting jobs have become increasingly scarce. Those who still have jobs must work harder and harder, while a growing fraction of the population is enforced to enjoy leisure time.

In our Europe of 2020, the situation has become even worse than in the other two regions of the "Triad", NAFTA and the Far East. The opening of the former socialist countries resulted in a tremendously increased cheap labor supply in the immediate neighborhood of the high-wage economies of Western Europe. More and more jobs in the West have been moved to the East, and for the remaining ones in the West wages and salaries have been eroded through the pressure of competition. Although these events could be evaluated positively from a theoretical point of view of social equality (to even out disparities inside Europe), the trend towards convergence of wages has not been evaluated positively by government or labor of the rich countries. Unemployment has become high everywhere, although it should have been lower for demographic reasons. Every cyclical economic crisis has added to the level of unemployed. Any increase in unemployment has produced the next crisis. Thus an awkward vicious circle has arisen. The result: About one third of the labor force in Europe is now without jobs.

The demise of the socialist bloc not only had effects on the economy and politics. An additional consequence could be seen in the level of social commitment: the erosion of holistic views, and the rejection of responsibility for all members of society by individuals, groups, political parties, and all other social institutions. After the Second World War, Western Europe was facing young socialist states at its Eastern border. As a defense strategy against communism, efforts were made to try to control the dark side of capitalism: the welfare state was invented. The walls constructed by the communists could not only be used for political propaganda against them; in fact the iron curtain had a beneficial effect on the Western economies, for the workers in particular. To a large extent, they were shielded from the poor masses of the East and their competitive power on the labor market. The wage level rose considerably, and social security systems boomed. In the nineties, when the socialist countries had disappeared, the only force remaining to control and to shape the economy was the market. The religious communities, traditionally in favor of cooperation, struggled hard for change, but their influence was limited to the inside of the churches or temples. In the streets, "catch as catch can" became the terrorist rule.

The frustration and despair of the outcasts grew as much as did the economy between the down-swings. After violence was experienced in the capitals of the US, it infected Europe's cities as well. Theft and murder, drugs and sects spread everywhere. The Third World knocked at the doors of Europe, but the European Union remained silent in the face of the demands of the people located in Eastern and Southern regions. The police and armed forces represented virtually the only sectors with growing employment. Right wing parties came into power, with the promise of right and order, but they soon failed when it become evident that they, too, could not solve the chronic crises within society. At some places, pogroms and massacres broke out. The scape-goats now: Africans, Roma, Sinti, or other common people with dark skin. It seemed to be a repetition of the Third Reich, but it was not: the dreadful activities were opposed by governments, but could not be stopped by them. Through spontaneous actions of violence, the killing continued. The wealthy part of the population carried weapons or hired body-guards; the houses of the rich changed into armed fortresses. Telecommunication became more important than ever. Many people did not dare to attend meetings in the evening, so they organized tele-conferences to communicate without fear. Physical access to the working place became dangerous because mafia-like structures and organized crime spread everywhere, in particular from the poorest countries, the former states of the Soviet Union and of Northern Africa. The situation was also aggravated by the state of the environment. The depletion of the ozone layer, the demise of the forests, the high emission rates of toxic substances into the air, polluted rivers and lakes, oil-covered beaches, made it increasingly unpleasant to stay outside. Many flats were supplied with filtering devices which produced clean air inside the rooms. People did not leave their homes unless they had to. Tele-shopping became necessary, tele-work the rule.

It was at this time that intellectuals began to analyze the social and economic situation in Europe. In addition to others, they could go back to scholarly works initiated by Futuroscope, a French futuristic park, located near Poitiers, France, in 1995. They sought a rational explanation of the difficulties. Their controversial result: the origin of the crisis was not located outside, but lay in the intrinsic structure of the economy. While markets can be instruments of democracy and peace under the condition of equal factor endowment, the production system based on private property is not compatible with democratic behavior and equal rights. Firms represent a hierarchical and unequal system, derived from the property rights of the owner. Workers do not offer their services in a voluntary way, but on an obligatory basis. Although the labor market was no longer a system where personal pressure is exerted by its predecessors slavery and feudalism, it still lacks voluntary and participatory elements important for a functioning democracy. While the economic system produces innovations and is able to increase labor productivity and efficiency of production to a breath-taking extent (within the framework of given prices), at the same moment it systematically produces and reproduces inequality by its very structure.

The following graph shows two basic loops of value-circulation in capitalistic economies. The left one represents the (re-)production of the workers, offering their services - in exchange for wages - to the enterprises. With their wages they are able to buy their everyday needs. The wage level depends on the general level of technology and the political bargaining process. Of course wages may rise or fall, but the main process is a (re-)productive one and is performed more or less on the same level. The other loop on the right hand side represents the accumulation of capital by private or public firms. Entrepreneurs and their shareholders become more wealthy by a completely different mechanism: they are able to accumulate wealth of a different kind (machinery, buildings, financial assets etc.), which remains their property. Consumption to them is not their essential activity. To put it in mathematical terms: the right loop represents an integral operation, the left just a multiplication by a factor of about 1, depending on the situation of political power, economic growth or decline.

Such being the general situation, what concepts were created by intellectuals in those days? They could see that classical approaches, implemented by the crown, later by political parties and religious bodies, had all failed. As history has shown to most of us, and finally to the intellectuals as well, the traditional slogans which accompanied the revolutions of the 20th century, such as "expropriate the exploiters", were no longer valid. Instead of the antagonistic policy of the socialist revolutionaries of the past, some intellectuals now looked for a different approach. To them it seemed no longer useful to struggle for power for only one social group, and to annihilate opponents, because this could be the reason for self-elimination in this highly interdependent society, and they looked for a cobweb of institutions which would be able to tame the dark features of capitalism in a new way. What could the new subjects be to achieve this goal? How should they be defined? As the classical subject of history in Marxian writings, the working class, had been dismantled by fractionating workers into too much different jobs, qualifications and payment, the new subjects had to be of a smaller size. Smaller groups should replace social classes or other institutions representative of traditional society. They had to be installed on a legal basis, should take care of their members first, but eventually could be linked to other groups or outside persons, encouraged by certain material and psychological incentives. Egotism should be limited, the individuals should work and live in a social arrangement that prevents them from being too selfish on the one hand, and should promote altruism on the other, by offering rewards for cooperative behavior. The increasing coldness of a technologically integrated society should be warmed by bringing people closer. This integration could not be achieved by technology alone, they declared, but through social constructions which could serve as a vehicle to increase collaboration, to strengthen the ability for self-determination, to exert democratic rights on a group level, to be able to control ones own social, economic, qualification and health-status level.

The above goals and results of a changed "gestalt" of society should not remain abstract, but had to be experienced personally, by each member of society, in an appropriate manner. Thus the size of the groups should not be too large.

The most radical of the intellectuals involved in concepts for a changed social structure demanded the complete transformation of the traditional bodies of parlamentarianism through a different principle of delegation. No longer should political parties fill the Houses of Parliament, but delegates of the new groups. They should be able not only to discuss new laws, but to decide on them as well. Their principle was to increase the direct influence and power of the affected on their social framework and on the overall rules of the social game. The more moderate ones allowed for an interim phase of competition between the new institutions and the traditional ones, but as well they believed in the overwhelming victory of the group-society.

Different kinds of groups with specialized working organizations were focused; partly they could be found in past experience, partly they were invented anew. The groups were to counterbalance the traditional social institutions, and transform them to achieve more favorable effects. To overcome the need for more democratic structures at the workplace, so called Intrapreneurial Groups were created. As a side-effect they could eventually create new jobs, with a wealth of very different profiles, time-structures, and qualifications. To make the bureaucratically ossified system of social security more humane and more flexible, Peer Group Care was invented. Small groups of singles, couples, with or without children, should take care of a few invalid, impaired, unemployed persons. They should be promoted by state empowering institutions, and by some material incentive. Study Circles, deeply rooted in the paradigm of self-organization, should carry out the task of permanent learning. This should be done not by a one-way teaching setup, but by groups with but little hierarchy, and by a continuous shift of the teaching and learning role from one member to the other. The predecessors of study circles go back to the Protestant bible studying circles of Scandinavia in the 19th century, and are redefined now as secularized and democratic learning tools. Workers' Health Assurance Groups should improve the health status on the job by direct evaluation of the factors promoting and hindering good health and adequate social climate. These groups could combine their demands for better health with political action aimed at the provision of equipment more protective for health (as done by Italian trade unions in the last century). The following table summarizes the problems faced and the remedies proposed.

Following the enactment of legislation for new groups, over the last few years we have seen the establishments of such groups throughout the region.

The organizational structure of each group is very similar to the others. Membership in a particular group is voluntary, although sometimes there is a need to be a member in one of the groups (If people wish to earn money they must look for a traditional job or approach one of the Intrapreneurial Groups). The group leaders, called "coaches", are elected for a certain period, usually for several months. In some cases they have money or other material resources at their disposal. The group assembly is empowered to decide upon the use and distribution of these assets in periodic meetings.

At the moment, there is public discussion on how to finance the exploding costs of social welfare in all public media, electronic networks, TV channels, the radio network, and the press. There are divergent opinions: The first one states that social security benefits should be reduced to a minimum, because every person who wants to work can do so without difficulty. It is argued that people are lazy by nature, they should try to get a job, and that they are themselves guilty if they cannot find one, thus they should not receive any public money at all. Social insurance, in particular unemployment insurance, should be canceled, and there would not be any need for financing. The somewhat more enlightened opposition has argued in a different way: because the economy does not supply enough jobs for everybody willing to work, the redundant individuals not having found a job should receive benefits from the state since it is the responsibility of the public hand to compensate the population for the malfunction of the economic system.

The opposition prefers to finance the existing social security system by a combination of progressive direct (in particular taxes on wages) and indirect (in particular value-added or turnover) taxes. The difficulty with this system is that tax rates have to be increased because of the rising government spending for social insurance benefits, and tax-evasion could become more common than before. On the other hand, the opposition says this system is more socially just than any other, because it would involve progressive taxation, and take most from the highest incomes. The traditional social security systems were usually based on tax receipts up to a fixed maximum amount, irrespective of the anount of income.

A third position goes beyond the traditional taxation system. It demands a high tax rate on environmental consumption, in particular on energy, special resources and materials (green tax), and the exemption of all direct taxes on wages and income. This would lower gross wages and thus the personnel costs to the firms. The proponents expect an increase in new jobs because material and energy would become comparatively more expensive than to hire a worker. Saving energy and natural resources would be an important side-effect. Capital investments would be driven in a more favorable direction. New, environmentally sound production and services with all their positive effects on the quality of life would outweigh traditional technologies. More jobs would be created, so that the amount required to finance the unemployed could be considerably reduced. If unemployment went down, a number of additional favorable consequences would result: criminal rates would be reduced, a higher rate of marriages would occur, the health status would improve, and thus life-expectancy would increase on average, among other effects.

The relative weight of the first position is shrinking. The reason could be that more and more people feel it is not sufficient that the state merely leaves them alone and assumes no responsibility for providing a social infrastructure. This opinion is quite understandable at first glance for the large group of the unemployed. But there is a reason for the employed to adhere to this opinion as well: they increasingly fear violence and social disruption, as consequences of a growing mass of unemployed.

The main discussion goes on between the green tax position and the promoters of a traditional tax and social security system. Scientists and politicians write a lot of controversial articles at the moment, and letters to the editor are booming. But this is not the only frontline. Unfortunately for the green tax voters they are split into two or more opposing groups: These differ as to the level of the tax rate required, and to what extent green taxes should be redistributed, as well as to whom. One group favors low green tax rates, just enough to compensate for the direct taxes which have just been canceled, and no redistribution; the other votes for high and permanently increasing rates. The funds generated by continuously increasing environmental tax rates could be spent in different ways over time. The initial use would be to finance unemployment insurance, and a next step could be to compensate for health care insurance, later on for contributions to social security, while a fourth use would be to compensate for direct taxes on employees (in the beginning, tax payments by firms for their employees would remain unchanged), and the last stage - a rather utopian proposal - could be its use for income redistribution. The latter could be done in two alternative or combined ways: first, by financing a base income for every citizen in the country; or, second, as an alternative, by combining it with a negative income tax (as proposed by the well known economist Milton Freedman in the middle of the last century, but only in respect of the contribution of the firm) on the poor. One of the main advantages of the base income approach is the increase in social security, and, perhaps, a reduction in the cost of administration. While the income distribution of wage earners would change only slightly, a fixed income would be assured for the lowest income groups. Thus, the overall distribution would become more equal than before. The traditional social security system could become "leaner".

A negative income tax would do somewhat more for redistribution. Higher wages would be more heavily taxed, and the negative tax would be added to smaller incomes. The problem with the negative tax is the higher amount of administrative overhead which must be financed by society as a whole.

In my opinion, the government should be very careful in any case in using the instrument of the tax rate. If green taxes and/or negative income taxes are introduced, the technique should be applied on an experimental basis first. The government should decide on tax rates by taking into account the number of unemployed. The higher the unemployment, the higher the green tax rates that should be set. The rationale behind this is to achieve a susbstantial change in relative prices. The price of labor should be lower, while the price of natural resources and energy should be increased. A reduction of unemployment can thus be expected. But I would remind you: unemployment will not become lower automatically. Institutions are needed to enable the unemployed to take advantage of the new jobs; programs for integration into the world of labor are necessary. I am optimistic that the recently initiated group scheme can have a positive impact in the struggle against unemployment. And, finally, it could be useful to bring into the discussion the traditional parameters again, such as the length of the working week and the length of the working life.