Around the time the German reforms were implemented, “civil society” was a buzzword and a fashionable topic of debate. It is especially relevant here because it also relates to east-west transfers. Eastern European dissidents relied on emancipative societies offering nonviolent, organized resistance, to oppose the repressive states they inhabited and overcome dictatorships. Their approach echoed earlier concepts such as nineteenth-century Poland’s praca organiczna (literally “organic work”), by which Polish society aimed to assert itself against the partition powers Prussia, Russia, and Austria. In the 1980s, the goal of a civil society that practiced resistance was actually realized in Poland through the Solidarność movement. When martial law was imposed and leading trade unionists imprisoned, the Solidarność cells in industry survived. The oppositional press went underground; lecturers organized a “flying university” (uniwersytet latający). When the communist regimes were toppled, the notion of active civil society seemed vindicated.22
But in 1990 the civil rights movements splintered into many different factions, and the public soon had more pressing concerns than attending demonstrations. The countries in transition received democratic constitutions. But low election turnouts, the electoral success of political unknowns such as the Polish-Canadian millionaire Stanisław Tymiński—who gained 3.8 million votes in the Polish presidential elections of 1990, relegating Prime Minister Tadeusz Mazowiecki to third place—and the public’s unease with democracy and its institutions (shown by opinion polls) were all signs that the new order was built on shaky ground. There was still some way to go to reach the goal of a politically active society, building democracy from below.
Eastern European intellectuals including Adam Michnik in Poland, György Konrad in Hungary, and Jiří Gruša in the Czech Republic, continued to propagate the ideal of civil society during the nineties. They were frequent guests in Germany, where they contributed to many discussions. Further west, in the United States, a parallel debate was being conducted about the relationship between the state and society. In 1995, political scientist Robert Putnam published the essay “Bowling Alone.” It lamented the rise of social isolation and the demise of community involvement in the USA.23 The remedy Putnam proposed was to create more grassroots initiatives and associations to build up the necessary social capital for a functioning democracy. Politically, the author sympathized with the Republicans. Like them, he idealized small-town America and local community life, but was skeptical of “big government.” The myth of big government was one of the most successful ideological constructs of neoliberalism. While it has a long prehistory in American libertarian thinking, its popularity grew in the 1980s until it eventually became a rallying cry of the Tea Party movement.
In Western Europe, Liberals, Social Democrats, and Green parties also advocated public initiative and an active civil society. The spectrum of proponents thus ranged from conservative Americans in the United States to mostly anti-American Greens in Europe. The leftist civil rights movement, inspired by Michel Foucault and Antonio Gramsci, regarded government as a repressive apparatus. The East German and Czech ecological movements, important centers of opposition in the eighties, were similarly critical of state power. The common ground thus shared by such a surprisingly broad spectrum was a desire for more public participation to strengthen democracy from below.
Germany was particularly receptive to calls for a more active civil society because of the strain on the welfare state after unification. Indeed, the concept seemed to suggest solutions for so many of the political and social problems of the late nineties. At the same time, it was vague enough to be interpreted in a range of political lights. The ruling Social Democrats mobilized it for their purposes and organized a number of congresses under the banner of activating civil society. Party committees debated it. The German Green Party embraced it. By the time sociologist Ulrich Beck, best known for his concept of reflexive modernity, warned against its becoming misappropriated by party politics it was already too late. Gerhard Schröder’s manifesto for a civil society (which he tautologically termed zivile Bürgergesellschaft—zivil and bürgerlich both meaning civil)24 marked the pinnacle of this trend in 2000. In the United Kingdom, Tony Blair’s advisor and intellectual mentor Anthony Giddens also promoted the idea of civil society. From the loose jumble of notions associated with it, Blair and Schröder selected as the prime element the principle of reducing the state.
British and American skepticism about the state was echoed in Poland. In a country with a long history of foreign rule, Polish society traditionally viewed government with mistrust. These attitudes were in turn similar to views in Italy, where the state (especially the tax authorities and the Guardia di Finanza) is widely perceived as hostile, or at any rate a troublesome money-grabber. According to Putnam, southern Italy’s economy and society are weaker than those of the north precisely because of the lack of public involvement and low confidence in the state, plus a shortage of social capital.25 With almost eschatological assurance, experts and policymakers advanced the idea that activating civil society would solve a range of political and social problems. Moreover, the philosophical aspect of their arguments assured them the intellectual high ground, which the SPD in Germany was keen to take.
But none of this helped in the face of mass protests, which Chancellor Schröder unleashed with Agenda 2010. After a series of regional election losses and a defeat in the traditional SPD stronghold North-Rhine Westphalia, Schröder decided to take full risk and call new elections. The subsequent election campaign reflected the predominance of neoliberal reform discourse. Promoting his Agenda 2010, Schröder promised that the painful cuts it entailed would eventually bring improvement. Indeed, the first signs of economic recovery were already beginning to show. Opposition leader Angela Merkel advocated an even more radical program of reforms, devised by the Christian Democrats at the party conference in Leipzig in 2003. She announced the “largest and most extensive reform package … for a long time” and the dawn of a “second era of enterprise-founding” in Germany.
Merkel defended social security cuts, accusing “work-shy” recipients of “welfare abuse,” and called for even more radical changes to the welfare state. She envisioned a “premium-based model” for the health insurance system, where everybody would pay a flat rate of two hundred euros instead of the progressive, income-based contributions. This poll tax for health care, she claimed, would have both economic and social advantages; the increase in “personal responsibility and personal provision” purportedly reflected the “free side of social security.”26 The Christian Democratic Union further stepped up its neoliberal rhetoric after the party conference in Leipzig. In 2004, Friedrich Merz, then deputy speaker of the CDU in parliament, suggested reducing the number of tax brackets to three and lowering the top tax rate to 36 percent. Although the proposed reforms were still far removed from the flat tax rates of the Baltic states and Slovakia, they would have marked a drastic change for Germany. To implement them, Merkel had chosen constitutional law expert and former constitutional court judge Paul Kirchhof. The prospective finance minister was not a party stalwart, but a technocrat. This made him vulnerable to attack, as Chancellor Schröder realized. The chancellor did not miss the opportunity to portray Kirchhof as an out-of-touch academic and the CDU reform program as a threat to society.
Angela Merkel’s neoliberal election program almost ended in fiasco. The expected landslide victory for the Christian Democrats shrank on election night to a marginal lead of only a few tenths of a percent over the SPD. It was the CDU’s worst election result since the war. Merkel had to abandon the idea of forming a coalition with the liberal FDP, which would have agreed to a flat tax system, and enter into a Grand Coalition with the SPD instead. In the run-up to the elections, the parties had competed to present the most radical reform program. But afterward, a different dynamic set in. The two major parties now tried to emphasize their caring sides. It could then be argued that neoliberalism had passed its peak before the crisis of 2008–9. Nonetheless, Germany continued to debate the flat tax, and retained the Hartz IV laws.
Reform discourses in Eastern Europe had an observable impact on Germany, not to mention on a global level. But pension reform and flat tax systems were two subjects on which opinions markedly shifted. Without going into the technicalities in depth, these two fields are examined below for evidence of east-west transfers.
German debates about the welfare state since the late nineties revealed a striking trend: growing doubt about the existing system and interest in international developments. In 1998, the influential conservative newspaper Frankfurter Allgemeine Zeitung published a lengthy article on capital-based pension systems in Latin America and Eastern Europe. It cited OECD expert Monika Queisser, who extolled the virtues of capital-based old-age provision—that is, supposed greater security and larger returns. Six months later, the weekly news magazine Der Spiegel ran an alarmist article on the impending “bankruptcy” of the existing pension system. Poland was mentioned for having introduced a third, privately financed “pillar” in its own system.27 The magazine drew much of its information from an article in a specialist periodical on pension reforms in East Central Europe. In this way, the Baltic and Polish models entered into German specialist discourse, and later politics.28 However, the importance of Eastern European models should not be overstressed. German policymakers and their advisors had examined the Swedish and American pension systems far more closely. Nevertheless, around the turn of the millennium there was a noticeable shift in focus among experts and in the media toward the “reform countries.”
In the debate that was sparked about the flat tax some years later, the wind definitely blew from the east. The Baltic states and Slovakia garnered more attention than almost ever before; the conservative press in Germany praised their reformers’ courage and vision.29 Yet the prehistory and inherent conflicts of the reforms were largely overlooked. Latvian social policy only makes sense in the light of the economic slump the country experienced after independence. Poland reformed its tax system because unemployment rose to almost 20 percent in the late nineties; there were far too many pensioners for the younger generations to support with their social security contributions. While some international analysts took these background factors into account,30 most commentators were concerned primarily with presenting foreign models as foils for the debates in their own country. They picked and mixed examples from abroad to serve as justification for neoliberal reforms at home. This discursive form of globalization has hitherto received little attention, perhaps because it is conceived as being driven mostly by finance and commerce.31
Lastly, it remains to add that most Eastern European countries overturned their pension reforms after the crisis of 2008–9. Hungary took the most radical action, in 2010 forcibly nationalizing the private pension fund it had introduced twelve years before (in order to plug the crisis-torn hole in the national budget, as discussed in chapter 8). In 2013, Poland confiscated Polish government bonds held in the private pension fund. This partial nationalization was to some extent motivated by budgetary considerations. It brought down the national debt in relation to GDP by several percentage points.32 But it also allowed the government in Warsaw to redress high administration charges and low profit participation (of insurance companies including Allianz, Aviva, AXA, and Generali). In the course of this reform of a reform, Poland transformed the compulsory pension contributions into voluntary provision—analogous to the Riester-Rente pension scheme in Germany. Eastern Europe’s flat-tax systems also came under pressure, and were abolished or relaxed in the Slovak and Czech Republics.
In recent years, the equitable distribution of tax burdens has been hotly debated in all Western countries. Unlike in the nineties and during the second wave of neoliberalism, the most pressing concern is no longer how to lower tax rates but how to maintain the welfare state, or at least some kind of basic government provision. Apple, Google, Amazon, Starbucks, and other hitherto privileged companies can no longer blithely use all the tricks in the book to evade taxation. Under pressure from the media and the public, some companies have even volunteered to pay slightly higher taxes. The trend toward reducing government is over. The introduction in the United States of the Affordable Care Act (Obamacare), albeit based largely on private insurance companies, is another indication of this.
Neoliberalism seems to have passed its peak in Eastern Europe, too, as pension schemes are revised and tax policies changed. Taxpayers are happy to no longer have to contribute to the profits of international insurance companies. But as governments reassume greater responsibility, the onus is on them to do the math and provide for future pensioners. Will they manage? The latest pension reform in Germany does not give cause for optimism. In early 2014, the German government came up with a €6.5 billion “mothers’ pension scheme” (Mütterrente) to benefit mothers of children born before 1992. This clear prioritization of the older generations at the expense of the young is further evidence of the short-term time frames in which democratically elected politicians operate—in parliamentary terms, not generations. If the new Polish government elected in the fall of 2015 fulfills its pledge to lower the pension age, the younger generation there will also be overburdened.
The German Social Democrats reworked their country’s pension reform in 2014 without any direct external impetus. They interpreted their—rather meager—election result as a mandate to perform an about-face, in order to correct past injustices (some of which SPD Chancellor Schröder had been responsible for). They no longer heeded the warnings of economists or experts, whether German or international. This was indeed a turnaround from the SPD-Green government’s pension and labor market reforms of 2001–5, which were introduced on the grounds that Germany had become uncompetitive and that other countries had evidently found better solutions for their problems. The semantics of these discourses are a sign that Germany, too, went through a process of catch-up modernization, motivated by a sense of having fallen behind as a country. It was a new experience for it to be measured not only against the West but in some respects also against the reform-hungry East.