The Pauperization of Germany

Poverty Report in Europe

By Wolf Richter   

On September 17, the German Labor Ministry sent a draft report “on Poverty and Wealth” to the other ministries to be rubber-stamped. Only the final report, once sanctified by Chancellor Angela Merkel, would be made public. The draft was supposed to remain hidden. But it seeped to the surface almost immediately. And it was hot. Too hot.

The massive data (PDF, 535 pages) described the tough reality that many people faced in Germany—a reality that got tougher every year. For example, in 1998, the lower 50% of the population owned 4% of all private wealth, while the upper 10% owned 45%. By 2008, the lower 50% owned only 1%, but the upper 10% had increased its share to 53% (at the expense also of the in-between 40%). Other reports have painted similar pictures.

The poverty report by Germany’s statistical agency showed that the “poverty rate” in Germany has been creeping up: in 2008, it was 15.5%; in 2009 it was 15.6%, and in 2010 it was 15.8%. Particularly hard-hit were people under 65 who lived alone. Their poverty rate was 36.1%. For single-parent households, it was 37.1%. The city of Munich issued its own poverty report. By taking into account Munich’s high cost of living, it found that nearly a fifth of its residents lived in poverty.

Poverty data has been stirring public debate for a while, and across most of Europe. Even the largest consumer products companies are adjusting to it by using commercial strategies that were successful in developing countries [read....  The “Pauperization of Europe”]. But now the Labor Ministry’s “Poverty and Wealth” report, as revised by the Economy Ministry, was leaked to the Süddeutsche Zeitung, which then put a grunt to work to compare the two versions. Turns out, the original version had been censured!

It started in the introduction. In the new version, the sentence, “Private wealth in Germany is very unevenly distributed,” has been deleted.

The original version pointed out: “While wages have risen in the upper areas over the past ten years, lower wages adjusted for inflation have dropped. The income spread has increased,” which would hurt “the sense of justice of the people” and could “jeopardize social cohesion.” Incendiary words, emanating from a Labor Ministry run by a conservative government. Too incendiary.

It was replaced by the new jargon, heard so often in the battle over Greece: falling real wages were an “expression of structural improvements” in the labor market and created low-wage jobs for many unemployed people.

The report also noted that the hourly wage of many people who live alone and work fulltime wasn’t enough to secure a livelihood. This “increased the risks of poverty and weakened social cohesion.” That comment was deleted. Now it only said that the low-wage issue “should be looked at critically.”

Even certain data has been deleted, including this sentence: “However, in 2010, over four million people worked in Germany for an hourly wage of less than €7.”

The opposition was outraged. “The whitewash of the report is shabby,” said Katja Kipping, head of the Left Party, accusing the government of a cover-up.

“Those who hide and ignore reality cannot make fair policies,” said Andrea Nahles, SPD Secretary General. “The reality” for which the coalition was “responsible” was “too gloomy even for the Merkel government. She wants to deny it instead of tackling the problems.” And she lambasted the coalition’s policies that served “only a very specific affluent clientele.”

“The federal Government wants to water down, conceal, and beautify crucial elements of the report,” griped Annelie Buntenbach, board member of the Confederation of German Trade Unions (DGB), an umbrella organization representing over 6 million workers.

The report has heated up the public fight between Labor Minister Ursula von der Leyen (CDU), who doesn’t mind shining a light on conditions in Germany, and Economy Minister Philipp Rösler (FDP), who is facing a very iffy reelection fight. The CDU and FDP are uneasy coalition partners. But if the FDP, which is teetering, doesn’t make it into parliament in next year’s election, Rösler would be axed from any role in the government.

He and laissez-faire stalwarts at his ministry were bothered by comments on the increasing social chasms in Germany, and their impact on social cohesion. He’d already criticized the original report after it was leaked, claiming that certain elements weren’t “the opinion of the Federal government.”

Then the backpedaling started. A spokesperson of the Labor Ministry declared that, yes, there’d been requests to change some things, but “all reports of the Federal Government” had to be coordinated with all ministers and the chancellor. It allowed the government to speak with one voice. So this was “a totally normal process.”

Alas, the statement that censuring such reports was “a totally normal process” caused another burst of outrage. As always, to no effect.

That this debacle would occur just as more money was being tossed at Greece, where poverty has been surging and where wages have been plunging, was priceless. By keeping Greece in the Eurozone, eurocrats or better “euro morons” have successfully avoided a weak drachma and a subsequent Greek hyperinflation. Instead they have successfully created stagflation. Read...  Euro Morons: Hyperinflation Successfully Avoided, Stagflation Successfully Created.