The memorable speech by a German Union boss on May 1st 2012

(Similarities with the actual speech of German union leader Michael Sommer are by no means unintended – original quotes are presented in italics and in quotes)

“Ladies and gentlemen, dear colleagues,

May 1st is no holiday – certainly not for many people in Europe. One in two young people in Spain are unemployed, millions of retired people in Europe are afraid of old age poverty. The people of Greece, Portugal or Italy fear the dictates of a troika that wants to dispossess them of hard-won workers’ rights and social progress, in order to pacify speculators and financial markets.”

For all of us May 1st should be a day of protest but also a day of reflection. How could it happen that more and more people in the southern periphery have lost their work? Do we, the German trade unions, perhaps bear part of the blame for this disastrous development? I am afraid we cannot simply dismiss this question. Our large corporations, especially in the field of automobile production, in the airline industry and in the machinery sector, sell more and more of their products to Asia. We welcomed this development without reservation because of the benefits it seemed to bestow on our workers. The volume of orders increased and this in turn often led to higher wages.

So we were apt to disregard the dark side of the question. National producers such as China can pay for high-technology products from BMW and BASF only with low-technology goods. This means, they flood Europe’s supermarkets and hardware stores with all those cheap products that soon wrought havoc with traditional industries in Spain, Greece, Portugal, but also in Germany. We, the trade unions, did not protest. We took the side of German big business, because there our people are the best organized and the most vociferous. It did not really disturb us that the success of big companies was paid for with the death of smaller ones. This happened in the South as well as here in Germany. Smaller and traditional companies were simply swept away by the invasion of cheap Asian products.

That is why, ladies and gentlemen, we now face a credibility problem. The countries of the southern periphery accuse us not without reason that we did nothing to defend their work and livelihood. They suspect us of shedding false tears over their fate.

These remonstrations are to be taken seriously. They become even more serious, ladies and gentlemen, when we look at our own situation here in Germany. “Currently we are doing well – at least superficially. But people tend to overlook that the so-called German employment miracle is bought at quite a high price. A quarter of all people working in this country must do so for extremely low wages – too low in fact to allow them a decent living. The principle of equal pay for equal work is violated a million times day after day in German companies. Women, even well-educated ones, are relegated into mini-jobs or such that need to be subsidized by the state. It is no secret that well paid jobs are under intense pressure by leased labor paid 30 or 40 percent less. This is not the kind of working society that we wanted either here in Germany or in Europe.”

Dear Colleagues. The first of May should be a day of reflection, even a day of reflection on our own mistakes. For we did certainly not lack better insight. I think that all of us are quite aware that it is completely useless to produce cars, houses or food, if people do not have enough money in their pockets to buy all these beautiful things. The sum total of all income (apart from savings) must always be large enough to absorb the sum total of goods offered simultaneously by the market. This is the golden rule of any functioning economy. We need not even fight for this principle as producers are just as keen as we are to see it maintained. Or do they make any profit when sitting on unsold products? Remember the memorable action by arch capitalist Henry Ford about a hundred years back. He paid workers five dollars per hour so that they were able to buy his cars!

Dear friends. We need not fight for the obvious. But fight we must for the golden rule itself. For there are certain conditions when producers no longer support it (I mean producers collectively not as individuals). How and when does this happen? I tell you, it happens whenever a single state or an economic federation like the European Union puts too much emphasis on exports. For then their customers are partly or entirely outside of their own economic space. Why should producers still cling to the golden rule? You know that the gang leaders of Sierra Leone sell their diamonds only to rich countries of the North. They are pure exporters. In principle, they need not pay their own people at all. They do quite as well and indeed at much lower cost if they employ slaves and replace them with fresh “human material” as soon as anyone drops dead at work.

Dear Colleagues. In Germany and in Europe, we are fortunately far removed from conditions in Sierra Leone. But we should not permit anybody to bring us even near to them. For this danger looms at the horizon once economies become more and more dependent on outward customers. In an all too simple and naïve way we used to place our hope on an increase of exports. In this manner we helped to undermine the golden rule in Germany and in Europe.

But meanwhile we see people around us getting more and more thoughtful. I tell you, in a few days from now a socialist government will be elected in France. And Greek people will chase saving fanatics from office. Across Europe, unionists will sit at a table with employers, because we have to cut the Gordian knot. As you all know we are all confronted with the same paramount problem: How do we cope with debts, without risking to dig our own grave with excessive austerity? I believe that we, the trade unionists, can offer the proper answer. Let us no longer tolerate that our industrial base is gradually being destroyed by cheap imports as already happened in North America. Let us no longer close our eyes to fate of Southern Europe which will in due course be our own fate as well. For too long a time we have been silent on this matter, because we didn’t want to stand in the way of large profits for Germany’s top industries.

But now is a time for change. We must not wait until the feast is over even for ourselves. Asians – first Japan and now China – already succeeded in shattering traditional industries all over Europe and in North America. It should be a warning that Japanese, South Koreans and Taiwanese have become great exporters of high-tech products. That is what now China with its population of over one billion ist an the way to achieve.

Should we, the trade unionists and representatives of working people, stand idly by while the foundations of our prosperity are being destroyed? Certainly not. We are determined to declare war on Europe’s de-industrialization.

Dear colleagues, “the first of May is our day of work. It is the day when we all demonstrate for the rights and dignity as working people, here in Germany, throughout Europe and all over the world. Because we know that it is work that creates value.

It is work that gives man his dignity.

It is work that holds society together.

It is work that makes solidarity and progress possible.

In other words, this society would be nothing without work. And without good jobs, without socially protected work Europe has no future. That is why our motto for this first of May is the following: Let’s fight for good work in Europe, that is for fair wages and social security. In order to make this true, hundreds of thousands demonstrate in our country. For we agree that things must change in our continent.

To be sure, much of what irritates us today is the result of wrong policy”, the result of wrong choices for some of which, unfortunately, we have to assume a part of responsibility. In Germany unions had much more power than working people anywhere else in the world. It is nonetheless true that we made an insufficient use of these privileges for we committed a number of serous mistakes. After all things did not turn out as we hoped. What should have been done in a different way?

From the beginning we had a choice between two different ways in order to create a socially just society in our country. We could make sure, on the one hand, that work be rewarded appropriately. In this case, no one would be entitled to an excessive income merely because he or she has a temporary monopoly on certain skills and qualifications. For instance, we could have insisted on a maximum pay of ten to fifty times the minimum wage. This we would have regarded as an absolute income threshold. But – what is still more important, – we could have insisted that work – and only work – be the basic premise of all legitimate income. For then we would have empowered government to radically tax away any income, which comes into being without work or personal achievement, by which I mean income from interest, dividends, currency speculation, stock price gain etc.

Dear friends, I think we all agree that from the perspective of working men, no matter whether clue or white collar, this should truly be a minimum requirement. Income without work is nothing better than an atavistic remnant of a quite distant past: it represents a direct continuation of ancient slave economy, where the greater part of society was held in subjection by a ruling and idle class which transformed the sweat of its subjects into its own luxury. Income not based on personal work is speculative income. We should have rejected it as illegitimate empowering the State to skim it in the form of taxes. In this way we would create a new tax system, a “new fiscalism” as I would like to call it. (1) This we could make more palatable by introducing some necessary safeguards. In return for our rejection of all illegitimate income, we would have advocated the protection of savings against inflation. Savings being the well deserved fruit of previous work, we don’t want it to be destroyed by the devaluation of money. Therefore government would devote part of its taxes on illegitimate income to the purpose of safeguarding savings. Germany would have become similar to Switzerland, where people used to deposit their money even at a time when interest was near to zero. People were quite content if they made no loss because of inflation.

Dear Colleagues. You know that unions are bound by statutes and rules which do not allow them to enforce their ideas and ideals on companies or on society at large. But we may educate the public and call it to action. And indeed this is the time to do just that. For even in Germany the enrichment of a tiny elite at the expense of the large majority has taken breath taking proportions. Listen to figures, they speak an unmistakable language! The total amount of interest as reported by the German Central Bank, currently amounts to no less than a third of all disposable household income, that is of all income actually used for consumption. So let’s be clear: You, myself and all other Germans devote about 30 percent of what we spend on consumption to the payment of interests and dividends with which to satisfy the demands of creditors! This is far more than what we pay for VAT which everybody loudly complains about. There is no mystery about all this. Companies pay dividends to their stockholders and they pay interest on their debts, both of which they do, of course, add to the price of their products. But, as I said, interest and dividends represent income without work. So with these 30 percent of our money we help a minority to make money without work. (2)

Dear friends here in Stuttgart. If all of you and indeed all Germans could pretend to have about the same amount of savings and an equal number of shares, then there would be nothing wrong with this situation. Everyone would receive with the left hand what he has to pay with his right. But don’t be misled. You know that savings and share ownership are distributed in a quite uneven way. Almost fifty percent belong to a tiny minority of just five percent of the population. And that is why most of the enormous income accrueing from those thirty percent levied on everyday consumption, assembles in very few pockets. As a matter of quite unbearable fact income without work flows in an ever increasin tide from the bottom of society to its top. It flows from the majority of people to the privileged few.

Yes, let me openly admit that so far we have failed to warn, let alone to protect our countrymen against the danger of income without work. No wonder that we lost credibility. But now we are in the midst of crisis and we have to speak our minds. For we now confront the results of our previous silence. Even in Germany a small top layer of super-rich has accumulated tremendous power through its economic clout. These people exercise their power through lobbies in Brussels and turn it to political purpose by manipulating the press. They are well on the way of making democracy meaningless.

Let us speak frankly without chewing our words. A greedy elite, among others the leaders of large DAX corporations, has been enriched shamefully and without any restraint, even some in our midst – let me admit this with deep regret – have demanded ever higher fees just to be “on par” with the other side. VW CEO Winterkorn pockets about 10 million € per year, which is about 500 times the pay of an ordinary worker. We have tacitly accepted this greed of self enrichment for the sake of getting a few crumbs from the table so that we could appease our own people.

Dear Colleagues. We can no longer be silent when the working majority generously subsidizes the richest part of society with illegitimate income – income without work. This not only happens in daily consumption when we pay an avarage of 30 percent just for the dividends and interests of the rich, but it happens in an analogous way each time that our government incurs debt. For all money borrowed from the rich, has to be paid back with interest. Instead of taxing the super-rich in order that they contribute their share to the common good, our government pampers them with interest paid out of our taxes. Politicians used to spoil the living generation with gifts that make future generations bleed. This money was largely put to a frivilous use. It was squandered for campaign gifts, with which to stuff the mouths of those who might have voiced their protest. That were wrong policies which now make us suffer. Unions have too long been silent on the subject of expensive loans instead of equitable taxation. Now the happy few fatten at our expense.

Dear Colleagues. “We know that there are reasonable alternatives. The alternative to the promotion of financial speculation and capitalism is the regulation of financial markets and support for the production of real goods and services. And we will not accept the assertions of those who claim that the financial transactions tax does not work. On the contrary, it could and will work quite well. After its introduction pressing the buttons with which speculators chase billions of dollars around the globe, will become quite expensive. Financial sharks will no longer pocket large profits.”

However, we should guard against easy recipes, so as not to be suspected of demagogy. The financial transaction tax is quite indispensable if we want to contain at least small part of the speculation business. But it does not help against the paramount evil of speculation, which is extraordinary enrichment through income from interest, dividends, stock price gains etc. Here is the field where to push government towards action. On behalf of all of you, on behalf of the public, government must prevent the further concentration of wealth!

Dear friends. Things have come to a dangerous pass. For it is only too true: “If governments no longer levy taxes, if they allow corruption, inflate military budgets, expropriate their own people by privatizing, unleash financial markets and give free way to predatory capitalism, they are justly blamed for the plight which has befallen many countries in Europe. For, after all, not the people have lived beyond their means, but it’s the greedy elites who have robbed the State and want to continue robbing it even more. These are the same ones who today preach abstinence and frugality, the same ones who want to take rights and protection from us, the same who prescribe poverty to the working people so they can feast on their wealth.”

I would like to transform the first of May into a day of determination where to gather our force and to reflect on future action. For there is a way out of the crisis. “The alternative to ruinous austerity and to government debt is the improvement of government revenue. The taxes for the rich must finally climb up again.”

That’s why we need a new fiscalism, a fundamentally new form of taxation. The work of working people – and I do, of course, mean the work of business leaders as well – should remain totally untaxed (unless exceeding a certain threshold), because work, dear friends, constitutes the very foundation of our common wealth. By what right does government tax those who give – instead of taxing those who take? We need a new fiscalism that exclusively taxes consumption and does so in a progressive way. As long as consumption is limited to the bare necessities of life, there should be no taxes at all, while the increase beyond this level is subject to progressively higher taxation. (1)

Dear friends, this is the fiscal way out of the present financial crisis. Let us liberate working people of an oppressive burden. Let’s put an end to an obvious absurdity that makes everybody pay the more to the State the more he contributes to the common wealth through his work. Let’s liberate work from its shackles! Then we will be witness to a miracle of employment: All over Europe even hitherto unprofitable industries will all of a sudden return to healthiness. We free workers, clerks and business in general from a crippling corset. In addition to individual consumption, government will only tax raw materials used by companies.

Dear Colleagues. We have reason to be full of hope. There are ways out of the crisis. But let me end with a warning. In troubled times like ours, lots of false prophets will cross your way. Beware of the demagogues. There are people who talk nonsense about a “billion dollar Marshall Plan.” I ask you: Who’s going to finance it? The Chinese or the Russians, perhaps? It would be terrible for us if they did. For then we will impose even further debt on future generations – and these will be much more dangerous too. We may, after all, expropriate the super-rich in own country. That’s precisely what over-indebted countries were apt to do in the past, once their level of debt climbed to unbearable heights. But with powerful foreign countries being our creditors, such a procedure becomes dangerous or impossible. Powerful foreign countries resort to war or confiscation.

So who or what remains for the financing of the hoped for billions? Perhaps the rich in our own country and in the European Union? Yes, if we introduce new fiscalism that is a radical new approach which makes the most privileged in our societies contribute their due share. In this case we may at least get rid of our debt burden so that our government could make better use of its taxes. But what if the rich manage to prevent any encroachment on their privileges? Were will the money come from? Will investors be glad to dumb their money in Euro Bonds? Perhaps, but only if interest rates are allowed to climb to astronomical heights what they will certainly do if Europe fails to substantially lower its overall indebtedness – and that remains a vain hope. Or should the ECB just keep the printing press running? Dear friends, we all know what this means. Goethe describes the outcome in Faust II. However, it you don’t believe the words of a poet, go back to history. We German went through all of it in the early Twenties of the last century.

1 I may be excused for feeling some satisfaction for the honor of seeing my ideas as to a “new fiscalism” openly favored by Michael Sommer, chief representative of the DGB though he here presents a somewhat distorted view (see http://www.gerojenner.com/portal/gerojenner.com/Neuer_Fiskalismus.html).

2 Thirty percent! This is a tremendous amount which many people refuse to accept, thinking that such numbers are either untrue or the conclusions derived from faulty reasoning. So we must give all the more credit to Mr. Sommer for his courage to speak his mind on the matter!