“Pressure is mounting under the lid”

Interview with Prof. Meinhard Miegel and Friedrich Graffe - Dialogue forums „Munich 2030“: Poor in a rich city?

The growing discrepancy between poor and rich and the threat to the prosperity of broad sectors of the population constitute a highly explosive social issue. The Munich Re Foundation asked Friedrich Graffe, Director of Social Services with Munich City Council, and Prof. Meinhard Miegel, Director of the IWG Bonn institute for economic and social research, about potential solutions.

Is the growing social divide a purely German phenomenon or does it exist in other countries as well?

Miegel: It’s not a specifically German problem. The divide is even more marked in France, Spain and Italy, for example, and beyond Europe it is a source of particular concern in the USA. It is a problem encountered by countries which industrialised early on, whether in terms of demography, organising the social security systems or labour market trends.

Where do the causes of this polarisation lie?

Miegel: By the time we realised how thin the ice was on which our system is built, it was too late. All the countries that industrialised early on enjoyed incredible privileges in the past. These date back to the 18th and 19th centuries, when we overran the world, tapping its resources as if we alone had a right to do so. On the other hand, there wasn’t fair trade because we were producing high-knowledge goods and the others were making low-knowledge goods, which gave us a huge advantage. In the past 30 years, however, some highly populated countries have caught up and we are suddenly finding that the Chinese and Indians are claiming their share of the world’s resources. So far we have been acting as if we would be able to continue our current lifestyle indefinitely.

Do we need to redefine our role in the global contest for resources?

Miegel: Precisely. Now we’re no longer the ones who call the shots – we ourselves are players. We find this a difficult role to assume, particularly since we are confronted with demographic disruptions and society is neither willing nor able to cope with such developments. According to one survey, only 18% of Germany’s population is prepared to accede to the politicians’ demands and roll up their sleeves.

Has the acuteness of the situation got through to the politicians at all?

Miegel: The attitude of the politicians is curious in this respect. They don’t in any way deny that the problems exist in open debate. But they put off galvanising the population into action because people prefer hearing that growth, jobs and prosperity are safe. The social change that is actually needed involves a major effort, which many are not ready to undertake.

Graffe: It’s somewhat easier for me to identify and address poverty because I’ve been working in close liaison with the city council for many years. And we are at an advantage because Munich, unlike other cities, can afford to develop social services and give additional voluntary benefits to those in need. For example, every eligible child starting school receives €100, we are establishing nursery schools, and we have set up an employment programme catering specifically for young people and the mentally ill. We in Munich are thus similarly privileged, as Prof. Miegel noted in general.

What about the willingness to “come clean” with people?

Graffe: Since I am someone who implements the policies, my role is primarily to carry out my duties. However, beyond that, for instance regarding implementation of the Hartz IV labour reforms or dealing with the long-term unemployed, I find that the higher up you go, the less people are prepared to listen. Sometimes I get the impression that the problems of the cities are duly noted, but my influence doesn’t go very far.

Miegel: You only have to look at the posters of political leaders like Angela Merkel, Kurt Beck or Guido Westerwelle telling people everything will be all right.

If the social divide continues, what will it ultimately lead to?

Miegel: Pressure is mounting under the lid. That section of the working population which is worse off now than it was 20 years ago is increasing – and, once again, the problem is not confined to Germany. Pensioners have also lost around 7% of their real purchasing power since 2003. People see the empty promises of the politicians for what they are and know they have not benefited from the upturn. That produces political discontent – a difficult situation for a democracy, which also survives on trust. The pain is easier to bear if the doctor tells you that the treatment will hurt than it is if you are unprepared. The next time around, will you still trust the doctor who didn’t warn you?

What options are open to us? Are the civil society or initiatives like service-trading schemes a possibility?

Graffe: I don’t go along with such schemes because they do not safeguard livelihoods. Also, many lack the necessary autonomy or skills. However, social commitment is one way of addressing the confidence crisis issue and preventing people from feeling that anyone who can't keep up even in monetary terms is excluded from everything.

Miegel: You have to do the one without neglecting the other. The foundations have to be underpinned by state support. I don’t think that we can stake all our money on the civil society card in this highly fragmented society. That would be too risky. But the civil society could achieve far more than it does at present, for instance where nursery schools or day-care facilities are concerned. I have just seen how, in some parts of Zurich, people deal with this very well by themselves.

Graffe: It also works in Munich, by means of a partnership between the city and parents.

Are there changes in the forthcoming Munich poverty report which you would not have expected, or measures that have been particularly effective?

Graffe: The 2004 and 2008 poverty reports are difficult to compare because the definition of poverty has been brought into line with European Union requirements. However, I assume that we will see more poverty among the elderly, and more long-term unemployed.

Apart from that, are there any insights, positive or negative?

Graffe: As a rule, our actions are not reflected in a reduction in poverty; at most, in the employment agency context, we find that lower unemployment leads to a fall in benefit payments. However, we are currently being overhauled by the obligation to pay supplements because, on average, whilst wages and salaries have fallen, rents in Munich have not.

21 February 2008