On the Politics of Shedding Government's Welfare Responsibilities in Austria


Austrian social policy once stood for exceptional high levels of social spending and high protection provided by the social security system. In the last two years of Austrian history, the fundaments of the Austrian social contract of the postwar era had been shaken by the attempt of the newgovernment to shed its welfare responsibilities. This sudden change in social politics came from the change in government; the new coalition government of two conservative parties abolished the sociopolitical contract of the postwar period.

The political climate in the Austrian parliament has also changed completely since the establishment of the new coalition government composed of Christian conservatives (the People's Party) and the Freedom-party, which is a catch-all party, i.e. a new type of people's party - supporting socialist, Christian and conservative policies and proposing new social policies and new neo-liberal finance policies at the same time. The old, traditional harmony between two political camps—the socialists (who renamed themselves later social democrats) and the Christian conservative (who have a strong party wing that is supported by the Christian social labor unions and Christian organizations)—had been dissolved.

Before these two political camps lived on the formula of compromise, you support my policy in my "sphere of expertise" (i.e. the political field that I dominate) and I will support your policies in your "sphere of expertise." Economic Policy was, thus, dominated by Christian conservatives and social policy and financial policy matters were almost completely in the hands of the social democrats.

Now the Christian conservatives—the long-term "bride" of the social democrats—have found their new junior partner, the Freedom Party. Whereas the last two social democratic prime ministers were business representatives, or spokesmen of big business, the new chief of the social democrats after the changeover of power, is a hardliner who often retreats to the vocabulary of class society and class struggle. The social democratic party, thus, continued to be in essence a socialist party, though the regency of two pro-business party chiefs (who also were prime ministers), i.e. Dr. Franz Vranitzky and Mag. Viktor Klima, seemed to have moved them further to the center of the political spectrum.

Today, the charismatic leaders of the new third way have gone. Thus, the new constellation in Austrian politics is not one that can be compared to a political marriage that broke into pieces. The social democrats moved—one could rightfully say jumped—back to the left in response to the shock of losing the higher echelons of power to its former junior partner (Dr. Wolfgang Schuessel, the current prime minister, was the last vice-prime minister of the long-term coalition of the Christian conservative party with the social democratic party).

The unique political system of Austria, however, enabled to social democrats to dominate politics outside parliament and the government, i.e. via the institutions of the social partnership, especially the Chamber of Labor and the Austrian Federation of Labor Unions. The new politics of social policy reflects sharply the changes in the overall power constellation in Austrian politics. Schuessel now openly attacks the politics of 30 years of socialist (social democratic) finance policy, i.e. Austrokeynesianism, i.e. the Austrian version of what came to be known as Reaganomics later on in the US.

The new finance minister Mag. Karl-Heinz Grasser proposed a new politics of cost cutting, privatization, and the shedding of cost-intensive responsibilities of the state. Though a direct reference to shifting responsibilities in the field of pension has not been made yet, it has become clear that the new politics of financial reform and privatization will not halt and continue to comprise the crises-shaken pension system as well. He said "the first budget of the new government shows clearer than before the limits of public tasks" and that "a reflection on what the state can fulfill is necessary." The new government's financial policies put forward large-scale reductions of government spending and, at the same time, help for weak members of society.

In the Budget-talk (a yearly speech to the parliament) for the year 2001, Grasser conceptualized social justice as follows "social justice is, when we put back the budget on an even keel, so that tomorrow we can fulfill important tasks. Social justice is, when today young people can be sure of that they still get a pension in old age. Social justice is when we receive help, when we really need it and not all, who want it. Social justice is performance is rewarded, and, at the same time, poverty in Austria is fought consequently. And social justice is also to protect the chances of the youth and, at the same time, ensure the security of the elderly generation... All who are entitled for social welfare should get it, and this in a non-bureaucratic and citizen-friendly way... One million people live in poverty. That must not be... social welfare has to be concentrated more, so that life-quality of the weakest can be guaranteed."

Grasser continued to emphasize further privatization of all major formerly nationalized industries, such as the state-owned printery, the state-owned auction hall, state-owned print media, the state-owned share of Vienna's airport, Post Savings Bank (PSK), Telecom Austria, and the Austrian tobacco industry. In addition, gas and electricity market will be liberalized. These all had been holy cows of the old political leadership. Now they are all slaughtered within short time.

The government has already advanced a new concept of social security: "We agree that it is part of the nature of a social community to help those who are deficient or not at all able to help themselves. Modern social policy is situated within a field of tension between liberty and responsibility, between efficiency and solidarity. The new arrangement of task sharing between officially approved state and private social responsibility belongs to the great challenges of social policy, in the face of financial threat and reduced targeting accuracy together with more and more expensive services. We can only distribute what we have acquired. In principle private provision must have pre-eminence before welfare."

The cutback of social benefits has already been extensively realised. For example, welfare benefits had been reduced; noncontributory co-insurance for childless spouses or long-time companions is, for the most part, abolished; unemployment benefits have been reduced; the charge for medical prescriptions has been raised; and a co-payment for out-patient visits has been introduced.

The fact that the social democrats still hold the presidency of the Austrian national social security agency ("Hauptverband der oesterreichischen Sozialversicherungstraeger"), the roof organization of all 27 Austrian social insurance agencies, has so far hold back any comprehensive reform in the field of social insurance. The president of the national social security agency, Hans Sallmutter, fiercely opposes the new government, and especially its reform plans. But, since particular reform proposals of the government are rare, the opposition, most notably, the leader of the social democratic party Dr. Alfred Gusenbauer and Hans Sallmutter, attack members of the government and their overall policy stand, and not particular policies.

The high poverty rate found and discussed recently and poverty/distribution effects of the rise of various administrative fees, and other cost-cutting measures and policies implemented so far. According to the common Austrian definition of poverty, there are 950,000 poor people in Austria. In EU terms, there are 770,000 poor people among the Austrians. The money spared by the government in recent years had been between ATS 7,500 and ATS 9,000 (USD 500 and 600). The social democratic party hopes to become elected into government again with this sort of policy proposals in the 2003 general elections. The shift to the left inside the social democratic party has also found expression in its new social policy proposals. It proposed a new national minimum for workers and employers of EURO 1,000 or ATS 13,760, a proposal that has originally been proposed by the Liberal Forum, a small party that failed to enter parliament in the 1999 elections (due to the 4 percent limit imposed by the election law). The new proposed social minimum for non-working citizens is 8,437 ATS.

The new policies can be regarded to be popular to those who would profit from the proposal-that is, however, a clear minority of the population. An estimated 350,000 workers and the unemployed/non-employed would profit from the proposal. Hence, the social democratic party clearly pursues a counter pole strategy to government policies, but in doing so it rather may lose mass support, i.e. the support of those who pay taxes and finance such policies.

The restructuring of the Austrian pension system which is likely to be a cost-cutting restructuring one—i.e. one with long-term effects (as it is announced by Schuessel, Grasser and Co.). The new major policy of the government that is certainly backed by a majority of voters is the "cero deficit policy," which by itself implies the retreat of the government in financing pensions. Whereas up to now, the government has sponsored up to one-fourth of all pensions with funds from the federal budget, the future of the pension system will not see any further increase, more likely a decrease, in the state's role in financing the public pension system. The new catchphrase of the Three-pillar model is an open rather than hidden message to all Austrians-that is, public pensions will be not enough to sustain one's standard of living in the future, company-based pensions and private pensions need to supplement the future (meager!) pensions. Everyone knows that! That is why the opposition does not have to wait until the government proposes its final proposal to withdraw from the responsibility of financing pensions. The announcement of the cero-deficit policy and the government's strict adherence to it so far are sufficient to stage a major protest of not only the opposition parties, but also the Christian social faction within the conservative People's Party.

The current trend of social politics in Austria clearly favors the establishment of a welfare society and a limitation of the traditional form of welfare state system applied by the long-term ruling coalition government of Christian conservative party and social democratic party. Welfare society is defined as a form of welfare system with a variety of welfare providers, who may either be the state, nonprofit-organizations, companies, the family or the individual. Like the three-pillar model is already suggesting, the private market should take care of two out of three pillars that provide social security (which may suggest that the market take over an imaginary two-thirds of the total load of securing income maintenance during old age).

Attempting the Rescue of the Welfare State

The initiative of the social democratic party for a high minimum income is to be considered a quite unrealistic proposal, especially in the light of the east extension of the European Union where salaries are up to ten times lower than in Austria. Such a policy would cause in the future an even greater stream of guest workers from Hungary, Czech Republic, Slovakia and Slovenia, since workers can reach there homes within one or two hours drive from their future workplaces in workplaces. Furthermore, budget criteria for keeping the Euro stable and prevent inflation inside the Euro zone do not allow such great additional spending, even the pursuit of current policies has to be called into question. Countries that do not obey the set budget criteria are facing heavy penalties for doing so. Social policies and forms of welfare states that do not depend on heavy fiscal commitments of the state, are still good—and likely—options for future welfare state development in Austria (and elsewhere).

In the following, I would like to discuss a very promising attempt to secure welfare state standards without - i.e. not necessarily - sacrificing the financial stability and the economic competitiveness of the economy: A very promising attempt of a rescuing the Austrian welfare state is the inter-party platform recently founded calling for a petition for referendum ("the petition for referendum for the social state"). Professor Emmerich Talos, one of the initiators of the petition, criticized the government of not take up any social policies that are aimed at reducing poverty. Talos proposed, in addition, a more realistic aim for implementing an ATS 10,000 minimum income limit. But, this is just one of the demands of the group that is composed mostly of a leader of the Christian labor union, the superintendent of the Evangelical Church, two lawyers, one doctor, one medical science professor, a former social democratic minister for women affairs, and two political science professors, one journalist and one economic researcher. The team is supported by all of the leaders of the Christian social labor unions, the labor union leaders of the Green Party, and a fairly broad base throughout the political spectrum. More importantly the initiative proposes to change the Constitution of the Republic of Austria, so that e.g. old social security legislation cannot be dissolved with a simple majority in parliament, but with a majority of two-thirds of votes.

The neoliberal wind strongly shakes the fundaments of the traditional welfare state in all of Europe. The proposed constitutional amendment should upgrade the social standards guaranteed by the constitution in comparison to other countries in the European Union. The amendment should contain the following words "Austria is a social state" [=welfare state]. Legislation and execution take into consideration social security and equality of opportunity of in Austria living people. Before the passing of a law, its effects on social conditions of those in concern, the equal treatment of men and women, and the societal context must be examined. Social security in case of sickness, accident, old age, unemployment and poverty is secured by public social security systems based on the principle of solidarity. The use of public financial means should orientate towards the principle that the in Austria living people make contributions according to their economic and social conditions."

This amendment, in fact, would secure the current level of welfare state standards to a large degree, or, at least, turn any attempt to change existing policies or introduce new policies into a long-term matter. The final text of any possible amendment can be expected to be slightly (or very) different from the proposed one. But, the direction is clear, to gather support for pro-welfare politics. Important is the political support of the Christian social labor movement, and even that of the green party.

In today's Austria, socialism seems to be not capable of winning the support of a majority. However, a platform supported by a broad platform based on conservative and other pro-welfare political movements is very likely to succeed in changing social politics at the beginning of the 21st century. Important is, that the constitutional amendment proposed here does not force the government to implement "impossible" policies that neglect the economic and political context of the European Union, its east extension and globalization as a whole. The current government coalition, composed of the Freedom Party and the People's Party, holds clear majority in parliament, and is unlikely to lose its grip on power. A support of such an initiative, with or without minor changes of the text of the constitutional amendment proposed, would certainly boost the support of voters from both the political center as well as moderate conservatives and moderate socialists or Green Party voters.

Therefore, we may predict not a neoliberal change in social politics that replaces a traditional type of welfare state with a welfare society where the state merely plays a marginal role beside the market and other nonprofit welfare providers, but a moderate change that forges links between economic necessity and new reality of the world economy, as well as the political and economic changes that come along with the eastward extension of the European Union, and the societal need for social security, the safety net we built our lives on, which in return strengthens culture, education, economic success and democracy.

by Christian Aspalter (The Hong Kong University).