Germany Reform Policies - Essay Example

GERMANY REFORM POLICIES Location: Introduction As portrayed in recent literature, most of the central welfare states are still the same. The reason for this is the reforms reinforced their characteristics, and they seem incapable to implement any significant reforms. There are other welfare regimes that have managed to overcome their difficulties through the reforms introduction. Germany as the case in point, not only appears incapable to find a way out of the crisis, but also seems to be sealed into its problems by the very weight of its tradition (Palier, 2007). Discussion German policy is shaped by the central role of the fundamental law and its interpretation by the federal constitutional court, throughout the Federal Republics history. Therefore, it is not surprising that constitutional considerations have decisively influenced the reform process. Nonetheless, the fundamental law is threatened with internal and external challenges that threaten to destabilize its significance in the long term. Germany in a long time has been considered an example of the central welfare regime and its political bodies favor the policy status quo, Stiller (2010) states. Hence, finding reforms in Germany is at odds with anticipated patterns of change in domestic policy. Conferring to a senior German political observer, change in domestic policy typically needs a longer period of planning, is usually incremental in nature, and occasionally borders on an institutional inertia degree. Opponents describe this as immobilization of policy. The perspective of the policy implies that, the country has been struggling to carry out essential reforms. However, those passed reforms that have given tend to be incremental adjustments that do not adequately address the underlying problems (Stiller, 2010). Longtime welfare state stability of Germany becomes even more puzzling if one considers the combination of pressures for reform. They comprise of obstinately high rates of unemployment and sluggish growth of the economy. Others include the comparatively high tax burden on labor and adverse demographic trends together with the rapid aging of the populace, and moderately low rates of fertility (Stiller, 2010). The institutional environment, mostly defined the labor market reforms challenge in Germany during the early 2000s. There were significant potential veto players involved in the policy process. They were given the heterogeneity of political parties in Germany and divided control of the state parliament. There was also the complexity of German federalism and the strong tradition of rendering the social cohorts a fundamental role in making of policies. Furthermore, the attachment strength of Germanys welfare state primary elements meant that reform opponents could often achieve a more compassionate hearing from the public than did reform crusaders. The SDP-Green coalition proved unable to overcome these obstacles to reform, for most of its term in office. They pursued more or fewer policies of the traditional labor market while exploring incremental change through corporatist channels that are established. What made it possible for the reform advocates to break free of these obstacles was the eruption of a perfect storm, William (2009), affirms. Rising rates of unemployment increased pressure on the government to be seen to be taking action to battle joblessness. Additionally, the approach of elections made it more difficult for the SPD traditionalist or the trade unions to challenge policies of the government in public. In these circumstances, the Chancellor and proponents used the Hartz Commission, as a leeway to bypass the traditional veto actors in the initial stages of the policy process. He subsequently moved to legislate the commission rapidly in the immediate aftermath of their victory in the election. The Chancellor had the opportunity to claim a mandate after his strong pre-election endorsement of the Commission, to implement the reforms and initially made it hard for the SPD or the trade unions to oppose him. Furthermore, the changes were laid in a sequence so that the issues were addressed first, leaving the tougher reforms until a later stage. Additionally, their focus was on activation of the jobless and hence stopped short of changes to the protection of employment. It also stopped the collective bargaining system that would have created a stronger opposition from the trade unions and other organizations that are interested. Nevertheless, the 2002 perfect storm did not last nor lead to a critical orientation of the various interests included in the policy of the labor market. This explains largely why the reforms in Germany are still unpopular and so hard to sustain. As the conditions of the labor market improved, and politics returned to normalcy, the urgent sense concerning reforms abated. There was even mounting pressure on the government to restore some benefit cuts. Even worse, the significant figures behind the Hartz reform passed from the scene of politics. Some of the figures were Mr. Clement and Mr. Schroeder. At the same time, the rise of the Left Party added to the pressure for the SPD to withdraw from the reforms. Another aspect that played a role in making it harder to sustain changes was the failure to communicate the meaning of the change more precisely when it was being implemented. Besides, failure to explain how and why the changes were working caused obstacles to reform. Similarly, the use of the stronger growth period that followed the implementation of Hartz as a chance to build support for deeper reforms were an obstacle (William 2009). In addition, the Hartz reforms did not promote productivity, the proper measure of labor reform though it was highly praised as the base for German competitiveness and presently being foisted on Southern Europe. According to the OECD data, German productivity growth fell to 0.3 % annually in the period from 2007 to the year 2012. This is as compared with Australians, Denmark, and Japan’s 1.3%, 0.5 %, and 0.9% respectively (Pritchard, 2014). According to Clemens and Saalfeld (2013), other significant crises that will help to understand properly why a deeply engrained, Germany policy model proved so difficult to reform are: The triple globalization and the shocks of Europeanization and unification beginning in the late 1980s and early 1990s The 1990s Institutional memory loss as Christian Democratic governments lost the vision and confidence that they could adapt the coordinated economy of the market to the altering circumstances. Postwar German economic, institutional and ideational success, initially called the ‘Wirtschaftswunder’ followed by the less hyperbolic ‘sozialeMarktwirtschaft’ and finally ‘Model Deutschland’ in the late 1970s and early 1980s. A subsequent turn toward a centrist direction in the mid-1990s by the German Social Democracy, as most leaders lost faith in previous democratic patterns left economic policies. This produced the thorny challenges that continued throughout the seven-year coalition of the Red-Green. It started with the removal of Oskar Lafontaine, the German Finance Minister, shortly after the coalition was initially formed and continuing through the Agenda 2010 and Hartz IV policies, and lastly, Popular support erosion of these policies among Oskars supporters. This ended in the loss of all the Lander governments to the opposition by the spring of 2005 and the merger. The merger comprised of the eastern German PDS, with a group of left-wing social democrats and trade unionists to form the newfangled PDS party. Other reasons, why the reforms in Germany proved so hard to attain, are argued in the analysis of the Joint Constitutional Commission of Arthur Benz (Cullen & Goetz 2013). He contends that the lack of innovative and forward-looking proposals in the report of the commission can be explained in reference to the institutional features of the Commission, specifically, the predominance of the behavior of bargaining as opposed to rational arguing in its negotiations. Benz argues that instead of offering for the open consideration of constitutional issues, the Commission largely reproduced the developed political outline. This encouraged the bargaining processes amongst the political elite (Cullen & Goetz 2013). Possible solutions One of the major solutions is the use of ideational leadership, which infers leadership with the assistance of ideas. Ideational leaders influence two major sources of path-dependence pinpointed by the institutionalism approaches. On the one hand are political institutions and on the other hand program- related barriers. Ideational leadership is exercised by those important policy makers who use idea-based strategies and aim at the accomplishment of change, even in light of resistance to reform. The policy makers are those that players who at often start key proposal of reforms. They afterward try to defend these proposals against the opposition by other antagonism forms. Ideational leadership can be viewed as a resource that assists important makers of policies to alter such opposition into acceptance of a specific initiative of reform. This comprises a number of aspects such as exposing the drawbacks of the principles of the old policy and policies built on them and legalizing newfangled policy principles by using normative and cognitive arguments. They also can frame resistance to reform as problematic for the welfare of the public and the interests of the stakeholders. Additionally, ideational leaders can make efforts at political consensus building to back the reforms initiative. Besides, they are supposed to be more policy-oriented than power-oriented. Overall, the various aspects of the ideational leaders combined, convince opponents of reform of the merits of policy improvement, eventually allowing for their adoption. This works through the establishment of the mechanisms of these aspects that are required to solve the institutional stalemate. They include the accessibility of a superior policy alternative and the declining efficiency of the status-quo. They also comprise of more and better information about the alternatives to the policies and decreasing costs of switching. The moment these mechanisms are in place, major reforms that replace the structures of policy can be adopted through the political institutions of a country (Stiller 2010). Clemens and Saalfeld (2013) suggest that if successful reform in Germany is to take place, it will mostly take an organizational form that is partly identifiable to scholars of CME. They suggest further that the organized mode would also require to be complemented by a set of ideas, consistent with the early 21st century economic circumstances. The Germany government should attempt to boost jobs in the circumstance of continuing financial merging. It will also be significant for the government to build on the lessons from the financial crisis in terms of policies that can assist in cushioning the labor market. Similarly, lessons from weak social influence activities such as the use of short-term working schemes. Tax reforms and a shift in the tax burden away from labor could assist in kick starting the jobs recovery and help financial consolidation. Additionally, reforms of the product market could also boost short-term growth, particularly if implemented in sectors that are sheltered, where the probability to generate jobs is moderately high. Case in point is retail trade and professional services (OECD, 2012). However, the German government through recent actions has shown that it is keenly aware of the importance to make up for the lost time (OECD, 2004). So as to cope with the developing social problems that social insurance is unable to deal with, the government has developed new instruments of social policy, with a new orientation to new social policy goals. New benefits have been generated, faced with the increasing number of unemployment. Additionally, former marginal benefits have been established in the form of targeted flat-rate benefits habitually financed by taxation and run by the state. The German government has also started to establish active policies of the labor market. To cope with the unrestrained health expenditure increase, public coverage level has been reduced. This leaves more room for private insurance. With the purpose of coping with demographic aging, pension reforms have presented small private top-ups, voluntary and pre-funded pensions (Palier, 2007). Conclusion Though the commitment, attention and resources to reunification was worthy of praise, valuable time has been lost in establishing novel approaches to regulatory policy and to launching harmonizing specific economic reforms. However, the German government through recent actions has shown that it is keenly aware of the importance to make up for the lost time. A view that is more rounded of the regulatory governance system would assist in ensuring that these reforms are timely, effective and efficient. The German government should, therefore, continue with a pursuit that is determined of specific reforms as well as continue with the adjustment to regulatory governance traditions so that the essential alterations can take place more rapidly. Possibly, the most difficult operational challenge is to generate reform engines that will deliver these changes. Finally yet importantly, Germany needs to pay careful attention to the communication of the objectives and reform benefits. It should also pay attention to the risks and costs of doing nothing so that momentum and backing from the public can be sustained. References Clemens, C & Saalfeld, T 2013, The German Election of 2005: Voters, Parties and Grand Coalition Politics, Routledge, New York. Cullen, PJ & Goetz, KH 2013, Constitutional Policy in Unified Germany, Routledge, New York OECD 2012, Structural reforms in times of crisis. OECD publications, Paris OECD 2004, OECD Reviews of Regulatory Reform OECD Reviews of Regulatory Reform: Germany 2004 Consolidating Economic and Social Renewal: Consolidating Economic and Social Renewal. OECD Publishing, Paris. Palier, B 2007, The politics of reforms in Bismarckian welfare systems. In: UNSPECIFIED, Montreal, Canada. (Unpublished) Pritchard, E 2013, German model is ruinous for Germany, and deadly for Europe. Available from http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/11150306/German-model-is-ruinous-for-Germany-and-deadly-for-Europe.html [March 1, 2015] Stiller, S 2010, Ideational leadership in German welfare state reform: how politicians and policy ideas transform resilient institutions, Amsterdam University Press, Amsterdam. William, T. 2009, The Political Economy of Reform: Lessons from Pensions, Products Markets and labor markets in ten OECD Countries. OECD Publications, Paris. . Read More