Economic Policy and Social Policy

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Lampert, Heinz

Article — Digitized Version Economic policy and social policy

Intereconomics

Suggested Citation: Lampert, Heinz (1970) : Economic policy and social policy, Intereconomics, ISSN 0020-5346, Verlag Weltarchiv, Hamburg, Vol. 05, Iss. 11, pp. 351-354, http://dx.doi.org/10.1007/BF02928936

This Version is available at: http://hdl.handle.net/10419/138411

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Applied Economic Theory Economic Policy and Social Policy

by Professor Heinz Lampert, Cologne

I I IIIII IIIIII

he spheres of political action which are term- Another connection between economic and social T ed economic policy and social policy must be policy is reflected by the fact that the package of defined before an analysis of their relationships objectives discussed in the context of the theory is undertaken. of economic policy 3, as well as the package of objectives of the economic policies practised in Economic policy may be defined as the forming many national economies 4, comprises in addition of social economic actions 1 by the institutions to objectives which belong primarily to economic bearing public responsibility according to set policy but are of relevance also to social policy- objectives which are primarily economic. Social like growth, external economic equilibrium and policy shall here, following Kleinhenz 2, be under- price stability-other objectives which are primari- stood to mean the measures of the institutions ly important under social policy aspects but also bearing public responsibility which are designed relevant from the point of economic policy-like to influence the living conditions of socially weak social justice, (economic and) social stability and groups of people (i.e., their scope for satisfying social peace. The reason for this ,,mixture" of the interests which determine the fulfilment of aims may be that the objectives of economic as life) so as to accomplish the objectives pursued well as social policy are drawn or derived from in regard to the living conditions by and in an the superior sphere of the policy which is con- order of society. cerned with all aspects of society and that a strict dissociation of the aims in this latter field Two Closely Connected Spheres of policy from those of economic and social That there exists a close connection between policy, and also a strict separation of all eco- the two spheres of directive activity must be nomic policy objectives from all social policy supposed because the economic opportunities objectives does not seem to be possible. have an abiding influence on the living con- It is impossible to separate certain economic ditions of all people and because economic policy aims precisely from certain social policy policy affects the opportunities for economic ac- aims because economic policy has effects im- tion on the part of society as well as individuals. portant for social policy and, conversely, social Closer analysis shows this connection to be one policy has effects which are economic and thus of partial congruence. For the social policy which important for economic policy. This is to be is aimed at improving the entirety of living demonstrated in the following. conditions for socially weak groups of people is also directed at improving economic living Mutual Relations between... conditions. Improvement of the economic living conditions, though not confined to but includ- It is common knowledge that a successful growth ing socially weak groups of people, is however policy provides a basis for a policy of social also among the tasks of economic policy, so security, income redistribution and social in- that social as well as economic policy has a vestments, so that social progress can be made task to perform in this field of raising the eco- in proportion to economic progress as measured nomic living conditions. by the growth rate of the social product and in

1 By forming of social economic actions is meant that co- 3 Cf. H. G i e r s c h, Allgemeine Wirtschaftspolitik, Wiesbaden operatively proceeding activity which aims at optimal satisfaction 1960, p. 59ff.; K. E. B o u I d i n g, Principles of Economic Policy, of, in kind and urgency differing, present and future requirements 4th ed., Englewood Cliffs 1964; R. A. Dahl Ch. E. L in d- for individual and collective purposes by drawing on available b I o m, Politics, Economics, and We fare, New York 1953, and produceable, in relation to requirements scarce, means. p. 28 ft. i.a. 2 G. K I e i n h e n z, Probleme wissenschaftlicher Besch~iftigung 4 Cf. E. S. K irec h n e.e., Economic Policy in Our Time, mit der Sozialpolitik, Berlin 1970, p. 58 ft., espec, p. 76. vol. 1, Amsterdam 1964, p. 4 ft. and p. 19 ft.

INTERECONOMICS, No. 11, 1970 351 APPLIED ECONOMIC THEORY proportion to the level of employment. Also known population. (The farm policy has, incidentally, is the significance for social policy of a policy turned more and more into a social policy for of price stabilisation owing to the avoidance of a section of the middle class). the negative repercussions on social justice of a deterioration of the value of money, especially ... Economic Policy and Social Policy by socially discriminatory processes-e.g., the ad- vantages accruing to the owners of assets in This by no means exhaustive enumeration of kind compared with money owners, the disad- economic policy fields with very close social vantages to people on low incomes relative to policy associations can be matched by a number those on higher incomes, and the lowering of the of social policy activities having consequences standard of living of the self-employed middle which may be identical with the attainment of class s economic policy objectives or are complementary to them. Effective protection for working people In the same way as growth, employment and for instance (prohibition of child labour, safe- money and credit policies may, by affecting the guards for young people at work, protection for rate of growth, the level of gainful employment working mothers, limitation of working hours, and the value of money, be of indirect importance accident prevention, health protection) has not for the living conditions of the socially weak and only a quantitative effect on manpower, thus con- for possibilities of improving them, the policy tributing to the economic policy aim of preserving pursued in regard to competition may, through the resources of the economy, but maintains and anti-monopoly, anti-trust and anti-amalgamation improves by itself the physical, and especially in policies, have social policy effects: the distribu- conjunction with education policy measures, the tion of the national income is improved by de- intellectual quality of the manpower and thus monopolisation to the benefit of the wage earners serves the economic policy objective of raising both in the short and in the long run6, while productivity and achieving technical progress. the excessive prices which branded fixed-price goods command in comparison with a market By creating formal and substantial equality of without price maintenance are, in accordance opportunity in education, by removing privileges with theoretical judgement and also with prac- and all but qualitative restrictions on entry into tical experience, tantamount to a cut in the real professions and trades, by maintaining formal income of the recipients of earned and, especially, and substantial freedom of competition, the social service incomes, that is in the first place achievement of social justice-an end which social the pensioners 7. policy aims at-furthers the economic policy aim of ensuring economic growth through an increase The power and farm policies may be mentioned as further examples of the social effects of eco- in the proportion of qualified and highly qualified workers in the labour force. The complex of so- nomic policy. These policies which relate to the structure of industry conflict with social policy s cial policy measures designed to accomplish the insofar as the latter is intended to favour wage aim of economic and social stability of living conditions (in the sense of avoiding major fluctuations earners and social welfare recipients, because the policy of import restrictions, taxation of com- in incomes and employment in the economy as peting commodities (fuel oil) and elimination or a whole and for the individuals in it), that is the alleviation of competition for the benefit of the social security system in the narrower sense coal mining industry, like the agricultural policy (unemployment, sickness, old age insurance), has by means of import quotas and guaranteed prices an anticyclical effect on economic activity and and sales, tends to raise the prices of products thus furthers the economic policy objective of (electricity, gas, fuel and foodstuffs) which are steady growth. a relatively heavy burden on the household bud- The examination of the interrelation of economic gets of the economically weak sections of the and social policy shows that the two spheres partly overlap and abut on each other 9, that s Cf. "Die wirtschaftlichen und sozialen Folgen der Geldentwer- tung", No. 24 of N0rnberger Abhandlungen zu den Wirtschaffs- und Sozialwlssenschaften (NOrnberger Fakult&tswoche 14.-24. No- 9 Of. K. J a n t z, Zur wirtschaftlichen Funktion sozialer Leistun- vember 1966), Berlin 1967, espec, article by G. E i s r m a n n, en, in: F. Greiss i.a. (ed.), Der Mensch Im sozio-akonomischen Gesellschaftspolitische Aspekte der Geldentwertung, p. 47 ft. ~ rozea, Festschrift for W. Schreiber, Berlin 1969, who arrives at the same result: "A precise demarcation of social policy and 6 W. K r ell e, Verteilungstheorie, Wiesbaden 1962, p. 114 and economic policy is impossible as regards their effects they are p. 137. n constant contact .... That implies mutual dependence-not 7 Cf. A. B u s c h, Die allgemelne Wettbewerbssituation in der one-sided dependence-of social policy upon economic policy" KonsumgSterindustrie, Prelsbindung, Vertriebsbindung, sonstige (p. 254). The same result is found in S. W e n d t, Bemerkungen Gesch~ftspraxis, In: Zehn Jahre Bundeskartellamt, RSckblick und 8ber des Verh~ltnis von Wirtschaftspolitik und Sozialpolltik, in: Ausblick, Cologne 1968, p. 167; also B. G r i s b a c h, Wettbe- K. Jantz I.e. (ed.), Soztalreform und Sozielrecht, Festschriff for werbspolitik im Rahmen der Wirtschaftspolitik, ibid., p. 45. W. Bogs, Berlin 1959: "The spheres of economic policy and social policy abut and indeed permeate one another. From this fact e Cf. E. Liefmann-Keil, Gegenwart und Zukunft der so- however It must not be deduced that economic policy and social zialen Altersvorsorge, Gbttingen 1967, p. 104 ft. policy are the same thing" (p. 378).

352 INTERECONOMICS, No. 11, 1970 APPLIED ECONOMIC THEORY social policy can contribute to the achievement rising technical and organisational level a high of economic policy aims and economic policy to quota of qualified personnel, which implies an the achievement of social policy aims. The inter- opening of the educational system to more en- dependence of economic and social policy ap- trants, is as necessary for further development pears however to depend in kind and intensity as the creation of the prerequisites for the adapta- upon the stage of economic development reached. tion of the employment structure to the chang- ing structure of the economy through the pro- In an expanding economy with full employment vision of education, further education and re- accident prevention, health protection and re- training facilities, developing economies must habilitation measures for instance are instruments still give priority to safeguarding a minimum of economic growth, quite apart from their own subsistence level for wide sections of the popula- value under social policy aspects. In a less de- tion, and their social product is so small that veloped, underemployed economy with a high resources cannot be released for social invest- rate of population growth, on the other hand, the ment (Kindergarten, pre-school education, ele- social policy objective of maintaining, improving mentary, secondary and technical schools, and and restoring the earning capacity is not in like colleges) to the extent desirable on grounds of manner an economic policy aim, especially if social and communal policy, nor is there as great for lack of labour protection regulations and a need for doing so as social policy demands in sickness and accident insurance the burden falls the interest of social justice. on the persons directly involved and not on those who cause these social costs or third parties: Unfortunately it seems to be generally true-and under the assumptions made, the demand for there is corroboration in historic experience in labour can be met without social policy protec- the West and East-that the social progress which tion, and there exists no economic or economic- a society can afford as well as the interdepen- policy motive to extend the workers' protection dence of economic, technical and social progress or make suitable social investments (hospitals, vary in direct proportion to the wealth which it rehabilitation centres)o This is a typical example already possesses. showing that, without intervention by the political authorities, the economy on its own considers Need for a Social Policy... and establishes social standards only to the extent to which achievement of set economic ob- And yet, although the scope for social policy in- jectives is tied up with the fulfilment of social sofar as it requires use of scarce resources is limit- standards, for economic action is ruled by the ed by economic opportunities, economic capacity principle of economic rationality rather than the and the pressure of competing political aims, an principle of humanity. attempt must be made also, and especially, in developing countries to accomplish a measure Similar considerations apply to the interdepen- of social policy objectives, albeit one which does dence of formal and substantial equity of op- not jeopardise growth. The question has not yet portunity, on the one hand, and economic growth, been systematically examined, and most cer- on the other:Whereas in an advanced and expand- tainly not answered, what social policy concepts ing economy where production proceeds at a are compatible with a certain rate of growth in

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INTERECONOMICS,No. 11, 1970 353 APPLIED ECONOMIC THEORY the various countries of the Third World and at forming the order and in view of the inter- what combinations of social and economic pro- dependence of the economic and the social gress rates are conceivable and attainable. If an order, fixes minimum working conditions, or al- answer were attempted-which of course cannot lows them to be fixed, by perfecting the organisa- be done here-it would probably be pertinent to tion of the labour market (e.g., by allowing and begin by asking what social policy measures encouraging the trade unions to act as the em- are indispensable, "cost" society little or nothing ployers' partners in fixing wages, by extending and promote economic development (e.g., limita- employment exchange agencies and career guid- tion of working time safeguarding a minimum of ance), if it concedes to the employees rights of regeneration, minimum wages according to the participation in industrial decisions, if applied principle of "high wages" 10) or leave it unimped- to competition it prevents the emergence of ed, and subsequently broach the question which monopolies or keeps them under control, if re- social policy measures yield social and com- strictions on the freedom of movement, factory munal benefits of a value in excess of their eco- regulations, traffic and town planning prevent in- nomic cost (e.g., an education policy which in dustrial congestion with consequent heavy social extent, character and structure, i.e., in regard costs, if the basic economic policy exercises an to the proportion of general and technical, ele- influence on the use and cost of land to the mentary and advanced schools, takes the medium- benefit of social policy aims and at least pre- term intellectual capabilities and employment serves the manpower capacity. structure of the population into account). Finally an analysis would be required to show which Criticism of the Federal Republic's social policy measures, while yielding desirable Economic Policy results, conflict with economic growth and other objectives so as to virtually preclude attainment Whereas in developing countries the basic and of these objectives (e.g., a national pension ac- structural economic policies are crucial for a cording to the Swedish model or continuing pay- prophylactic social policy because they are ment of wages and salaries during illness). These capable of obviating or lessening social harm speculations are founded on the assumption that and costs, it is in developed economies of in- there exists for every society a kind of "Law of creasing importance how the economic process balance of marginal utilities" with regard to is regulated. B. Pfister formulated one of the re- meeting the "demand" for social-political and sults of his investigation into the circulatory ef- economic progress which also applies to meet- fects of the system of total social policy in ing the demand for alternative social services. Great Britain as early as 1936 as follows: "From British economic and political life...one can ... also in Developing Countries however learn.., how much, when the statutory framework and technical insurance apparatus of It is an important question of social policy, not the State's social policy have been by and large only in developing countries, whether and to completed and when it is operating well within what extent the need for social policy corrections the legal compass, the economic value and con- and compensations can be lessened by an eco- tent, the social and economic substance of the nomic policy which gives a priori consideration system of total social policy frequently depends to social policy although there are specific situa- on the general economic policy (credit, price, tions not avoidable by prophylactic means which currency policy) rather than on extensions and make an autonomous social policy indispensable: refinements of the statutory frame of this policy however successful an economic policy may be, which is now taken for granted 11/, there are handicapped, ill and old people, there is bound to be structural and frictional unemploy- There is every reason to re-examine the social ment, and there exist natural differences in ability substance of the Federal Republic's economic and attainment resulting in differences in income policy which is characterised by a "soft" policy and wealth which are thought to require com- towards restrictions of competition and economic pensating for. concentration, by failure in the fight against the creeping price inflation, by an extremely high But the need for social policy corrections can ap- level of interest rates, and by lack of a protective parently be lessened if economic policy, aiming shield against external economic influences.

10 Cf. K. W, Rothschild, Lohntheorie, Berlin and Frank- 11 B. P f i s t e r, Sozialpolitik als Krisenpolitik, Stuttgart 1936, furt/M 1963, p. 34 ft. p. 283.

354 INTERECONOMICS, No. 11, 1970