Monday, December 13, 2010

The economic crises and the Germans

Since USA appears to be doing nothing or actually doing the wrong things in this economy, the most interesting story out there is Germany.

On one hand, Germany's real economy is recovering from the various financial catastrophes quite nicely.  Exports are up.  Unemployment is down.  Bet you could find some smug damn Germans these days.  Even though industrial capitalism has taken a mighty beating at the hands of the neoliberals around the world, it still burns in Germany--even if not so brightly as it once did.

Of course the banksters, noticing that the Germans have some prosperity to go rob, have figured out a way to make the German taxpayer bail out their sour loans in Ireland, Portugal, Greece, etc.  And of course, since Germany also is home to some of the more ham-fisted banksters headquartered in Frankfurt, it is clear that this is in some ways just a move by German banks to seize a greater share of German industrial output.

Of course, none of this is especially new.  In 1915, when Americans were first being told that they must enter WW I with Germany as the enemy, Thorstein Veblen wrote an incredible book called Imperial Germany and the Industrial Revolution.  It would be the best example of Institutional Analysis he would write.  It's a big book with lots of conclusions that are almost eerily accurate today.

In one example, Veblen postulated that the Germans got the way they were because they are the product of nearly equally-powered cultural elements.  The newcomers were the upstarts--the titans of industry who built the Ruhr valley into a colossus that by 1900 had surpassed both France and especially England.  For sake of simplicity, I call them the "geniuses."  But Germany was also the country of the Prussians, the Junkers--the "militarists."  This combination of genius and militarism pushed Germany into waging war in 1914, argued Veblen, and it was a cultural problem that would guide German behavior for a long time no matter the outcome of WW I.

Of course, WW II pretty much destroyed the German militarist class which caused an industrial renaissance they called Wirtshaftwunder.  But as global finance took on a more predatory tone after 1973, the Germans have discovered they still have a lot of Prussian left in their culture.

Ah yes Veblen--right again.  What a shockeroo!  And I am certain he would just love the piece in today's Spiegel.  On one hand, we see Ms. Merkel who has listened to the geniuses at some level, and on the other hand, we see Finance Minister Schäuble who could be a freaking Junker come back to life.

No really?  Merkel is also being criticized by a guy named Juncker?  I just love it when the militarists start criticizing the geniuses for 'simplistic thinking'.  You cannot make this shit up. (sigh)

Waning Influence in Brussels

Euro Crisis Leaves Germany Increasingly Isolated


German Chancellor Angela Merkel is coming under growing criticism ahead of this week's EU summit. Her preferred approach to fighting the euro crisis has failed to receive support in Europe. She is also at odds with Finance Minister Wolfgang Schäuble, whose loyalty to France has become a subject of ridicule in Berlin.


German Chancellor Angela Merkel is always good for a little variety whenever European leaders pose for their traditional group photo at summits. Sometimes she wears a blue blazer. At other times she is in beige. Sometimes the chancellor stands next to French President Nicolas Sarkozy, while at other times she positions herself next to Luxembourg Prime Minister Jean-Claude Juncker.

But one thing has consistently been the same recently: Merkel stands in the middle. To some extent, the protocol reflects German national policy and the chancellor's favorite position, namely that the Germans should not be standing on the sidelines in Europe.

Merkel will position herself in the middle again at this week's summit of EU leaders in Brussels, but this time image and reality are hardly compatible. A deep divide runs through Europe, and Merkel is more isolated than ever within the circle of the EU's 27 heads of state and government.

The chancellor sees herself confronted with the charge that she has focused exclusively on national interests in the euro crisis. Last week, in the German weekly newspaper Die Zeit, Juncker accused Merkel of "un-European behavior" and "simplistic thinking."

The premier of the Grand Duchy is not alone in his criticism. Many European leaders resent Merkel for the fact that Germany has recently been less flexible and not as enthusiastic about the EU as it used to be. Germany's understandable desire to not become Europe's paymaster doesn't give it the right to be its taskmaster, say critics from Lisbon to Helsinki.

Making the Markets Nervous

Ironically, Merkel and Finance Minister Wolfgang Schäuble have been everything but successful in their efforts to reform the monetary union. To save the euro, they wanted to establish a new procedure to deal with debt crises in the euro zone. But nothing will come of it. The decisions European leaders plan to make this week will have little to do with Berlin's original plans.

There are two reasons for the Germans' lack of success and loss of support. Merkel and Schäuble are depending too heavily on solidarity with France. They are seeking to align themselves with Germany's most important neighbor, as they did last Friday at the German-French summit in the southwestern German city of Freiburg, while ignoring the fact that Paris mainly pursues its national interests with little regard for sensitivities east of the Rhine.

An even more serious problem is that Merkel and Schäuble often disagree. The two politicians send out very different signals in Brussels, which makes their partners -- and the financial markets -- nervous. Worse yet, it weakens the German negotiating position, because the chancellor and the finance minister often make themselves vulnerable to being played off against each other.

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