Sunday, July 27, 2014

The German Producers object to sanctions against Russia

Thorstein Veblen was like many of us who grew up in the north-central states like Wisconsin and Minnesota in that we knew many Germans of incredible virtue.  I grew up around German-speaking pacifists who were also superb farmers with beautiful fields and healthy herds of animals.  My Swedish tribe admired the Germans because they skillfully made quality goods.  The neighbor my grandfather most admired was a machinist.  The Germans in Wisconsin also brought with them some of Europe's most advanced political ideas.  In the repression following the Revolution of 1848, some of Germany's finest intellectuals were forced to flee and a significant part of them washed up in Wisconsin.  They were even called the 48ers, and their legacy includes the founding of the Republican Party in Ripon as an abolitionist party, the Progressive movements of LaFollette, and the Socialist governments of Milwaukee.

After graduating from Yale, Veblen spent several years in Madison hanging out with the Wisconsin Progressives and most certainly understood the legacy of the 48ers.  In his world, smart Germans could also be heroic.  So when it became obvious that Germany was at least partly to blame for starting the insanity that was WW I, Veblen wanted to know how this could happen.  And so he wrote a book that is a towering monument to Institutional Analysis called Imperial Germany and the Industrial Revolution.

Veblen's essential argument is that there are two Germanys.  There is genius Germany that makes high-speed printing presses and BMWs, and there is aggressive Germany that is rooted in the warlike animus—think Prussian.  WW I was so insane because genius Germany could produce more efficient ways of killing people than the professional killers could comprehend.  Genius Germany had already come to dominate the world by 1914 but most of that advantage was squandered when Germany went to war.  Two undeniable cultural currents merged to make a dangerous warlike Germany inevitable.  Veblen even argued in 1915 that it didn't much matter how Germany fared in the current conflict, her cultural proclivities meant she was likely to try again if she could only reorganize.

While we don't have the Prussians teaming up with the Krupps to make trouble any longer, the mixture of Predatory Germany and Genius Germany still makes for interesting outcomes.  The banksters of Frankfurt are the new Prussians while the German Producers are still cranking out world-class goods and still defining industriousness.

In this fight over whether Germans should threaten economic sanctions against Russia for refusing to capitulate over Ukraine however, the interests of the Producers and Predators could not differ more starkly.  Predators view the world as friends or enemies, Producers view the world as suppliers and customers.  Big difference—HUGE!  So while the would-be Prussians try to outdo each other for violent, naked, threats, the Producers just want to get on with making their corner of the world a little more prosperous.

Put me down for being on the side of the Producers in this one.  Like Veblen and my grandfather, I happen to admire genius Germany.

German industry warns against tighter sanctions

Marcus L├╝tticke / gsw  23.07.2014

The EU's discussion about expanding its sanctions against Russia is alarming parts of Germany's business community. Industry associations are expressing fears of a serious slump in the country's exports.

Taking a decisive stand against Moscow while protecting economic interests - that's the challenge facing European governments after the MH17 plane was shot down. The US, for some time, has been calling upon the EU to undertake more drastic measures toward the Kremlin. However, interest groups representing various industries are warning of unforeseeable effects should tighter sanctions be implemented.

"Every third job in Germany depends on exports. If we interrupt German-Russian trade, then we have 300,000 jobs that are affected by this trade," says Volker Treier, deputy head of the Association of German Chambers of Commerce and Industry (DIHK). "There are many companies that have made enormous investments in Russia. Do they now have to pay for a political conflict? As a spokesman for industry, I have my doubts, and we have to articulate these doubts."

Sanctions already being felt

Treier adds that he believes the existing sanctions, which have largely been seen as restrained in scope by the public, have already had a significant effect on business. "In the first five months of the year, we had a 13-percent drop in exports to Russia," he explains.

As such, the trade representative warns that Russia is now looking increasingly to partners in other regions of the world for doing business. "We know - in light of experiences reported by Germany's foreign chambers of commerce - that Russian business partners are particularly looking around in China," Treier says.

Even though he claims Chinese companies generally cannot deliver the same quality as their German counterparts, new trade deals are emerging between Russia and China.

Dangers for small and mid-sized business

Germany's smaller businesses have also spoken out against tougher sanctions against Russia. "There would only be losers when it comes to an economic battle with Russia," said the president of the German Association for Small and Medium-sized Businesses (BVMW), Mario Ohoven. "An embargo or similar compulsory measures toward Russia would hit our export-oriented mid-sized businesses above all."

Ohoven says the majority of the approximately 6,300 German companies that are active on the Russian market are small and mid-sized enterprises. He adds that 98 percent of the 350,000 German exporters are mid-sized companies, and one in four of them would feel the effects of economic sanctions.  (Big German companies, such as Volkswagen, also manufacture in Russia.)

German industry is putting significant pressure on the federal government to show restraint in its implementation of sanctions. The EU's foreign ministers agreed Tuesday (22.07) in Brussels that the European Commission would present suggestions on sanctions by Thursday - including which persons or companies would face the economic penalties.

Tough balancing act

German Foreign Minister Frank-Walter Steinmeier had called for the EU to undertake "sharper measures" ahead of the meeting Tuesday.

The EU, he said, has constantly pursued a dialogue and a de-escalation of the situation in Ukraine. "However, Russia has not lived up to its commitments to a sufficient extent," the foreign minister criticized. "We must and will draw our conclusions from that fact."

Steinmeier, however, has yet to go into specifics concerning planned sanctions.

Should the EU at some point decide to implement sanctions affecting entire business sectors, there are fears within German industry of how Russia might respond.

"We would then provoke extreme retaliatory measures and work our way into a spiral of sanctions," Treier says. "The politicians have to explain to the public and to businesses how things are supposed to continue here in Germany."

After all, Treier adds, Germany depends heavily on imported gas from Russia. "This question has to be addressed." more

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