Economics and politics - comment and analysis

An interview with Heiner Flassbeck: Germany’s model and its growing class of working poor

Heiner Flassbeck gave an interview to the American The Real News Network. The main topics were the ideology of Germany as a model economy and its growing class of working poor.

Merkel’s strategy over the years has been as simple as it has been destructive. The plan was to provide jobs for as many people as possible. This sounds indeed very nice. As Flassbeck explains, unfortunately, the real story is very different. Flassbeck makes the point – which is crucial – that more jobs are not the best social protection. Everything depends on the wages that are being paid. If wages are too low, according to Merkel, nothing can be done. The issue is creating jobs. Flassbeck rightly calls this sheer ideology.

This is what really happened. Germany reduced its wages and went for a policy of beggar-thy-neighbours within the eurozone. By realising a reduction of labour costs, it improved its competitiveness at the expense of his neighbours. This is the cause of the eurozone crisis. Germany’s policy is not a model. It violated the rules of the Monetary Union. This is not sound macroeconomics, the contrary is the case. The reason why nowadays unemployment in Germany is falling is not the due to the reduction of social contributions. It is mainly the result of Germany’s huge export surplus. The problem is that wages are too low, but this Merkel, with her ideology of “low wages produce jobs” cannot accept. Otherwise, she would increase the minimum wage. This would not be a problem, given the very high level of German productivity.

The interview also dealt with the refugee crisis. As Flassbeck says, the refugee problem dates from 2015. Merkel is internationally known for her “welcome culture,” but she actually did nothing to decrease the tensions between poor Germans and the incoming refugees, although she could have very easily increased the social contributions to the poor, given Germany’s sound public finances. The result is that right-wing parties now benefit from the fear caused by the influx of foreigners. The policies of the mainstream parties are not dissimilar. They have given up on the poor and Germany’s policy towards its neighbours is not being questioned.

Finally, Flassbeck also discusses the upcoming election and the likely result: Germany is going to the polls on the 24th of this month.

The interview can be seen here.