Economics and politics - comment and analysis
7. January 2023 I Heiner Flassbeck I Economic Policy, General Politics

The Uptight Republic – Notes on the Turn of the Year

If one were to wake up from several years of sleep at the beginning of 2023 and look around Germany, one would not be able to avoid noticing a country in a state of high collective uptightness. A republic full of oddities that no one wants to talk about openly. The political leadership no longer even tries to give the citizens a certain orientation. The country is drifting along, even though everyone keeps talking about finally wanting to tackle the unavoidable tasks of the future.

The list of oddities is almost endless:

– There was a pandemic that has long been over in most countries of the world, but whose end was simply missed in Germany. Didn’t they want to prove the critics of the state’s coercive measures right? Those responsible still seem to be looking for a “killer variant” with which they can conceal their own failure in dealing with the virus. No one talks any more about the grandiose failures of politics, about the almost total closure of the borders in Europe (for which Horst Seehofer in particular was responsible) or the state measures taken to the point of absolute absurdity (think, for example, of bans on going out and masks in public parks), most of which were without any sense and without any rationality.

– There is a war that neither side can win, but which hardly anyone in Germany wants to end. Politicians and the media tell themselves that they know exactly who represents the just cause and who must therefore win. But “in the great events of man’s history, in the unwinding of the complex fates of nations, justice is not so simple” (J. M. Keynes). Like little children, politicians play with fire without giving a single thought to the possible consequences.

– German foreign policy has allowed itself to be talked into a “rivalry with China” by the USA – apparently without suspecting that it is thereby allowing itself to be reduced to a stooge for the economic interests of the USA. In this way, it directly supports the delusion of the American neo-conservatives (which includes Biden) that it must remain the only superpower and vehemently harms European interests. The fact that it even tends to go along with American provocations on Taiwan is beyond stupidity and irresponsibility.

– In the same breath, German trade policy is oriented towards a “rules-based order” and “value partners”. This is so naive that one is at a loss for words. First of all, it is absurd to regard the USA, which represents nothing but its own interests (and its own delusions), as a value partner. A rules-based order only ever interests the US when it serves its interests. Whether it is the World Trade Organisation, the IMF or the international courts of justice, the US itself never acquiesces to the constraints of a rules-based order.

– Even worse is the fact that the “value partners” with their Washington institutions have caused immeasurable damage in the developing world over the last 70 years by ruthlessly imposing their neoliberal ideologies. Germany, the great mercantilist, must also ask itself whether it is the appropriate country to sell a rules-based order to its “value partners”. With its merciless current account surplus policy, no one has trampled on the rules-based order in the European Monetary Union more than Germany for twenty years.

– After a Marshall Plan with Africa, which was meant to limit the flow of refugees, a new policy “for Africa” is already being drafted, which has nothing to do with Africa, but only with the attempt to live out the “rivalry with China” in Africa as well. For Africa, this is more of a threat than a hope, because again, there is no attempt to even begin to understand what has gone wrong in Africa over the past thirty years under the regime of the IMF and the World Bank. The naivety with which the German development minister, formerly environment minister, indulges in this issue is breathtaking.

– There was an enormously important pipeline for German energy supply that was blown up. But nobody in the German government wants to know who did it. As my American colleague Jeffrey Sachs has convincingly pointed out, we deliberately look the other way, even though it is obvious to anyone with half a common sense that it was Germany’s “value partners” who were responsible.

– There is an “inflation” that is not inflation at all and yet is being vigorously fought. Everything that could be said and written about the supposed inflation has been said. In the meantime, it is evident in many areas that the temporary price effects are subsiding and rates are very quickly moving towards normality. More than astonishing, however, is the way politicians have handled this issue. From the first to the last minute, there was not even an attempt by the responsible ministers or the Chancellor to intervene in an enlightening way. The Finance Minister even believes that more government demand to fight the recession could fuel “inflation”. It doesn’t get any more far-fetched than that.

– The economy is threatening to crash dramatically, but is being glossed over day after day. The trick is simple: postulate a mild recession (or even a “winter recession”) and sell it to the naive public as the most normal thing in the world. However, after a massive slump called Corona, even a mild recession would not be the most normal thing in the world at all; it would be a sheer disaster. In fact, it looks like a deep slump. The Federal Statistical Office has just reported that the most important economic indicator, new orders in German industry, plummeted massively in November and are more than 10 percent below the level of the previous year. Particularly naive minds naturally believe that it is good for the climate if the economy stops growing. But it is not a question of stopping the economy, but of giving the dynamics of the economy a different direction. Anyone who tries anything else will fail miserably.

– German climate policy gets lost in the minutiae instead of finally taking a global perspective and seeing that there can never be a global solution without the conflict with the producers of fossil energy. The producers, and Saudi Arabia in particular, are doing everything they can to torpedo global climate policy. However, no one is willing to at least clearly address the open conflict between the producers (including the USA, of course) and the consumers who are willing to do without. As Friederike Spiecker, Constantin Heidegger and I have shown in the new Atlas for the World Economy (in German), it is practically impossible to sustain global incentives to save fossil energy for a long time if the supply of these substances on the market is not consistently reduced.

– Government debt policy clings spasmodically to the debt brake and yet it creates more debt than ever before. Everything has been said about the debt problem, but neither logic nor clear empiricism make even a small step forward on this issue. The ranks of the rejectionists and ignoramuses in politics and the media are firmly closed. They refuse any attempt to break down the individual economic narrowness. They defend the intellectual haze of the Swabian housewife and in this way they actually succeed in blocking any attempt at enlightenment with their own stupidity.

– It is no different with pension policy, where, completely unimpressed by the miserable failure of the Riester pension, they are once again relying on private savings. Here, too, everything has been said in terms of content. But here, too, one is struck by the narrow-mindedness with which one ignores logic and empiricism in order to push through one’s own ideological agenda.

All this is depressing. But it is even more depressing that there is no improvement in sight. Democracy, at the very time when it is supposed to be showing its superiority, is proving to be totally incapable of filling top posts in such a way that effective governance is possible at all. Once the top personnel of the parties have been served, the gender distribution, the migration background and the regional distribution of offices have been satisfied, there is simply never any room left for a person who would be intellectually and organisationally capable of leading a ministry and giving the country the necessary orientation. Not only in Eastern Europe, not only in Africa, not only in Latin America, no, on our own doorstep, the model we love so much is failing because it has not found a way to solve the personnel question.