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 Date:9/15/2009 It's Your Call |
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Puritan Ethic? Germany’s 21st Century Puritans need to wean the economy off its ‘destructive addiction’ to industrial exports, argues Reginald Dale. 
Germans, like others in Northern Europe, can be sanctimonious about other people’s failings, not least because of the region’s strong Puritan traditions. (England, whether by good luck or good management, shipped many of its more fervent Puritans to North America in the 17th century.) In today’s Germany, censorious disapproval extends to behavior ranging from warmongering, especially by the United States, to irresponsible birth control – it is not uncommon for Germans to denounce those with more than one child as “amoral,” because of the added strain they place on the planet’s resources.Modern Puritanism, like its antecedents, flourishes especially strongly in economic ground. German leaders frequently condemn the alleged callousness, greed and other excesses of “Anglo-Saxon” capitalism, as vigorously as their forebears denounced the sin of usury. The original Puritans, according to the philosopher and historian John Herman Randall, Jr., insisted “both on unremitting diligence and toil and on the sin of enjoying riches through wasteful and thriftless consumption.” Such attitudes, along with a Quaker-like pacifism, can be readily detected in modern Germany. Most Germans, however, remain in denial about the problems that such beliefs and the policies they engender create, both for themselves and others. The need to wean the German economy off its destructive addiction to industrial exports is the biggest single policy challenge facing the country, but it barely raises a mention in the current humdrum campaign for national elections due at the end of September. On the contrary, Christian Democratic Chancellor Angela Merkel, the likely winner, has gone out of her way to stress that Germany will continue to run an export-dominated economy once it emerges from recession and that temporary stimulatory and employment-boosting measures are meant simply to tide Germany over until its usual habits can be resumed. Merkel and others do not understand the global financial crisis as a warning that Germany must change, but conclude it has vindicated the country’s traditional thrifty approach. Finance Minister Peer Steinbrück, a Social Democrat, has gone even further and predicted that the United States, because of its recklessness, “will lose its superpower status in the world financial system.” Such differences with the United States are not a new source of transatlantic tension. Since the postwar period, German capitalism, enshrined in the revered “social market economy,” has diverged from the U.S.-British variety in stressing saving over consumption, caution over risk, government welfare over private wealth, collectivism over individualism, discipline over indulgence, goods over services, and exports over imports. The German way, as foreigners will sometimes be told, is not only best for Germany in practice but also morally superior to rival systems. Trade surpluses are next to godliness, and bring earthly rewards in addition to any that may lie beyond. In achieving this blessed state, the population’s energy is channeled into the skilful crafting of chunks of iron and steel rather than into frivolous and speculative financial innovation. Germany’s exports are heavily oriented toward goods such as cars, machinery and consumer durables, as well as chemicals. The service sector is under-represented, both in exports and domestically, compared to the U.S., British and other developed economies. Outside Germany, however, there are increasing doubts as to the validity of this approach. It is becoming clear that Germany’s squirrel-like economic hoarding not only bears partial blame for the financial upheaval, but also risks causing serious damage to Germany itself. If Germany persists in its convictions, it will be harder for the global imbalances at the heart of the crisis to be resolved, and more difficult to increase the standard of living, and quality of life, of the German people. It may not even be as morally desirable as many Germans think to advance further along this track. That viewpoint jars with many in Germany who believe that the country’s ascetic approach is even more appropriate, and commendable, in hard times. Surely, many less technically minded Germans would argue, any self-respecting government should seek to run a trade surplus – especially Germany’s 15 partners in the euro zone, whom Germany likes to lecture on sound Teutonic practices. But of course, by definition, not every country can run a surplus – and excessive surplus countries pose just as much a danger to the international system as deficit nations like the United States and the United Kingdom. It is universally agreed that righting the world economy will require a significant reduction in the U.S. trade deficit that can only be achieved by declines in surpluses elsewhere. At around $700 billion last year, America’s trade deficit is almost entirely matched by the surpluses of the two biggest surplus countries, China and Germany. Germany’s surplus is more than half that of China, and the two countries are in a neck-and-neck race for the title of the world’s largest exporter. Germany and China have reached this position as a result of government-backed policies that promote exports at the expense of the home market. Germany has cracked down on costs, notably including wages, and raised taxes on the domestic economy in order to drive output into export markets. One result has been domestic growth that is among the slowest in Europe and a lower standard of living for the German people. Another has been to make Germany even more vulnerable than other countries to the collapse in world demand that has occurred over the past year. And few economists expect strong global markets for German exports to return soon. In Europe, it will be hard for Germany’s partners to recover if Germany persists in restraining its home demand and promoting its exports. Germans themselves will suffer as the country’s slow-growing, production-based economy deprives them of the kind of financial, commercial and domestic services enjoyed by other advanced countries. Across the Atlantic, the more agile and adjustable U.S. economy may adapt more quickly than the German to the post-crisis global economic era. The key to tackling all these problems, both at home and abroad, is for Germany to boost domestic demand and develop the country’s stunted service sector – allowing the country to pull its weight in repairing the world economy. This should be the prime task for the new German government that will take power this autumn. It presents a huge leadership challenge. But it should not be impossible. Anyone who has enjoyed the party atmosphere of Munich’s Oktoberfest or heard the Liebestod from the last act of Tristan and Isolde knows that a Puritan streak is not the only component of the German character. Reginald Dale is Director of the CSIS Transatlantic Media Network in Washington DC and a former commentator and senior editor for the International Herald Tribune and the Financial Times. |
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