Wednesday, January 18, 2012

What makes Angie tick? (3 of 6) Angie's embrace of neoliberalism

"Angela Merkel pflegt ihren Ruf als Pragmatikerin. Aber hinter dem Pragmatismus verbirgt sich eine handfeste wirtschaftspolitische Ideologie." ("Angela Merkel promotes her reputation as a pragmatist. But behind the pragmatism hides a particular economic-political ideology.") - Jakob Augstein, Die Sparschweinerei Spiegel Online 10.11.2011

In my last post, I focused on Angie's 2004 expression of admiration for Alan Greenspan. Not because she's carrying around a Quotations from Chairman Greenspan book or something. (Or, who knows, maybe she is!) But Uncle Alan's record is a good illustration of the kind of reality-resistant economic thinking that Angie obviously still embraces.

Digging into details of German politics is always a reminder how tricky it can be to try to discuss European politics in terms of American categories of "liberal" and conservative. In European terms, present-day liberals are the advocates of something like classical historical liberalism in foreign policy, e.g., deregulation of business, hostility to government income-support programs, hostility to organized labor - what passes for "free market" policies in the US. But European liberals often are strong advocates for civil liberties and individual choice in matters like abortion and same-sex marriage; the ones who don't care about that aspect are known as rightwing liberals, a concept that just doesn't compute in conventional American terms.

Angie's "ordoliberalism" emphasizes the need for a strong state, so you won't hear Angie talking about the need to drown government in the bathtub, or that all economic problems are caused by government, as one hears with American Republicans. But she's down with the program that would be familiar as the 1% prescription for economic policy in the US or Britain: lower pensions, later retirement, lower wages, weaker unions, less adequate unemployment insurance, more expensive and lower quality health care combined with bailouts for giant corporations and banks that get in trouble.

The latter concern is how Angie-nomics turned a crisis of the European banks into a massive sovereign debt crisis and now a existential crisis for the European Union. When it became generally apparent that Greece was overborrowed and was not going to be able to pay back the full principal on its sovereign debt, Angie and her junior partner Nicolas Sarkozy, the "Merkozy" duo, wanted to avoid the bank losses that major German and French banks were likely to take if Greece defaulted. So they instead tried to maintain Greece's payments to their creditors by EU subsidies.

But here's where Angie's truth faith in ordoliberal economics showed its destructive face. To justify the subsidies to Greece (which were really backdoor bailouts to banks), Angie and Nick insisted that Greece adopt austerity policies that applied the ordoliberal (and also neoliberal) menu of lower pensions, later retirement, lower wages, weaker unions, less adequate unemployment insurance, more expensive and lower quality health care. This had the entirely predictable effect to anyone familiar with basic macroeconomics (as Paul Krugman ruefully insists in his criticism of austerity policies during this depression) of shrinking the Greek GDP, which make their GDP-to-debt ratio worse, which made them less able to pay the debt, which required more subsidies, for which Merkozy insisted they implement more austerity economics, and so on.

Then bond speculators went after other countries that were not overborrowed by any half-reasonable historical definition before the economic crisis: Italy, Ireland, Portugal, Spain. Ireland had increased its own vulnerability by its government's own unwillingness to force bank stockholders to eat the consequences of private banks' own bad debts, and therefore assumed large amounts of substandard bank loan liability, which increased their vulnerability to bond speculation attacks.

If the "trioka" of the EU, the European Central Bank and the IMF had broken from one-percenter orthodoxy in 2009 and allowed Greece to write down a large portion of its debt and not insisted on self-destructive austerity policies, it's highly possible that the current euro and EU crisis could have been avoided. Or at least postponed until adjustments could be made to remove the hard-money trap that the euro currency constitutes for the less robust European economies.

It's a staggering failure of European governing elites that matters came to this point. Within the EU, the longer-term leadership failure should be especially laid on Britain, France and Germany, whose leadership was absolutely vital to the growth and development of the EU. The fact that Norway and Switzerland passed on EU membership wasn't vital to the European project. But the leadership of the three leading powers was essential.

Angie's role does have its own significance, however, because as leader of the country with the largest GDP of the EU and the eurozone, Germany's financial resources inevitable gave it a great deal of clout in the current situation. A more pragmatic approach by Merkel's government could have produced a far better result.

Which tells me that Angie's understanding of economics really is heavily ideological, and that she really is committed to her ordoliberalism. Some of her policies don't fit into a pure ideological picture. She has supported tax cuts for the wealthy in the past, for instance. But now one of the big issues in her governing coalition is that she opposes tax reductions for the wealthy right now while the junior coalition partner, the Free Democrats (FDP), favor them. Here, concern for a balanced budget and a belief in the importance of such fiscal rectitude probably do override ideological preferences for the comfort of the most comfortable. In Keynesian terms for Germany itself, they haven't needed a big injection of stimulus the last couple of years, so her policy would be consistent with that. But the eurozone definitely has needed stimulus, and badly, so Keynesian considerations would have said that Germany should be borrowing more to provide stimulus to weaker economies like that of Greece and Portugal.

The traditional approach of the Christian Democratic Union (CDU) and its Bavarian ally the Christian Social Union (CSU) have combined a paternalistic concern for social welfare functions with a solicitude for the comfort and convenience of the wealthy. That combination, along with the "C" part of the party names which primarily meant a close alliance with the Catholic hierarchy, has defined the CDU/CSU brand of conservatism as it is know in Germany. The CDU has a labor union wing, though its influence has notably declined in recent years. There is a German description of "Christian unions", which go back to the earlier days of the labor movement when they provided an alternative to the socialist-led unions. A century ago, the Christian unions may have rejected the seizure of the means of production then still theoretically advocated by the Social Democratic Party (SPD). But they have provided a real base of support for public pension programs and other policies that benefited labor and the consumers within the CDU.

Angie famously embraced the less paternalistic neoliberal view at the CDU's Leipzig convention in 2003. Then General Secretary of the Party, since succeeded in persuading the convention to adopt a program that embraced more of her ordoliberalism, particular more aggressive policies on business deregulation and the rollback of social benefits to workers. And she was able to unite the CDU behind that approach from then until today.

She frames her anti-labor positions in terms of individual freedom, the need to enhance competitiveness, and the challenges of globalization and technological change. Merkel biographer and political scientist Gerd Langguth places particular significance on the framing of her approach in a speech she gave October, 2003, called "Quo vadis Deutschland" in which she discussed freedom, solidarity and justice as basic values of German and CDU politics:

Unser Gemeinwesen braucht eine Neujustierung dieser drei Werte in ihrem Verhältnis zueinander, und zwar zugunsten der Freiheit. Oder anders gesagt: Damit Solidarität und Gerechtigkiet wieder gelebt werden können, muss die Freiheit in unserer Wertehierarchie wieder deutlich von unten nach oben kommen.

In Langguth's view, "Hier handelt es sich um das eigentliche Credo der CDU-Vorsitzenden."

In other words, in Angie's view Germany had too much solidarity and justice, and needed to balance them with more individual freedom, which in her ordoliberal outlook means lower pensions, later retirement, lower wages, weaker unions, less adequate unemployment insurance, more expensive and lower quality health care combined with bailouts for giant corporations and banks that get in trouble.

Her statement in her book Mein Weg in 2004, quoted in the firsts post in this series, is striking in that she not only compares ordinary Germans unfavorably with Americans, but does so by sneering at the childishness of anyone who doesn't admire the American approach, which even the European business has been known to call killer capitalism: "What does the German do" in the face of economic change, she asks. "First he gets depressed and thinks, may the state is a more secure harbor - like a little child who falls down on his first attempt to walk and then would rather just lie there than to hurt himself again."

Whether she personally believes such policies actually enhance individual freedom for anyone but the 1%, who get more freedom to accumulate wealth, exploit their workers and cheat their customers and business partners under the ordoliberal approach. But if we understand Langguth's statement to mean that Angie's committed to the policies she sees as enhancing freedom, then her career since 2003 provides plenty of evidence that it really is her "true creed". One can look at the results of Angie-nomics in Greece, Ireland, Portugal and Spain to evaluate how much weight solidarity and justice have in her real existing system of values. The Portuguese Prime Minister Pedro Passos Coelho recently suggested that people who can't find a decent job in Portugal should just move out of the country to Angola or Brazil where Portuguese is also spoken. (Mario Queiroz, No Jobs? Just Emigrate! Inter Press Service 12/29/2011)

So the 99% in Angie-nomics do have the freedom to become economic refugees.

Sources on Angie's life and career:
  • Gerd Langguth, Angela Merkel.Aufstieg zur Macht - Biographie(DTV; München) 2007 edition
  • Michael Lümann, Der Osten im Westen - oder: Wie viel DDR steckt in Angela Merkel, Matthias Platzeck und Wolfgang Thierse? Versuch einer Kollektivbiographie (ibidem-Verlag; Stuttgart) 2010
  • Angela Merkel, Mein Weg.Angela Merkel im Gespräch mit Hug Müller-Vogg (Hoffmann und Campe; Hamburg) 2004
  • Volker Resing, Angela Merkel.Die Protestantin - Ein Portrait (St. Benno-Verlag; Leipzig) 2009


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