The value of a progressive/left reading of history

I suppose I should start this off by saying again I'm fine with replacing Old Hickory's face on the $20 bill with that of Underground Railroad leader Harriet Tubman. I'm sure Tubman said something sometime that Ben Carson wouldn't approve. Or something else that would seem retrograde in the context of 2015 progressive politics in the US. But I'm down with using her image on the $20.

What I'm also insistent on is a progressive reading of history that recognizes complexity of progress, which often occurs simultaneously with retrogression in other areas.

Paul Krugman has a good blog post on this topic, Fighting for History 05/13/2015:

... progressives are much too willing to cede history to the other side. Legends about the past matter. Really bad economics flourishes in part because Republicans constantly extol the Reagan record, while Democrats rarely mention how shabby that record was compared with the growth in jobs and incomes under Clinton. The combination of lies, incompetence, and corruption that made the Iraq venture the moral and policy disaster it was should not be allowed to slip into the mists.

And it’s not just an American issue. Europe’s problems are made significantly worse by the selectivity of German historical memory, in which the 1923 inflation looms large but the Brüning deflation of 1930-32, which actually led directly to the fall of Weimar and the rise of you-know-who, has been sent down the memory hole.

There’s a reason conservatives constantly publish books and articles glorifying Harding and Coolidge while sliming FDR; there’s a reason they’re still running against Jimmy Carter; and there’s a reason they’re doing their best to rehabilitate W. And progressives need to fight back. [my emphasis]

I should note that the idea of a progressive/left reading of history quickly runs into objections from postmodernism, which is highly resistant to anything that might suggest a "meaning" in history, much less a scary Hegelian "teleology."

Merkel gearing up for a confrontation with Greece

Angela Merkel is staking out her hardline austerity negotiating position in preparation for the possibility of an anti-austerity Greek government headed by Alexis Tsipras and his SYRIZA party coming to power in Greece with the Greek elections scheduled for January 25.

Griechenlands Austritt aus dem Euro verliert seinen Schrecken Rheinische Post 31.12.2104 reports on a statement by the deputy head of Merkel's CDU caucus in the Bundestag, Michael Fuchs, laying out Angie's threats. (The English-language biography on his website gives his party position as "Vice-Chairman of the CDU/CSU Parliamentary Group.")

Reuters provides an English-language report, Euro zone no longer obliged to rescue Greece, Merkel ally says 12/31/2014:

"If Alexis Tsipras of the Greek left party Syriza thinks he can cut back the reform efforts and austerity measures, then the troika will have to cut back the credits for Greece," he said.

"The times where we had to rescue Greece are over. There is no potential for political blackmail anymore. Greece is no longer of systemic importance for the euro."

The remarks are the clearest warning yet to Greek voters from a senior German politician that Athens might lose support if it flouts the terms of its 240 billion euro EU/IMF bailout after early elections next year. ...

On Monday, German Finance Minister Wolfgang Schaeuble warned Greece against straying from a path of economic reform, saying any new government in Athens would be held to the pledges made by the current government of premier Antonis Samaras.

Of course, the assistance Greece is receiving is designed to allow it to keep paying on the enormous and unsustainable debt it has, not to stimulate its depression-devastated economy. So losing that kind of aid doesn't necessarily look to all Greeks as the kind of threat the German government imagines it to be.

It's grim irony in Fuchs' bullying statement is that he accuses Tsipras and SYRIZA of "blackmail." Reuters renders it as "political blackmail." But Fuchs' statement as quoted by the Rheinische Post is more direct, "Es gibt kein Erpressungspotenzial mehr" ("There is now no potential for blackmail").

In reality, it's Merkel and her "Troika" of the European Commission, the IMF and the ECB that blackmailed Greece into accepting the assistance which came at the price of requiring them to load up with an even higher burder of debt, the problem they were officially trying to solve.

Tsipras takes the position that Greece should remain in the EU and the eurozone. But their EU partners also have to recognize that Greece's main problem is the economic depression that needs a Keynesian stimulus for the eurozone economy. He also is insisting that Greece's creditors recognized that Greece cannot repay the amount of debt it is carrying, which in the most recent estimate I saw was around 200% of Greece's GDP. The country has to "take a haircut" on the debt, i.e., a major portion of that debt has to be written off and not paid back.

Merkel and her austerity supporters have been claiming that Greece was showing a major improvement in 2014. Yanis Varoufakis explains in Greek and European prospects for 2015 – Interview in L’Antidiplomatico 01/01/2015:

Over the past two years, no fact could get in the way of the EU propaganda machine which, approximately eighteen months ago, went into overdrive in an attempt to shore up the Samaras government, terrified at the prospect of a new government in Athens that insists of speaking truth to power. Have you noticed how the ‘Greek Success Story’ narrative disappeared once elections became inevitable? What kind or ‘recovery’ was it that went up in a puff of smoke the moment an election appeared over the horizon?

The answer is: a ‘recovery’ that existed only in the realm of propaganda. A ‘recovery’ that was engineered by means of two new bubbles, one in the bond market the other in the market for Greek banking shares – bubbles that burst the moment the Greek people seemed as if they were to have a chance to express what they felt about the said ‘recovery’ in the polling stations. A ‘recovery’ evidenced in one quarter’s positive GDP growth (equal to 0.7%), after seven years of continuous decline, which was due to the sad fact that nominal GDP fell – but for the first time it fell less than average prices did.

He also addresses the blackmail issue:

Exit from the euro is not an idea that a SYRIZA government will ever entertain or use as a negotiating strategy. While it is clear that Greece should never have entered the Eurozone (and, indeed, that the Eurozone should never have been designed the way it was), exiting would inflict massive damage upon everyone. At the same time, the ‘logic’ of the current agreement is busily working toward dismantling the Eurozone. Italy’s social economy for instance is unsustainable under policies inspired by those first tried in Greece in 2010. To save the Eurozone, and indeed to save Europe’s integrity and soul, we need a New Deal for Europe. SYRIZA is determined to kickstart the conversation on what this New Deal should be. Naturally, the outcome of such a debate will be a compromise. Alexis Tsipras, SYRIZA’s leader, knows this: When you are entering a negotiation, you are aiming at a compromise with which all sides can live. To bring it about, you must stake your initial position – which is what the party’s platform does – and set thin red lines which, if the other side crosses, you walk out. One such line, in Greece’s case, must concern the demand that Greece borrows from, amongst others, the ECB to repay the... ECB for bonds that the ECB bought in 2010/1. If Berlin continues to insist on such illogical transactions, a SYRIZA government must simply say ‘No’ and refuse to do it. Whatever the threats. [my emphasis]

Harold Mayerson has a good piece explaining the background of European drama over the Greek elections later this month, Squeezed By Austerity Imposed By Germany, Greece and Spain on Verge of Revolt The American Prospect 01/02/2015:

The policies that the European Union — that is, Germany — has imposed on southern Europe run counter to every lesson history teaches us about how to counter a prolonged economic crisis. In the 1930s, Franklin Roosevelt devised the New Deal not merely to counter the Depression’s effects but specifically to bolster what was then the underdeveloped economy of the American South and Southwest. His remedies extended beyond such successful stimulus programs as the Works Progress Administration, which gave millions of Americans jobs building needed public infrastructure. His policies also were crafted to bring the Southern economy into the 20th century through such programs as the Tennessee Valley Authority and rural electrification. The Jeffersonian anti-statism of today’s South notwithstanding, it was the New Deal and postwar military spending, as well as minimum wage and civil rights legislation, that enabled the Southern economy to catch up with the rest of the nation.

A similar understanding of the economics of depression and under-development could have yielded more successful economic outcomes in the European south over the past few years. German Chancellor Angela Merkel also could have learned a lesson closer to home: It was the austerity policies enacted by Chancellor Heinrich Brüning in the early 1930s that plunged Germany deeper into depression and paved the way for the Nazi takeover. Say this for the German misunderstanding of macroeconomics: It’s consistent. [my emphasis]

More on Heinrich Brüning's disastrous austerity policies

I recently wrote about German historian Knut Borchardt's controversial defense of Heinrich Brüning's economic policies during his Chancellorship of 1930-32.

Geschichte und Gesellschaft 1985/3 did an issue on the controversy over Borchardt's argument, featuring four major articles.

Editor Heinrich August Winkler breaks Borchardt's argument into two main points: the German economy was dangerously wounded before Brüning's Chancellorship; and, Brüning basically had no alternatives to his deflationary policies.

Charles Maier in "Die Nicht-Determinirtheit ökonomische Modelle.Überlegungen zu Knut Borchardts These von der „kranken Wirtschaft“ makes a strong argument against Borchardt. He points out that Borchardt bases his argument about labor costs being the whole problem rests on using total production costs per employee rather than the more conventional measure of cost by hour (unit of labor). This understates productivity during the period in question (1924-1932) because starting in 1924, the hours per worker were progressively and substantially reduced to such an extent that so using headcount understates productivity; it doesn't pick up the very substantial decrease in hour worked. Maier gives figures of the metal industry that the percentage of workers that worked more than 48 hours per week was 64% in 1934, going down to 34% in 1928.

Maier also shows that the portion of national income going to labor rather than capital during the Weimar Republic after 1924 looks fairly normal in international comparison. Borchardt makes much of the fact that the percentage going to labor increased after 1924.

Maier also points out that Borchardt's argument about real wages after 1924 is misleading, because in the immediate aftermath of the hyperinflation of 1923-4, conditions were very unusual and showed an artificially low real wage level in Germany. A comparison between real wages from 1913 to 1929 had Germany at a similar or lower level than the US and Britain.

Maier describes that Borchardt's argument about Brüning having no real alternatives as essentially deterministic, i.e., Borchardt argues that what did happen had to happen.

Bernd Weisbrod in "Die Befreiung von den 'Tariffesseln'" explains how closely Borchardt's arguments reflect the general view being expressed by business lobbies during the Weimar Republic. And he gives examples of how determined some business leaders were to drive down wages. This doesn't mean that all business leaders were well-disposed toward Brüning regime. On the contrary, some wanted him to be even more partisan toward capital and against labor. Weisbord also stresses the exaggerated fears of inflation expressed by business leaders and Brüning.

Gottfried Plumpe in "Wirtschaftspolitik in der Weltwirtschaftskrise.Realität und Alternative" calls into question Borchardt's argument about excessive wages and their effects, showing that especially the chemical and electrotechnical industries were very competitive in exports despite rising prices. Wages clearly weren't pricing them out of the export market.

He observes that with a depression already pushing down wages and prices, even conservative, classical economics should have told Brüning and his government that their policy of actively pushing down wages and prices further was seriously misguided.He argues further that the onset of the financial crisis in Germany in the summer of 1931 should have been a signal to Brüning to change direction away from aggressive deflation. "Die Regierung hat mögliche Alternativen nicht einmal ernsthaft erwogen," he writes. ("The government never even seriously considered possible alternatives.")

Jürgen von Kruedener in "Die Überfordung der Weimarer Republik also Sozialstaat" makes an unconvincing argument in favor of blaming labor for Weimar's economic problem s by looking at benefits costs paid by businesses. He also takes a weak stab at making the case that public social expenditures had overwhelmed the Republic.

Tags: austerity economics, german history, heinrich brüning, knut borchardt, weimar republic

Did Heinrich Brüning have no other choice but austerity economics in the Great Depression?

German economic historian Knut Borchardt caused a stir in the late 1970s and 1980s when he offered a spirited defense of the austerity policies of the "Hunger Chancellor" Heinrich Brüning (1885-1970).

Brüning served as German Chancellor from March 30, 1930 to May 30, 1932, holding his office by Presidential decree rather than by normal Parliament electoral procedures. Unemployment and the human distress that came with it rose significantly during Brüning's Chancellorship, as did the votes for Hitler's NSDAP (Nazi Party) as they exploited the issue. The NSDAP's popular vote in parliamentary elections rose from 6.4 million in 1930 - already a huge increase in their support from 0.8 million in 1928 - to 13.7 million in 1932, for the first time getting more votes than the Social Democrats and Communists combined.

Heinrich Brüning (1885-1970)

Several things struck me in my first reading of Borchardt's argument. (Chapters 9-11 of his Wachstum, Krisen, Handlunsspielräume der Wirschaftspolitik. Studien zur Wirschafsgeschichte des 19. un 20. Jahrhunderts, 1982) One is that it sounded awfully like a dogmatic defense of Brüning's "Hunger Chancellor" policies. And he sounds like he basically wants to blame the whole economic problem of the Weimar Republic on greedy workers demanding too much in wages. Both of those inclined me to take a dim view of his argument.

And, like Brüning's other defenders, he also argues that the foreigners made him do, i.e., that the reparations demands of the First World War victor countries are largely to blame for the restricted scope of decision-making by Brüning's administration.

Between the greedy workers ruining the economy and the bad foreigners forcing him to do exactly what he did, what choice did poor Brüning have to pursue deflationary, pro-cyclical antilabor policies that exacerbated unemployment and gave the NSDAP (Nazi Party) their highest margin in Parliament in 1932?

Although he describes several possible alternatives, his descriptions are an odd mishmash of discussions of who advocated them, the fact that there were arguments against them, and suggestions that they weren't politically plausible anyway.

Doing "what if?" scenarios on historical events are tricky, and there is always an argument that what actually happened was the best of all feasible occurrences. But that method of looking at alternatives reduces history to a bare description of events. Which is why it is well suited to a polemical defense of whatever happened in the case being discussed.

The trickiness of it can be seen at the time of this writing in the January 1, 2013 tax bill that ended the phony "fiscal cliff crisis" in the US. Those who followed the disputes closely at this point could point to several feasible alternatives whose advocacy by key leaders might well have produced other results with other implications. But defenders of the deal do essentially what Borchardt does for Heinrich Brüning's entire record on economic policy as German Chancellor in 1930-32. They argue that the deal struck was the best of all possible worlds. Twenty years from now, it will be more of a challenge for an historian to make a case for alternatives, because what happened will be embedded in the various narratives of the whole period and the possible alternatives won't be so fresh in the minds even of those who followed the events closely at the time.

A more realistic way of looking at possible historical alternatives would be to state the alternatives clearly; look at who advocated those alternatives, who might have advocated them, and why those were either rejected or not seriously considered; and, examine the ways events might have developed if key decision-makers had taken an alternative approach.

Brüning's failures are most remembered now for their implications on the events that followed, which led to Adolf Hitler's appointment as Chancellor on January 30, 1933. Virtually everyone would agree that some alternative that would have avoided that eventuality could have produced a much better result for Germany and the world.

And the outlines of an alternative scenario to Hitler's actual selection as Chancellor are not that hard to produce. President von Hindenburg could have decided to keep Hitler out of the government. The key political figures in the decision like Kurt von Schleicher could have taken different positions. Hitler's Chancellorship wasn't a foreordained event of destiny. It was the result of concrete decisions taken by real people, people who could have decided differently. There are many other ways to approach that question, such as looking at the positions of the various political parties in the year before. And any "what if" scenario requires a certain amount of humility from the historian, a quality not always in abundant supply among academics. But there are more reasonable approaches than Borchardt's.

Borchardt was looking at a longer series of events than a discrete decision like Hitler's appointment as Chancellor. But he effectively eliminates any look at what might have happened if Brüning or other key figures had insisted on a very different course of action. If Brüning had refused to continue his austerity course and insisted to the Western Allies that the Weimar Republic would be destroyed if he did, France might have proved more accommodating than they actually were. Similarly, Borchardt seems oblivious to the fact that the NSDAP was benefiting mightily from the dire economic conditions Brüning's policies produced. If the Nazis could make an issue out of unemployment, why couldn't Brüning?

In history as it actually occurred, with Brüning's accession to the Chancellorship in 1930, the Weimar Republic degenerated into a semi-authoritarian state. And Brüning's Chancellorship represented a major step toward the Third Reich. On the other hand, Brüning was very much opposed to Hitler's participation in government, and he fled Germany when Hitler actually did take power. It's not a counter-factual to argue that he really didn't want Hitler to take over. Given that reality, it seems feasible on its face that Brüning could have decided on policies that would have combated unemployment, if only to deprive the Nazis of that issue. That didn't happen. But why it didn't happen is more complicated than Borchardt's steadfast defense of Brüning would suggest.

Tags: german history, heinrich brüning, hitler, knut borchardt, weimar republic