Democracy and prosperity in the German elections

Electoral rebellion: Germany giving votes to Spain

Electoral rebellion: Germany giving votes to Spain (click to enlarge)

A shocking article by Wolfgang Schäuble in the Financial Times claims that “Europe is being fixed”.  (Read it here.)  Germany’s finance minister claims that the European economy is on the mend, with “a well-calibrated mix of incentives and solidarity to cushion the pain”.

He points to the experience of Germany in the last decade, with wage restraint and other structural reforms, that has rescued his country from the position of sick man of Europe.  Indeed, he says now that “Domestic demand is the main driver of growth in Germany today.”

Of course it is, because demand from Germany’s normal trading partners – in the eurozone – has collapsed, because they are now following the path of wage restraint and other structural reforms.  Germany, then, had plenty of countries to export to: is Germany willing to return the favour now?

Furthermore, Wolfgang Schäuble likes to refer to eurozone aggregate numbers: public deficits in Europe have halved; in the second quarter the recession in the eurozone came to an end.

But the problem in the European economy is not caused by the aggregated economy, but by concentrated pockets of stagnation and decline.  It is meaningless to claim that the eurozone recession is over if one is concerned about the economic problems of Greece and Portugal, where the recession is most certainly not.  Perhaps there might be some excuse if Wolfgang Schäuble was ready to use the resources of Germany to assist the poorer, weaker eurozone member states – to allow the eurozone to be more than just a geographical expression – but he absolutely, firmly, definitely is not.

For example, the claim that “current account deficits are disappearing” is utterly insufficient.  To pay off their foreign debts, countries such as Italy and Spain need to run current account surpluses, and they need to run them with Germany.  But for Germany to have a current account deficit flies in the face of everything Wolfgang Schäuble has written about the virtues of domestic thrift.  The model of the economy described here does not add up.

In the 1990s, we were told to copy the American economic model, which entailed running large and growing trade and current account deficits.  Not every country can import more than it exports.  Now, we are being told, equally absurdly, to copy the German model: we cannot all export more than we import.

Whenever a politician stakes out a claim like this, the same question always recurs: “Why is this lying bastard lying to me?”  The answer is, of course, that there is an election coming.  On Sunday 22 September, Wolfgang Schäuble’s defence of the eurozone orthodoxy might be confirmed or rejected by the voters.  A lot rests on Sunday.

Those voters, of course, are German voters, but the victims of the orthodoxy are found across the whole of Europe.  (For “victims”, you can read “beneficiaries”: the rest of this article applies equally.)  The welfare of Greek, Cypriot, Portuguese, Irish, Italian and Spanish voters, to say nothing of the rest of the EU, will be affected by the result of Sunday’s vote just as surely as that of the Germans themselves, but they will have no say.  The absence of a proper European economic government forces the largest single member state to assume the burden all on its own.  That is neither efficient as an economic measure nor fair as a democratic one.

The Electoral Rebellion campaign (see its campaign page here) asks German voters to acknowledge the injustice of the situation and vote on behalf of people outside Germany who will nevertheless be affected by outcome of the election.  It is a symbolic, but important, illustration of how far democracy and prosperity are now linked in Europe: if we do not have the former, we cannot expect to have the latter.

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