Germany's grand myths and delusions - part 1

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I do point out other countries' myths, fallacies and delusions at times. The "Chaos in Iraq" blog entry had a link to a video discussing some such, for example.

This shall be an attempt to create a list of important myths, fallacies and delusions of Germany. Most of them are rooted in West Germany.

(1) The Economic Miracle of the 1949-1964 period was a huge, uncommon achievement and the Marshall Plan was an important contribution to it.

The Solow-Swan economic growth model is a simple model which predicts that and explains why a market economy with much skilled labour would rise out of the ashes as did Germany, and quickly.

West Germany's economic miracle isn't so terribly uncommon anyway; Italy and Japan had theirs as well, and Taiwan / PRC / South Korea achieved theirs after the groundwork of education was laid.

All these economic miracles eventually came to an end when the growing capital stock was no more the bottleneck, but skilled labour became scarce (and expensive for export-capable production). The Solow-Swan model points at the problem of depreciation and how an ever greater share of capital investment is soaked up by replacement capital investments and defines the zenith by this ("Golden rule of steady state".
 
The Marshall Plan's marginal contribution was detailed earlier.

In the end, the economic miracle in itself was a product of circumstances and groundwork laid by earlier generations. It wasn't something specific German, and no specific knowledge how to rapidly (re)build an economy was required or present.

(2) A major war in Europe is impossible because of nuclear deterrence

This is a commonly held assumption in Europe, and it's likely nonsense.

Military history tot he rescue: A similar deterrent existed during the Inter War Years; poison gas. The people didn't even know about nerve gas agents. They only knew phosgene as most deadly poison gas.

The 30's saw many civil defence programs with gas masks for everyone and such; the common idea of strategic air warfare wasn't about knocking out fuel production, railroad networks or about firebombing cities to destruction by firestorm: It was about dropping phosgene on cities.

Eventually, this fear did neither prevent war, nor did chemical weapons have a major role in the Second World War.

Interestingly, the Soviets had given up the first use of nuclear weapons in the event of WW3 by the 70's and instructed their military accordingly. Old NATO soldiers from the 80's will still stubbornly swear that the Russians would have dropped hundreds of nukes on day one - but this wasn't their plan, period.

This created a serious problem because, by the early 1970s, Soviet leaders had lost their faith in the utility of nuclear weapons. According to Vitaly Tsygichko, a scientific analyst working in the Ministry of Defense, top Soviet generals “understood and believed that the use of [tactical] nuclear weapons by either side would be catastrophic.”

By 1975, and probably earlier, the Soviet General Staff had already received an “instruction” from the leadership that Soviet forces were never to be the first to use nuclear weapons. There was now even greater pressure on the Soviet military to be able to overwhelm NATO with conventional forces before it could “go nuclear.”

source

The other reason for why this confidence is foolish is the example of multi-national countries and the European unification ideology/movement. A Europe that's first bagged into a common state instead of first becoming one for real would diverge and break up - probably violently as did Yugoslavia. The European Unionists have it backwards, and could become a huge threat to peace in Europe if they succeed. Europeans first need to grow together, not be tied together for growing together. A common picture of the world through common news, a very high degree of cooperation and a fine handling of regional special needs is what we need first.

Or else I could see a very, very ugly European civil war in my lifetime.

(3) Our economy is fine

It's not. We have multiple imbalances and have fallen back from past achievements in several ways.

Cartels are common. Even the list of recently busted price cartels is impressive, but there are many more. Cartels are actually the norm - not the exception - whenever there's an oligopoly in Germany. And this is because our legislation against cartels has been watered down ever since the 60's - and the original legislation fell already very much short of Erhard's proposal.

Our trade balance is a mess. No, a huge trade balance surplus is not an achievement. It's a failure to balance and distribute well. (A huge deficit is worse, of course.)

The trade balance wouldn't have been so very much out of control if there hadn't been the legislation of the Schröder government and the late Kohl-era currency reform to the Euro:

The push for more capital-based retirement arrangements did provoke more savings, but there was no demand for an extraordinary increase of the capital stock in Germany itself. So capital export was needed, (which led to poor investments in foreign countries) and such net capital export is mirrored by net goods and services exports, of course.

The German industry association had spammed Germany with propaganda about too high cost of labour and concerns about national economic competitiveness since the early 90's. After several years, they were able to collect the fruits of their work: The so-called social democrats exerted much-increased pressure on the poor (unemployed, low income workers) beginning in 2003 and the ever-weakened labour unions were unable to achieve real wage growth in several years and sectors.

This depressed German labour costs much lower than needed for balanced trade.

In the end, we didn't get balanced trade or economic health; we transferred a substantially larger share of the national income to capital owners instead of employees, and the capital owners saved much of this and invested it in foreign countries. Add the savings of workers panicked about their retirement income and you get the poor domestic demand and the present excessive economic dependence on trade.

The Merkel cabinets are worthless in this regard, of course. Merkel only preserves her personal power, and her conservatives are basically administrators in the tradition of Kohl, not reformers. No such cabinet did or will solve these issues. A social democrat-led cabinet wouldn't either, for the social democrats are unable to distance themselves from Schröder's legislation projects. *imagine expletives here* Their entire left wing deserted to the socialists long ago, leaving only the pro-Schröder wing in the party.

The socialists are unable to correct the problems simply because they're still pariahs on the federal level, as they incorporated the former East German dictatorship socialists.

(4) Inflation is evil

The hyperinflation trauma of 1922-1923 never really faded. The German ideal of a central bank is still one which keeps inflation at about 1% p.a. - preferably for consumer goods and services. This is where the maximum 2% p.a. limit of the ECB comes from. We wanted this rule, and some inflation-ridden Southern countries wanted it as well.

The problem is that such a low rate of inflation may artificially increase unemployment (simplified story here), whereas a reliable inflation at about 4% would have hardly any ill effects.
Right now this aversion against moderate inflation causes economic troubles in Southern Europe, since they won't leave the common currency and need to reduce their relative wage level for competitiveness. This would be simple if the Southern economies were allowed to have high inflation for a real decrease of the wage level. Wages are sticky and extremely difficult to cut, after all.
Instead, they have almost no inflation and need to either go the hard route of cutting wages (and pensions) producing much domestic stress and they are still slow in the readjustment of their wage level. The mess could have been over long ago with a little more inflation.
There's no open discussion about inflation in Germany: It's a public consensus that inflation is evil, and any proponent of importance would commit career suicide if he/she went public with his/her opinion.

Deflation is evil. Inflation is a poison, and effects of poison always depend on dosage.

(5) The United States are an ally of Germany

On paper, and they disregard even this at will.

(6) NATO is Germany's only defence alliance

No, it isn't.

(7) Germany needs to accept more responsibilities now due to its strength.

I cannot see any nature's law, international law or ethics supportive of this claim. This sounds like a nebulous bollocks argument used by those who simply want something specific done that's not an attractive proposition in itself.

(8) There's no alternative

We should write into the constitution that a politician claiming "there's no alternative" only proves his or her lacking fitness for office and is immediately fired. Sadly, this phrase ("alternativlos") is an unduly fashionable rhetoric in use to strangle discussions about policies. It hurts our political culture and degrades the quality of German policies.

(9) We cannot do this alone

Usually, we could - if we wanted to. The limiter is rarely capability; it's our will (motivation) - and this is especially true as long as our ruling federal coalition is focused on administration, not on active redefinition. This myth of being unable to do something as a nation state on its own is a very powerful inhibitor and is paralysing the country.

(10) Our political mass media are free

Let's face it; the public networks are controlled by parties, churches, labour unions et cetera. The major newspapers are dominated by publishing houses with more or less obvious political bias. You're not going to find an effective for-minimum wage text in the FAZ or an article critical of Israel in the Blöd. The TAZ is refreshing, as it's highly critical of the party it's supposedly aligned with (greens) - but that's only so because they're greener than the greens.

The current crisis in classic advertisement has created huge economic pressure on political media (except the public networks), and the consequence is a further restriction of their freedom of action.

Our political mass media aren't restricted by state censorship, but they're restricted in their role by economic constraints. Alternative political media have not developed well enough to pick up their role, not the least for want of adequate business models.

It's difficult to see one's own country's delusions, so I suppose more parts will follow later.

S O

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