Friday, September 20, 2013

Andy Markovits's final assessments & predictions for the German national election

This guest-post by my friend Andy Markovits follows up one from last week: Andy Markovits & Joseph Klaver explain Germany's "boring" election and predict its likely outcome. (Like the previous guest-post, this one is also available at the Huffington Post.)

The policies of the German government have had, and will continue to have, enormous consequences for the rest of Europe, not only for Germany itself.  But in following the election campaign leading up to the vote this Sunday, Andy and his collaborator Joseph Klaver have been struck by the extent to which it has exemplified, at a national level, Tip O'Neill's adage that all politics are local.  That is, they have been struck "by the virtual absence of any serious debate about the certain effects that German policies -- or their non-existence -- will have on Germany's European partners and neighbors over the next four years."  Under the circumstances, that absence seems both odd and a bit irresponsible—especially since the current ruling coalition and the opposition parties are advocating different economic policies that would have different ramifications for the rest of Europe.  For some details, see below.

—Jeff Weintraub

Huffington Post
September 9, 2013
The Virtual Absence of Germany's Concrete Effects on Europe in the Current Campaign for the Bundestag
By Andrei Markovits

Co-authored by Joseph Klaver (University of Michigan)

In our following the current electoral campaign culminating in the vote on Sunday, September 22, we have been struck by the virtual absence of any serious debate about the certain effects that German policies -- or their non-existence -- will have on Germany's European partners and neighbors over the next four years. There exists a broad pro-European consensus among all six (counting the CSU as its own player) political parties that currently occupy Parliament. In contrast to other European countries, none of the German contestants likely to enter the Bundestag are running against Europe or exhibit any Europhobia of note. To be sure, the degree of Europhilia varies among the parties; most important, the very texture of this Europhilia has different meanings to the parties of the center-right and the center-left with the former much less skeptical of a Europe dominated by multinational corporations than the latter which prefers a Europe ruled by grass-roots participation of its citizens. This broad pro-Europe consensus reflects by and large the German public's continued support of the idea of Europe even if the intensity of this support has declined notably in the wake of the crises of the past five years and appears to exist only as long as the German public perceives Europe as in no way intruding on Germans' privileges and decided advantages derived from it. The operative term here, of course, is that of the "idea" of Europe in contrast to its actual physical existence and material being which remains distant and ill-defined in this electoral campaign and German politics much more broadly.

Germany, after all, is far and away Europe's most powerful country particularly because Europe's comparative advantage and its very calling card -- in explicit and proud contrast to the United States -- has become its wielding of "soft" power in which Germany excels and which renders France's and Britain's military superiority compared to Germany's rather ephemeral, if not meaningless. Indeed, to apply Madeleine Albright's apt characterization of the United States to the situation at hand, Germany is Europe's "indispensable nation". Alas, just like the American left felt uncomfortable with this assignation and continues to oppose all that it entails, so, too, does the German left dislike the notion of Germany's being Europe's dominant power. The reasons for most Western lefts' - and the German's in particular -- reticence towards state power are manifold and often legitimate but not germane to this short essay. For us, the fact remains that - to use the old adage - when Germany has a cold, the rest of Europe catches pneumonia.

Whether one likes it or not, the fact remains that Germany has immense power in Europe. As the world's fourth largest economy and far and away the largest national economy and exporter in Europe, Germany is integral to the functioning of the European economy's every facet. And yet, nary a discussion occurred in this campaign as to what the concrete effects of Germany's economic policies would inevitably have on its European neighbors. Germany's economy does not exist in isolation, so the lack of discussion relating to the continent-wide economy is short-sighted, especially in relation to austerity measures both in Germany and abroad.

As it is integrally related to the wide-reaching salience of precisely such extant austerity posture, let's examine the issue of how the competing parties propose to deal with Germany's debt. The CDU/CSU sees it as a serious problem and wants to confront it aggressively but demands that this be done without raising any taxes and only by cutting expenditure thus, by extension, leading to an intensification of the extant austerity regime. Concretely, the union parties want to act expeditiously and pass the next federal budget without incurring any debt whatsoever. Not surprisingly, the pro-business FDP, currently the union parties' junior partner comprising the German government and their preferred candidate for a similar role in the next one, also oppose raising taxes but plead for an abolition of Germany's so called solidarity contribution in support of the five states that joined the federation in the wake of East Germany's demise which it perceives as a long-obsolete waste of money. The party also advocates the cutting of various state-led subsidies and the thinning of the work force in public bureaucracies in the quest of an eventual eradication of Germany's debt. All three government parties oppose the legally binding introduction of a (federal) minimum wage, although the CDU favors such a mechanism provided it emerges through the collective bargaining process between the unions and management.

In contrast, all three opposition parties of the left advocate serious tax increases as well as a legally binding minimum wage. They only differ in the magnitude and means that each prefers. Thus, the Social Democrats would like to raise the income tax for individuals earning 100,000 Euros (200,000 Euros for spouses) per annum from the current 42 percent to 49 percent and would like to see the current capital gains tax rate of 25 percent raised to 32 percent. The SPD wants the legally binding minimum wage to amount to 8.50 Euros per hour. Among other drastic forms of enhancing social equality and stimulating domestic demand, the Left Party desires to impose a 75 percent tax rate on any annual income of one million Euros; desires to increase the extant inheritance tax; and hopes to install a financial transaction tax -- where a 0.1 percent levy of the transaction's value is applied on any and all financial transactions -- in which all proceeds would accrue to the common good. Moreover, the party wants the legally binding minimum wage to be 10 Euros an hour throughout Germany. With very similar policies, the Greens, too, aim to introduce economic reforms under their motto of "social justice". Additionally, the core of their reform plans features -- behooving this party's ecological bent -- a demand to cease all current exemptions to the ecology tax and to enact a more stringent regulation of the taxing of Diesel and other fuels, especially concerning their use by vehicles used in any official capacities. Though discussed purely in a domestic context throughout this election campaign, all of these policy reforms, if implemented, would have Europe-wide ramifications. They would enhance demand in Germany thereby leading to a loosening of the current German-imposed austerity regime in Europe.

While Tip O'Neill's statement that all politics is local pertains as much to Germany as it has to the United States (or any place else in the world), the disregard for the probable implications of this local onto a much larger entity is not only a tad provincial but potentially irresponsible, especially if one is accorded the role of chief architect in the building of a new entity as has been Germany's task in the continued construction of the European edifice. Even though the word "Europe" appeared prolifically in Germany's now concluding electoral campaign and was invoked almost always in a positive context, the concept itself remained by and large an illusory intellectual abstraction rather than a lived experience in a concrete reality.

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