Archiv der Kategorie: politics

compulsory reading, German Politics

The Real Problem Of The German Social Democracy: Brackets

In an interview with Gerhard Schroeder, printed in this week’s issue of “Der Spiegel” (in German), the journalists interviewing the chancellor rightly alleged that people like them – those who hold a lot of human capital, who represent the backbone of our knowledge based economy but are unable to pick a regulatory regime like those predominantly owning financial capital – would be the ones to have to pick up the tap for continued non-growth in this country. The chancellor answered sarcastically that the thought of their deprived economic situation really shook to him to his core, that he was close to tears. I was just a joke, but I fear there was a little bit more to it. It was also an unconscious expression of the fundamental conflict within the German Social Democracy – brackets, more precisely, income brackets.

A few weeks ago, I had a discussion with my friend American friend Sonya about the difference between perceived and actual relative income positions. Our conversation was based on a CNN poll, according to which 20% of US citizens believe they belong to the top one percent income bracket. Another 19% think they will be there at some point in their life. In Europe, things are bit different. Over here, many people tend to believe they belong to a lower relative income bracket than they actually do.

In both cases, the consequences for the economic policies implemented are severe. In the US, economists like Princeton professor Paul Krugman have begun to talk about the construction of a Plutocracy. In Europe, overregulation and suffocating marginal tax rates strangle more and more economic activity – or drive it into illegality. While some in the US deplore the lack a European style welfare system, welfare systems have evidently contributed significantly to the distortion of incentive structures on this side of the pond. It was this simple observation that prompted former LSE director Tony Giddens to write his now largely discredited book about “The Third Way”, which helped the other Tony to rebrand the British Labour party back in the mid 1990s.

While there may not be just one Third Way, it seems almost self evident to me that any economy/society must get both elements, individual motivation as well as redistribution of income, at least roughly right. “New Labour” seems to have understood this, but a large number of German Social Democrats still seems to have a hard time grasping the point. While the chancellor spent the rest of the interview explaining just how he wants to get the incentives right, and while his little sarcastic remark may not even tell us about his personal attitude, it certainly captures the mood of a significant part of his party. All reform rethoric aside, it appears many Social Democrats still do not really regard the professional middle class (the group they called “Neue Mitte” in their 1998 election campaign), working in human capital intensive jobs as those who add the most value to our economy. Many economists as well as political scientists have written extensively about the societal consequences of changing patterns of economic activity, and most of arguments are necessarily a lot more complex than the simple one I am making here [ the following link leads to a particularly good paper by Fritz Scharpf, concerned with sectoral changes and welfare regimes in competition ]. Nonetheless, I believe this is the core of the SPD’s internal conflict – those within the party who have not already done so need to realign their perceived structure of income brackets.

In the US, when political Robin Hoods demand to take from the rich and give to the poor, they probably do not plan to take it predominantly from working professionals earning, say, 60,000 Dollars. When some German Social Democrats talk about taxing the rich, those earning 60,000 Euros should beware. Don’t get me wrong – I am by no means saying that there should be no significant tax progression up to 60,000 Euros – of course there should be. Someone earning this amount is evidently able to bear a much larger part of common good than a struggling single mother earning a mere 15,000. No doubt about that.

But I seriously believe that people in this country need to realize that the most important problem of our economy is not lack of capital or demand (well, there is a cyclical lack of demand on top of the structural problems) but a lack of both powerful intrinsic (like the American Dream as a social institution) and extrinsic (monetary compensation) incentive structures. Isn’t it telling that the largest group among German university graduates wants to join the public service where they expect job security and predictable income increases for their entire working life? An economy that is devoting more than 50% of its time and money to administrating itself is probably not a particularly creative or productive one. And creativity is just what is needed to pull ourselves out of the self-designed slump we’re in.

Isn’t it time to realize that supporting those who actually deliver this creativity with some extrinsic motivation will be great for the common good? Isn’t it time for still traditionalist Social Democrats to finally leave the remains of cherished working-class-struggle rhetoric and policies where they belong – in history books?

I think it is. And I really hope Schroeder does, too.

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US Politics

Is Middle Earth ruled by the Bush administration?

Wired’s Noah Schachtman is rightly concerned with the Bush administration’s proposal to create a Total Information Awareness System (TIA) and can’t help to draw the conclusion that recent attempts of the US administration

“… to peer into the lives of Americans were more than a little similar to the exploits of Middle Earth’s would-be rulers.”

Hmm, maybe the world should pay more attention to W’s wedding ring or the gold on Condi’s fingers…

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German Politics, Iraq

Dear Gerhard,

Why can’t you just cut the crap and just tell us what we already know. Now I know you might not have spoken to many ordinary (that is non party-affiliated) people lately to avoid a heavy beating by angry tax payers. So believe me if I’m telling you that, really, everybody in this country knows that,

  • no, German troops will not actively participate in conquering Bagdad. And let’s face it, Donny & Conny & Tommy (Rumsfeld, Rice, Franks…) are most likely rather grateful that the US armed forces will not have to babysit ze Tschermans while trying ot invade Iraq, but
  • yes, Germany (ahm, you) will do pretty much everything else the US ask for to facilitate their (and token British) strike on Saddam’s regime. Yes, we know that includes all the “eventualities” you still refuse to discuss, especially some sort of involvement of the ABC clearing tanks only deployed in Kuwait for operation Enduring Freedom and those German soldiers in NATO AWACS planes – only “protecting” NATO territory, of course.

Ple-heease. We know you’ve been “framing the truth” all along. And yes, even those who voted for you two months ago knew it. But they liked your irredentist behavior. Bashing the rich and powerful is a natural socialist instinct (which, by the way, all too often led to schizophrenia once socialists had become rich and powerful…) and we like some good political entertainment.

But now we know how the story ends and there’s not too much repeat viewing value to it. So can you please save yourself and all others a lot of time by just telling us what we all know?

P.S.: And while you’re about to make some useful decisions, please fire Olaf Scholz (your party’s general secretary who does not believe Germany needs a makeover). I guess you hired him to make yourself look better in comparison. That’s fair enough. And I guess he did not even understand why he got that job… but seriously, that guy is lowering the level of this comparison to levels rarely seen in postwar politics.

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compulsory reading, German Politics

Why ’68 was so important for Germany.

Not a lot of you will have read Tierry Jonquet’s novel “Rouge. C’est la vie”. It wasn’t a bestseller. It’s a generational novel about love and life of two teenagers in Paris during the infamous 1968 revolts on Boulevard St. Germain, which is exactly where I read it in the Summer of 1998. 30 years later, in a different world. No doubt, Paris saw the most violent expressions of social unrest in ’68. But I contend that in most respects, ’68 was far more important for Germany than for France or any other Western country.

These days, most people over here tend to concentrate on the incentive distorting economic policies implemented in this country during the last 30 years when they talk about the consequences of ’68. And it’s fair enough to say that ’68 was followed by a general shift to the (economic) left in the German party system that led, in combination with the experience of rapid economic growth during the 1950s and ’60s and macroeconomic mismanagement during the oil crises of the 1970s, to a pervasive, somewhat problematic incentive structure in this country. But that’s not the entire story about ’68. And it is plainly unfair not to mention the rest of it – because the rest is much more important than the economic mess which my generation will have to clean up now.

I was born in 1975, so I don’t have any personal memories of what this country was like before 1968. But it must have been a different county. Sometimes people say that 1945 made the difference. And yes, it clearly was 1945 that made the difference – but it did not make that difference in 1945. It happened in 1968. One generation later.

To those who only know contemporary Germany, the image painted by Martha Gellhorn’s brilliant article Is There A New Germany(from the February 1964 issue of the Atlantic), will probably seem slightly bizarre. Sometimes I find it hard to believe how much things have changed since then. There might not have been a new Germany in 1964. But it was clearly about to hatch out. And it did.

In 1968. Let’s not forget about that.

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German Politics

Hayek for Social Democrats.

While reading the following excerpt from a speech called “Flexibility for the Labour Market” given by Germany’s new economics & labour super-secretary Wolfgang Clement’s at a conference in Berlin yesterday, you might become a little confused about the current position of the German Social Democrats on the economic left-right scale. Has the SPD become a proponent of Hayekian laisser-faire econmics instead of state-regulated intervention? Hardly. But let’s see (quick-and-dirty translation by myself)

we tend to continuously pass new legislation to improve social welfare. But this well-meaning attempt can be perverted if those whose lifes are supposed to be improved by new legislation are getting lost and drown in the wave of regulations that are imposed on many different levels. In addition, there is the danger, that too strict rules are making the necessary development of processes more difficult or are preventing them entirely instead of speeding them up.”

But let me assure you: It’s just words. And words can be, at most, a promise for deeds. They are a lot more credible if backed by acredible record or credible committments. The problem with the former is, there is no credible SPD record regarding deregulation for the post 1998 period. Social security reforms, yes, to some extent. But labour market DE-regulation? No. If anything, things have become worse due to the still rampant union inducied insider-outsider problems.

Actually, Clement somewhat recognizes the lack of a record in the excerpt. So past experience does not quite work to help convince the public of the truthfulness of his (speechwriter’s) words.

And there’s the core of the government’s communication problem (which is huge, but evidently pales in comparison to the fiscal and regulatory ones.) It has no idea how to credibly commit itself to the reform rethoric it is once again employing.

That’s why so many people are wary believing the SPD today when it employs libertarian rethoric. They believe it just means further state regulation and more unemployment, however much disguised.

Shame on you if you fool me once, shame on me if you fool me twice…

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Economics, US Politics

More about the 19% of millionaires mentioned below

(Link) I don’t know what kind of organisation the group “citizen’s for tax justice” are. So I would not rely too much on the information – but in case they are reporting correct figures for the averge US income (and the ranges seem not implausible – note: not GDP/capita but income per working person) on this website that I found today, then it would be even more astonishing that 19% of Americans believe they are in the top 1% income range and another 20% believe they will be there at some point.

According to the figures reported on the page, the average income for the top 1% of tax payers in the USA in 2001 was 1,028,000 USD. Thus given the usual outliers, I think the top 1% will start somewhere between 400,000 and 500,000 USD, as the avergae top 5% income is 204,000 USD. The general average is 56,500 USD – again, according to this source.

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US Politics

Still in love! Bush caught nibbling Schroeder’s earlobe!

bu_schroePrague. 21/11/02. In what must be regarded as a striking revelation given recent public rows, the two world leaders weren’t ashamed to demonstrate their feelings toward each other publicly during yesterday’s NATO summit in Praque. The only remaining question is what George W whispered in Gerhard’s ear. I suppose it was something like “And they all believed we were actually fighting. We should do that more often! See ya later…”

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German Politics, Germany

Am I giving Schröder too much credit?

The reelected German SPD-led government is having a hard time these days. An opposition spokesperson yesterday stated that it was now offically allowed to call Hans Eichel, the finance minister, a liar (for he said he did not know about the looming deficit before the election) and it will be next to impossible to find a paper not bashing the government for its troubled first weeks. The Economist is no exception here.

While almost everybody (except for the powerful service union leader Bsirske, who publicly stated this weekend that he has yet to see the crisis) agrees that Germany is badly in need of some deregulation, especially concerning the labour market, things are a lot harder to do than to talk about. Especially given the troubled economy which will make it much more difficult for the government to produce visible results after much needed structural reforms.

To reform the labour markets is one important step. But it is a politically troublesome one if it only means to cut welfare without more people actually getting jobs because of lacking demand.

And it is a politically even more troublesome step if the powerful unions, as always pursuing their insider-ousider game, are cashing in their price for supporting the chancellor when his campaign looked the bleakest last summer.

So what is the government doing? It is proposing a problematic incoherent austerity package in combination with redistributive measures which the unions approve of but which are increasingly despised of by a growing majority of people.

However, I believe, the chancellor thinks he can play a game because most of those laws have to be approved by the upper chamber of the Bundestag, the Bundesrat, in which the conservative opposition (CDU) currently holds a majority. So he proposes legislation to service the unions knowing it does not pose a great risk supposing the opposition will block it anyway.

After that he will be able to tell the unions to keep quiet whilst actually going to reform things.

Am I giving Schröder too much credit? There’s one big problem with such a strategy: It depends on the key players to silently cooperate. If the CDU actually lets some the “union-reforms” get through the upper chamber in the hopes that the following implementation will anger a significant amount of previous Schröder voters it won’t work. And if Schröder can’t credibly blame the opposition for blocking the union-proposals, he will not be able to escape the unions’ embrace.

It’s a risky strategy and, of course, I don’t know if it’s actually what is happening. But it does make strategic sense to me. The SPD has probably already lost the two upcoming regional elections because of the revelation of the ever increasing deficit just after the general elections (which the government is only partly to blame for). Should that also be the perception of the government and the opposition leaders, the silent cooperation may have already begun.

We’ll see.

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German Politics, US Politics

See? Again stuck in the middle.

Dimplomacy is a difficult art of communication. History is full of examples of unskilled German diplomacy. Looking at Europe’s history I sometimes think Germany should join France and let the Quai d’Orsay handle things for us… As for examples, here’s one more:

While the US administration is still sulking following Gerhard Schroeder’s campaign promise that Germany would not participate in a military action against Iraq (note: apart from all the stuff the pacifist public won’t be able to see and possibly more after the Weapon inspectors will have been thrown out early next year and Germany will be the chair of the UN Security Council from Febuary 2003 on when the war resolution will likely be voted on.), Osama bin Laden (or what/whoever is threatening the Western World and Russia using this name) is threatening Germany for its cooperation with the US.

So after praising the terrorist attacks on civilians in Tunisia, Karachi, Bali and Moscow he asks – “What are your governments intentions in allying themselves against the Muslims with this bunch of criminals in the White House? Don’t your governments know that these criminals in the White House are the biggest slaughterers of these times? [..] I’m explicitly naming Great Britain, France, Italy, Canada, Germany and Australia.” (retranslated from German – source). Stuck in the middle.

OK, I know that the recent row with the US administration was not about cooperation in the war against terror but about different approaches in strategic foreign policy. I also know that being on Osama’s list is a consequence of Germany (now) being an integral part of the west and not a consequence of any specific kind of anti-terrorist cooperation. The list therefore is also a confirmation that the main German policy goal since WW2, integration in the west, has been successful.

So we’re possibly good at structure. But definitely bad at diplomacy ;-).

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Economics, US Politics

Un-f***ing-believable

Brad Delong quotes a very interesting paragraph in his Blog. It goes as follows:

DAVID BROOKS, ATLANTIC MONTHLY – During the most recent presidential election a Time magazine-CNN poll asked voters whether they were in the top 1 percent of income earners. Nineteen percent reported that they were, and another 20 percent said that they expected to be there one day

If correct, this number shows a) that Americans are ignorant to a scary extent about their relative economic situation as well as about the absolute levels and distribution of income and wealth in their society; and b) that material affluence (or the social standing associated with a high income) and “winning” have become important the US to an extent people either choose to lie about their relative financial statusnot to they choose not to know about not being part of the top 1%.

I think comparing these percetual numbers with the real income distribution will lead to intreresting insights regarding the “rational” political behavior of those electing and those elected. Likewise international comparisons would be interesting – in this country everybody tries to calculate himself poorer than factually correct.

Very interesting. Clearly more thinking is needed in this respect.

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