13 December 2008

How to Save the World

I've been enjoying the little Anglo-German spat over how to save the world economy that has been running for a few days now.

It all started with Peer Steinbrück, the Federal Finance Minister, who was interviewed by Newsweek and said,
The speed at which proposals are put together under pressure that don't even pass an economic test is breathtaking and depressing. Our British friends are now cutting their value-added tax. We have no idea how much of that stores will pass on to customers. Are you really going to buy a DVD player because it now costs £39.10 instead of £39.90? All this will do is raise Britain's debt to a level that will take a whole generation to work off. The same people who would never touch deficit spending are now tossing around billions. The switch from decades of supply-side politics all the way to a crass Keynesianism is breathtaking.
Gordon Brown, saviour of the world, tried to brush off his comments by claiming they were an reflection of internal political tensions within the ruling coalition, conveniently forgetting that Chancellor Merkel herself made the same point at the recent CDU party congress:
We will not take part in a competition to outdo one another with an endless list of new proposals, in a senseless contest over billions.
Now, the CDU budget spokesman, Steffen Kampeter has weighed in.
Peer Steinbrück's comments have nothing whatsoever to do with internal German politics as Prime Minister Brown has suggested. In questioning the British Government's approach, Peer Steinbrück is exactly expressing the views of the German Grand Coalition.

After years of lecturing us on how we need to share in the gains of uncontrolled financial markets, the Labour politicians can’t now expect us to share in its losses.

The tremendous amount of debt being offered by Britain shows a complete failure of Labour policy.
Labour tried to dismiss Hr. Kameter's comments by claiming that he was a mere backbencher, but presumably someone with the role of budget spokesman does not speak on financial matters - especially when that involves directly criticising other governments - without authority.

Mr Brown's Foreign Secretary and occasionally loyal sidekick, the boy Milliband, made the excuses this time - internal German politics blah, blah, blah; Gordon and Angela best of chums blah, blah, blah; Angela totally supportive of the EU's planned fiscal stimulus package blah, blah, blah.

(Incidentally, what a sad reflection of the UK's diminished world status that one of the great offices of state, once held by the likes of Wellington, Palmerston and Salisbury, is now held by a political lightweight like Milliband).

On Friday, Chancellor Merkel did indeed endorse the EU latest plan, though it remains to be seen what this will amount to in practice.

What's it all about? It's clear that there is an internal debate in Germany about the extent of Government intervention, but no-one, including Peer Steinbrück, is advocating no action. It is the rash and ill-considered nature of what is being proposed that is causing the German government concern. As the biggest economy in the EU, it is inevitable that Germany will end up having to carry some of the long term costs of bad decisions made now by other EU countries. Hr. Steinbruck also noted this in his Newsweek interview:
For a while the position in Brussels and a few other places has been "We're now very much for setting up large-scale spending programs, but we're not really going to ask what the exact effects of those might be. And since the amounts are so high, well, let's get the Germans to pay because they can." Ms. Merkel and I are trying to calm them down a bit just now, and understandably that's getting us criticized.
Hr. Kampeter's comment is also telling - 'after years of lecturing'. Hr. Steinbrück, like his fellow EU finance ministers, had to put up with Mr Brown's regular visits when he would indeed lecture them about the failings of their economies and economic policies. Martin Kettle in the Guardian picked up on this point:
It must be hard for Germans to take lectures from Brown. For more than 11 years he has descended on continental Europe for brief visits - always luridly well-trailed in the Daily Mail and the Sun - in which he has lost no opportunity to lecture Germany from the free-market right about the shortcomings of its social market economic model. Now, with no word of apology, he is lecturing them again, this time from the diametrically opposite statist left. Not surprisingly, the Germans don't like it.
Now, with the UK entering a recession, which the OECD predicts will be be the worst of any G-7 economy, and with Mr Brown abandoning every economic rule he has ever preached, it would take a saint not to put the boot in.

Beyond the row with Britain, what I found most admirable about Hr. Steinbrück's comments was his honesty. He is not claiming to have saved the world, he's not even claiming that his way is the right way:
Dealing with an unprecedented crisis is a puzzle, a trial-and-error...

Making political decisions means taking responsibility in an environment of uncertainty.
Well said. If only more politicians could display a little more humility about the extent of their understanding and their ability to control events we might be less contemptuous of them. I won't hold my breath though.


hjuk said...

Yes, but it's all so embarrassing if you're English. Can't we just pretend.............

IsarSteve said...

@ HJUK how did YOU find this site?

What I find most depressing about the whole thing is how the Brits still seem to be in a '1946 mindset' when it comes to all things German.

Most Interviews on Radio or in the Press and comments on them that I've read or heard, contain at least 1/3 with military or snide remarks about Germany.

It sometime amazes me how the German society goes trotting along regardless and ignores all the hurtful remarks made about it. If the reverse were the case, well, all hell would break loose. I suppose that's an indication of what a stable sophisticated democracy Germany has become.

I'm afraid, I'm gradually turning 'mein Blick' away from England, Britain.. the U.K. because it seems to be continually travelling in the wrong direction and becomes more neurotic by the day..

I do enjoy living in that 'steady as she goes' liberal German environment. Perhaps it is a bit bland sometimes, but it sure beats my British experience.