Man Without Qualities

Saturday, January 04, 2003

Diese Weise Nach Argentinien

Germany's ongoing search for the door marked "This Way To Argentina" continues apace. In the 1930's Argentina was wealthier, per capita, than the United States. And now the Economist reports that Chancellor Gerhard Schröder in his new year message to the German people said: “WE ARE a rich country and we want to stay one”. No doubt the Argentines wanted the same thing - and then they went right ahead with market- strangling policies and practices that impoverished them.

But the Economist observes that it's not just some Argentines, without means, who do it:

[N]either Mr Schröder nor many Germans seem to have fully grasped the extent of the changes the country must make if the prosperity of the post-war years is to be preserved. Not long after Mr Schröder’s message, data showed a further decline in German manufacturing, with output and order books contracting. Even export prospects appear to have weakened, partly in response to the rise in the value of the euro, which has made German products less competitive on world markets.

The chancellor has warned of the need for reform—in his message, he talked about the need for fundamental change—but after more than four years in power, his newly re-elected government has shown little appetite for pushing through unpopular policies. Ironically, the government’s dithering has itself delivered unpopularity on an almost unprecedented scale. Within weeks of the start of his government’s new term, Mr Schröder had seen his popularity fall further and faster than any other chancellor in modern times.

It isn’t just employers who lack confidence in the government. Support from the unions, traditionally strong backers of Mr Schröder’s Social Democrats, appears to be fading as well. On January 2nd, talks restarted to avert a possible strike by millions of public-sector workers. They want a pay rise of over 3% against the 0.9% they have been offered.

But this is a government chosen by the voters largely on the basis of its performance in dealing with a flood and its willingness to stick its tongue out at the correct policies of its most important ally towards Iraq. Too few cared or care about the economy and reform - they're having a party.

Hamelin is in Germany - so the Germans shouldn't be surprised that they have to pay up. Curiously, many consequences of post-war German social and economic policy seem to lead to the loss of the next generation, just like the fairy tale: low birth rates, high youth unemployment, downward intergenerational mobility, bad social security incentives, lots more.

Maybe the Germans haven't learned a thing.

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