I've observed with some degree of fascination how Mr. Krugman - an economics Nobel laureate - discussed the Western economic troubles. It's fascinating to see a macroeconomic position with such a huge preference for the short term over the long term. It was also fascinating to see him fail to understand the German position on the economic troubles.
Mr. Krugman is no doubt a smart man - probably 20-30 IQ points superior to myself - but he appears to lack the cherished multi-disciplinary approach and the necessary wide angle of view. His look at the 'German' position (there is domestic dissent, most notably in the Financial Times Deutschland) is purely about macro. He misses the point.
Being a busy man promoting a book, having a newspaper column, having a blog and doing research all at once he'll 150% not look at this text. Still, I'd like to share my thoughts on this 'German' position with my readers. After all, it does provide some insights into German military history and doctrine (to some extent).
The following is merely my opinion and I cannot cite social science study reports as backup:
Germans have a lower than average tolerance for imperfections, and their preferred countermeasure to imperfections is to organise them away. This "organising" may be about creating an institution, enacting laws, enforcing laws or simply entering a treaty or other agreement. We don't wait for a glorious performance of a single person either - our preferred reaction to intolerable imperfection is a collective one.
We do not develop a convenient hypothesis (such as "lower taxes solve economic problems") and expect to get rid of an intolerable imperfection the comfortable way. Well, not as often as some other countries. It should be mentioned that almost all imperfections are intolerable to us.
An example; back in the late 19th century the socialist movement picked up steam in elections and became a major political force. The arch-conservative chancellor Bismarck reacted by introducing the anti-socialist social insurance system. Yes, social insurances are anti-socialist, even though many in the United States call them socialist. Fact is, people from the U.S. have on average no clue about all things socialist anyway.
To Germans, all major imperfections would be intolerable at home. The economic crisis directed our attention on the Southern European partners (mostly Greece, Spain, Italy) while we keep ignoring most of Eastern Europe. The Austrians look at Eastern Europe - most Germans don't. Eastern Europe - that's to us the non-allied Russia and our neighbour Poland. Poland is the place where we park our cars if we want to get the insurance money for our car because of theft. Such a dangerous life for cars would be intolerable to us at home, of course.
So we look at Greece and we see a country where nobody really pays attention to red lights in street traffic. A place where tax dodging is a national custom. A place where the government is a booty to be plundered, not an institution to address imperfections in society.
What we see when we look at Greece (or with other imperfections; Italy, Spain) is a country with intolerable imperfections.
It's inconceivable to us that these imperfections could be tolerated. It's likewise inconceivable that these imperfections will be addressed successfully once the pressure from the crisis' symptoms is gone. After all, this would imply that the pressure of the crisis' symptoms didn't suffice to force an organisational countermeasure!
So basically it's inconceivable to us that these countries address the short-term problems (symptoms) in a way people like Mr. Krugman advise - and then just go on. That's simply not our way of doing things, and we're not all that flexible in our way because after all, they kinda work well.
A superficial repair as strongly promoted by Mr. Krugman doesn't address the imperfections, and living with said imperfections is inconceivable. We couldn't.
Well, Germans and even Germans with access to widely distributed media are no macroeconomic geniuses. It doesn't matter that said imperfections are likely responsible for the economy having a lower natural gross domestic product growth path as opposed to being responsible for the short-term slump below said growth path.
Still, what Mr. Krugman doesn't get is that we don't care all that much about what he cares about. He doesn't care all that much about what we care about either. He would probably not be so flabbergasted by the 'German' position on the economic troubles if he understood this. All the macroeconomic data graphs and formulas he can throw against our position are not all that relevant to us - they're designed to be powerful arguments for someone who shares his preferences.
Mr. Krugman discusses how to apply a medication against the short-term problem (the slump far below the potential GDP growth path). The 'German' position mistakes reasons for a lower potential GDP growth path with roots of the current slump below it. Assuming a long-term focus, 'we' demand that the imperfections be addressed, for they won't be addressed any time soon if not under the current pressure. Thus the readiness to apply additional pressure.
'We' simply cannot understand how -even under huge pressure- tolerance for major imperfections could prevail over the desire to get rid of them through some organisational response.
Besides, we won't accept any fix of symptoms that includes major transfers from Germany to South Europe. We had that experiment with Western and East Germany and it sucked. Well, we won't accept it until our notoriously U-turning chancellor does a U-turn on the topic.
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