Peter Michael Lingens – Why this juggling with facts?

To prevent any misunderstandings: I admire the former editor-in-chief of Austria’s “Profil” and current contributor to “Der Falter” for the lucidity of his style, his straightforwardness, his political intuition and, yes, for his sense of justice. Moreover, I hope not being inclined to quarrel over each dot on top of an ideological “i” to the point of utter disagreement – a tendency so widespread among left-wing thinkers. So once again: I always enjoy reading Lingens, but that is precisely why I feel called to protest when he blatantly brushes aside his sense of justice.

I do not make this accusation lightly, but we disregard facts not only by distorting them. We do so from the very moment that we stubbornly ignore all evidence that contradicts them. This is exactly what Lingens does – again and again – when he rides his hobbyhorse: the supposed blessings of government debt.*1* In his latest Falter article „Zerbricht Italien an Deutschland? (Is Italy Breaking Up Because of Germany?), we see him riding this favorite horse of his like a reborn Don Quichotte turning his lance once again against Germany, which he blames for the possible breakup of the EU.

Lingens’ argument is rather simple. Without mentioning him, he echoes a criticism voiced many years earlier by German economist Heiner Flassbeck. Lingens literally speaks of “Germany’s insane wage policy” due to which “German goods could be offered up to thirty percent cheaper than Italian ones thanks to ‘wage restraint’.” That is why “the euro and the EU are threatened with the next crisis.”

I had already reacted to Heiner Flassbeck’s criticism (in “Der deutsche Exportstaat”) a decade ago, on September 5, 2012. “This is what Heiner Flassbeck has failed to understand when he criticizes Schröder for having done so much harm to the countries of the South by reducing the costs for German business. It is not Schröder’s decision that is at the root of the evil, but the decision for unlimited free trade that preceded it, and which led Schröder to take such measures in the first place” /in the US, free trade was officially sanctioned almost a decade earlier by the Washington Consensus and its high priest Robert Reich/.

Gerhard Schröder only reacted to a situation dangerous for Germany’s position as an industrial power (see Stiglitz versus Merkel (30. 4. 2012): “Had Germany not thus reacted to competitive pressures exerted by the emerging Asian countries, it would still be the “sick man” of Europe. Only because and only after Gerhard Schroeder imposed this drastic cure on the German economy, did the “sick man” turn again into a successful exporter. Austerity combined with fruitful investment was the tandem, to which Germany owed its amazing recovery.

Lingens omits these facts – that’s why his argumentation is distorted and untrustworthy. Even if serving a correct insight, truth does not profit from false arguments. In the previously mentioned article written ten years ago (Germany as an Export Nation) I said the following:

“In the long run /free/ trade only works if the Greek olive farmer in a United Europe earns as much as an /unskilled/ German worker at VW. Or, to say it in a different way, if his working time and effort is worth the same as the effort of his German colleague… The glue holding Europe together ist the promise of a steady equalization of incomes and living conditions. Only under this condition will the Germans be able to continue to sell their automobiles, machine tools and chemical products to the rest of Europe. Only under this condition will trade with Germany appear worthwhile to the people of the southern periphery. After all, trade presupposes the satisfaction of all partners involved.

It is Germany’s export policy that is damaging the economic and ultimately the political future of the Union. This is what gives the debt crisis its full weight, as collapsing revenues in southern European countries make it virtually impossible for them to limit their debt burden. The common currency would not be in such acute danger today /i.e. ten years ago and after the ECB’s interest rate hike probably soon again/ if unrestricted free trade had not exposed the countries of the Eluropean south to the pressure of the global markets causing them to fall further and further behind. This happened because Germany valued its own exports and success in global markets more than the satisfaction of its European neighbors and secure exports to their countries – despite the fact that… this trade amounted to three quarters of its total exports only a decade ago /about 2000/. Instead of joining the U.S. trade liberalization, northern Europe should have protected its southern neighbors with tariffs. Of course, Germany would then have suffered similar restrictions of its own non-European exports. But at that time /!!/ only a quarter of Germany’s foreign trade would have been affected. That was and is the price the North would have to pay for European unity. To this day, Germany has not wanted to take such a measure.

In the end, all of Europe will have to pay a far higher price!

… Germany should not be surprised if the South purchases fewer and fewer goods from its factories and instead more and more industrial products from the Asian low-wage countries… This will cause massive damage to the economic cohesion of Europe and, not least, to the Germans themselves. There can be no doubt /though Lingens omits this fact/: only a few years ago Germans still counted among the most convinced Europeans. But they were also particularly proud of the achievements of their leading industrial companies, which they wished would rise to global prominence. No one seemed to suspect that a conflict for Europe was bound to arise from such expectations.

The responsibility for the breakup of Europe

… Who is really to blame for the /possible/ breakup of Europe? Is it to be sought with the German industrialists? I do not think so. A German ball bearing producer will do everything to promote his sales for his own benefit and the profit of the people employed by him. It is also understandable that he will forcefully defend his interests through lobbyists in Berlin and Brussels. He proceeds in quite the same way when he pollutes the environment, without thinking much of it, as long as no one objects. His raison d’être is his own profit and that of his employees. He should promote both in the best possible way. Just as the individual motorist is not responsible for the traffic rules and the maintenance of air purity, the entrepreneur is not responsible for the rules he is supposed to follow in the interest of the general welfare…

On the other hand, it is the actual duty and task of politics to define the interests of the general public and to enforce compliance with them. Politics, and only politics, should reconcile the particular interests of individuals with the common good in the interest of the general public. The blame for the breakup of Europe does therefore not lie with the companies – they always go as far as permitted by current rules – this blame lies with politics, or more precisely, with the German globalization policy as it has been pursued since the 1990s. No one other than the guardians of the common good, i.e. the politicians in Brussels as well as in the capitals of Europe, should have faced the question whether uncontrolled free trade is compatible with the economic well-being of Europe. In my eyes, German politics has clearly failed because it did not fulfill its responsibility for the good of Europe as a whole but served exclusively the interests of the German economy” (5. 9. 2012).

And in an article from 16. 2. 2015 (Eurosclerosis):

Germany bears the main responsibility for this disaster. The Germans wanted and want to shine with a future as global players. From a positive point of view, this is called cosmopolitanism. In a negative perspective, it is strength that crushes the weak. Germany did not consider that it would destroy the European house if it abandoned it to the global markets without protection. Nor did Germany consider that it is endangering its own future if this house collapses.

…The entire South, from Greece to Spain, is no longer a match for international competition. The costs of its social systems are borne by an economy that is increasingly shrinking because /many of/ the products it produces are no longer competitive on the world market. Compared to Europe, countries like China, India or Brazil bear only a fraction of these social costs. It is therefore hardly surprising that their products easily beat those of the southern periphery, especially since they are already of equal quality or will be so in the near future – thanks to the investments of European financiers and corporations. In the countries of the southern periphery, politicians are making every effort to act ethically, i.e., to maintain the existing social services, but in doing so they are fighting against the merciless logic of a world market where it is enough to be cheaper in order to be considered better” (16. 2. 2015).

I agree with Mr. Lingens that German economic policy risks tearing the Union apart, especially now that the European Central Bank is raising interest rates. But unlike Mr. Lingens, I insist that Italy’s huge public debt burden did not make that country richer at all but, on the contrary, poorer and more unstable. Mr. Lingen’s claim that Germany only had to incur enough debt to help itself and all of Europe – seems grotesque indeed.

The actual reason for the Union’s vulnerability is completely different. In the race of nations for markets and resources – in the race above all against the low-cost suppliers from Asia – Germany was prepared, in the wake of the United States, to make its own location cheaper – we can certainly speak of deep social cuts – while the South resisted this painful surgical intervention. The “sick man” Germany benefited from this because the initial cutbacks were at least partially offset by increased exports. The southern periphery did not take this step, so it has steadily lost competitiveness. But as I explained before, the race to the bottom was never the only alternative.

1 Government debt makes everyone happy in the first place. A rich minority that grants them as interest-bearing loans is happy anyway, but so are the politicians who take them on, the private or public companies that profit from them, and of course journalists like Peter Lingens who loudly propagate them. The rude awakening, when the loans, as is so often the case, lead to bad investments or even state bankruptcies, comes years afterwards. By then, the politicians are no longer in office, and the journalists have changed flags in time to take a different line. Almost always, government debt causes a shift of income and wealth from the poor to the rich. The minority of lenders becomes even richer than before, while the majority of taxpayers, who must pay for it with compound interest, becomes poorer. When the interest rate is higher than the growth rate, sovereign debt becomes a reliable mechanism of redistribution from the bottom to the top (as Helmut Creutz and, after him, Thomas Piquetty have demonstrated). Of course, this is by no means always the case. Needless to say, there are a great many sensible and necessary investments that benefit the entire population and where the debts more than pay for themselves in the end (the necessary prerequisite for classifying them as useful). But unlike Peter Lingens, anyone who knows the long history of government debt knows that these tend to be rare cases of good luck.