The ugly German – return of a ghost long thought to be dead

Does he really deserve these accusations, this hatred, these comparisons with and incantations of a Fourth Reich? In Greece, Germany has become the enemy Nr. 1, but if you listen to Italian talk shows you will be acquainted with similar insinuations. And the same holds true for Spain or Portugal. As for France there is not doubt that mistrust has grown steadily since Gerhard Schröder became German chancellor.The friendship between the two countries has often been invoked – and, no doubt, the political and economic elites on this and the other side of the Rhine want it to last – but id it ever penetrate to the depths? Now that Germany suddenly appears to be of dominant strength while the countries of southern Europe, including France, show their economic weakness, Germany not only becomes the object of envy but also of renewed and growing fear. Europe – some time ago still hailed by wishful thinkers like Jeremy Rifkin as the happy continent (1) – can no longer count on the implicit approval and identification of its citizens. On the contrary, these are just about to browse their collective unconscious for national stereotypes and prejudices. Fixed ideas, cartoons and caricatures come to life again: the specter of the ugly German is back!

An all too simple woodcut

As any caricature the ugly German exhibits the coarse and simple features of an amateur woodcut. He is supposed to be arrogant, steeped in its own superiority, firmly convinced that he must, if need be, force others to do what he considers to be their best. The ugly German is seen as a stiff and humorless being or else people are taken aback by his blustering bonhomie. They are afraid of his stubbornness to always defend his principles, even if he tramples on the flower beds of other peoples life. His efficiency – as seen by the propagators of this cartoon – emanates the cold charm of a robot that has been programmed to work with machine-like reliability in all possible conditions. To be sure, the doings of a robot are always right in their own way, but unfortunately that is no reason to love him. On the contrary, people are indignant if they are required to obey him. But this is, exactly, what they are expected to do. Just now, German experts of tax and finance are sent to Greece – probably many of them with the best intention to help. But the people there suddenly feel as if in a conquered country. They feel as if they had to be made into Germans in order to become full-scale human beings. On behalf of Angela Merkel, Prussia’s new avatar (with only the spiked helmet still missing), the ugly Germans have come to reshape poor Greek people after their own beloved image (Deutschland, Deutschland über alles).

Why such a misunderstanding?

What have Germans done to arouse such a tsunami of distrust and even hatred in normal people as well as from television and newspapers of southern countries? How is it that of all people this should just happen to them? After 30 years of fratricidal European war (from 14 t0 45) did not many Germans wanted nothing more than not to be German any longer (unlike French, Italians and British who never rejected their own identity)? Didn’t they wish to be just good Europeans? And, last not least, is it not true that they turned out to be the most self-sacrificing nation of Europe – its true paymaster giving more to the common money box than French, Italians and Britons together? Between 1958 and 1992, they donated no less an amount than € 540 billion to the Community Fund (2). Recently they shouldered the lion’s share of another 500 billion, and there seems to be no end of further aid to the community as billions and billions are being pumped into the system at a truly dizzying pace. German went even further. In order to placate French mistrust at the time of Reunification, they sacrificed the DM – the very symbol of their postwar economic success. This was a concession Francois Mitterrand had wrested from Helmut Kohl although the latter was well aware that for many German this was just the ultimate sacrifice. The Germans had worked, and worked, for quite a time that had renounced the amenities of life just in order to get on their feet again. And for half a century they consciously kept a low political profile, mostly in the shadow of France, just in order not to reawake any suspicion or resentment. Self-denial sometimes verged on masochism as Dietrich Schwanitz rightly observed. As when German intellectuals believed they had to prove to themselves and to the world – whether asked or unasked – that they belonged to a people whose crimes stand out as unique in all world history. They didn’t seem to care if such a kind of ostentatious flagellantism would produce confidence.

And yet: Germany became quite a normal Western democracy

Anyway, one thing remains undisputed: Nationalist statements will be heard less in contemporary Germany than in other European countries. Nowadays, German pride almost exclusively rests upon economic strength – so much so that Germany is now no longer referred to as the land of poets and thinkers, but rather as a somewhat prosaic headquarters of industrial production – a land of plumbers and fitters. If you turn your head away from the economy Germany has made itself small in every respect or it simply got smaller. And that’s why most Germans find it so hard to believe that again they are confronted with a wave of distrust. Now that nationalistic bragging and megalomania that had defined the image of Germans since Wilhelm II, have all but disappeared, why do people still fear the ugly German? Is it only because of German economic success and the resulting envy?

The German Sonderweg

Such questions are more of a rhetorical kind, and therefore miss the point, namely a real problem that Germany has created for herself as well as for the rest of Europe. Although it has done more for Europe than any other country, it has, at the same time, done more against United Europe than any of her neighbors. This conflict and contrast has almost never been openly discussed, but it nevertheless provides the answer to the problem of Europe’s actual vulnerability, which could well culminate in its failure (3). If we admit in all soberness, that the common currency will not survive in its present form, and that Europe could well be torn apart by the Euro, we do not say the whole truth. That lies beyond the Euro. It is due to Germany’s economic orientation which prevents a true European integration.

The critical years

At the start of the 90s things could still have been turned around without much trouble. At that time, three-quarters of Germany’s exports still went into countries of the European Union and only the remaining quarter to the rest of the world. Without any major loss of prosperity, Germans could have renounced extra-Union exports. These and the respective imports – apart from the then indispensable part of raw materials – would then be limited to Europe. Germany would have bought olive oil, tomatoes, apples etc. not from outside the Union, even if these were offered at better prices on world markets. In this case, once flourishing Greek industries would have been spared their subsequent fate of being victimized by Asian low-cost providers. For the Greek people, who according to a now current prejudice never produced much more or better than yogurt and olive oil, did at that time – the early 90s – still boast a considerable number of industrial enterprises. Just to mention the car industry, more than 100 industrial plants still produced buses, trolley buses and Pullmans part of which were successfully sold abroad. Biamax, for instance, employed some two thousand people in three factories (Thessaloniki, Athens and Larissa). Its super-fast Pullmans were even exported to the United States. (4) These and many other Greek companies went bankrupt during the 90s. The European Union offered no protection against cheap goods, cheap labor and social degradation caused by low-cost outside providers. But exactly this protection against competitors from outside the Union would have been a necessary economic condition for a true and successful union. Lester Thurow rightly observes:

History tells us that an economic union has to keep outsiders out, since this is the glue that holds together the disparate insiders. In the one hundred years after it was formed, the American common market was very restrictive on outside access. This issue was in fact one of the major causes of the American Civil War, which began in 1861. The North was attempting to keep the South from buying cheap British manufactured products (5).

Germany wants to eat the pie and have it too

Germany’s interests turned against such moderation. Not satisfied with the fact that it was able to sell its goods within the European Union and its predecessor, the European Community, it wanted to be a leading player on world markets as well. Comparing it with American economic policy as outlined by Lester Thurow, Germany now plays the same role within Europe as did the southern states within the Union. Instead of providing protection to the whole of Europe’s industries, it insisted on opening its own and the whole of European industries to a ruinous competition with low-cost producers. In order to stand up to such competition Germany had either to be and to remain top ranking in innovation so as to be able to demand exceptional prices for extraordinary products, or it had to downgrade its own costs, wages and environmental standards so that they correspond to the much lower level of low-cost providers. For a while the first alternative carried the day, but with ever growing technological competence of Asian competitors the second alternative came to prevail.

This is the very root of Europe’s schism

German dependence on world market conditions instead of dependence on conditions as prevailing within the European Union had serious consequences. This was the wedge that tore Europe asunder. The turn against Europe and towards world market had already been initiated during the ’90s when globalization suddenly gained speed and force, but its consequences were not really felt until the so called Agenda 2010. Chancellor Gerhard Schröder then slashed the costs of production and the well-fare state so that the country would be able to compete with Asian low-cost providers at least for the next five years to come. Wages, pensions, working conditions were now gradually brought down to lower levels. This proved to be of great help to the German economy, up to then languishing exports flourished again. But to the rest of Europe this proved to be a blow below the belt, from which it did not recover. From which, in fact, it could not recover, because the weakest states of the Union (the so-called Southern periphery) had now lost their own currencies. With their previous Drachmas, Liras or Pesetas they would have devaluated and thus regain competitiveness without putting any special burden on any specific part of there citizens. But now they had the Euro and this option was therefore out of reach.

Prices have grown too far apart

Prices in Greece exceed prices in Germany on average by 31 percent (6). This is a direct result of the credit glut caused by the switch to the euro. Money became exceedingly cheap; it had, so to speak, only to be picked up from the road. Nowadays, the ECB again provides cheap money and thus makes sure that things remain as they were. But how will a country become competitive with products excessively priced by no less than a factor of 30 percent? Unions would underwrite their own death warrant should they so much as merely think of cutting wages by 30 percent. They would compromise all their previous efforts to improve the well-fare of workers. The existing social fabric would have to be torn asunder before Greece could lower prices down to German levels. In fact, despite all reform efforts, neither Greeks nor Italians, Spaniards or Portuguese have up to now proceeded in this direction. The price gap has not been reduced – the lack of competitiveness of southern European countries persists (6).

But supposed the Greeks driven by European Commissioners would be successful in enduring more and more sacrifices – would that make any sense? Who needs new production sites in Greece if Asian nations backed by billions of workers continue to build new factories in order to dump their products (of equal quality but much lower price) on European markets?

We now face the bill for wrong policies

Without intent or a clear understanding of what globalization would finally mean Germany has put the European project into jeopardy. As economist Lester Thurow remarked a Union needs the protection of its members against the outside for this is the glue which holds it together. But Germany’s ambition went farther. For its industries it wanted both: the European backyard and the world market as well. Now we face the consequences. Under present conditions Greece will never again be competitive, it will rather continue on the road of descent initiated in the 90s. This means it will finally fall back to an agricultural stage (yogurt and olive oil). In a longer perspective this fate will probably also befall Italy, Spain and Portugal (only Ireland seems to get out of the crisis). However, even as the South suffers from industrial depletion, it will be raise it voice all the more in European panels where it easily overrules the Germans (the ECB being a case in point). So Germans will dearly pay for their globalization spree: they pay with increasing transfer bills. All advantages reaped by Germany through its successful presence on world markets, will be more than cancelled by this transfer which may even endanger Germany’s industrial strength as help for the southern periphery dramatically raises its costs as a production site.

And this is not the end of the story. The climate within Europe will be all but poisoned. The southern states are blessed in their self-esteem as they get more and more into the position of paupers. At the same time, northern countries, especially Germany, will find it increasingly hard to play the role of involuntary benefactors for half of Europe. But as I said before, Germany herself is responsible for this outcome. Not long ago French president François Mitterrand had still called for an economic policy more independent from world market and its pressures. Germany did not want this to happen. Now we are faced with the consequences. And these are momentous. The forced opening of Europe to the world market has the potential to shatter the Union.

The European Commission

In this context the role played by the European Commission is rather inglorious. With tens of thousands of regulations and laws the bulk of which equals the weight of a full grown hippopotamus as Enzensberger scornfully remarks, it has forced upon all European countries a violent leveling from above thus substantially aggravating the situation. And it did so despite the fact that successful unions never came into being in a similar way. Neither were the 50 states of the American Union subjected to a similar procedure of leveling nor did this happen to Swiss cantons. But it did happen to Eastern Germany after reunification – and this should have served as a warning. After reunification East Germany was immediately forced to live under the same conditions as its western counterpart. The retirees of the former GDR were, of course, happy as this greatly increased their allowance, but the economy of the new federal states did up to now never recover from this hasty imposed egalitarianism. In view of its low productiveness eastern wages and general costs were simply too high. Industries therefore preferred to move some hundred kilometers further to the Czech Republic and Poland. As a result the German East not only lost much of its young and most talented workers, who flocked in droves to the West, but it lost confidence as well. As of today there are very few of those flourishing landscapes promised by former chancellor Helmut Kohl. Instead the visitor to these regions finds many of them depopulated.

Different conditions – that’s what we need

The European Commission commits exactly the same mistake as did the Germans after reunification though at the time they had been warned by Oscar Lafontaine. The mistake being the same we may expect its outcome to be quite similar too. From Greece and other countries in the European periphery, people will escape to the north (as their money already does). To the southern periphery we must not provide the same but, on the contrary, we must give them better conditions, so that we achieve that gradual equalization of living standards which – besides of maintaining peace – is the main goal Europe’s unification. Ireland acted quite properly when it reduced corporate income tax in order to provide incentives to foreign industries to come to its shores. The Czech Republic and Poland acted as wisely by offering lower wages and taxes in order to turn redistribution into their favor. Within a political and economic union such competition is no race to the bottom, but a means of equal distribution of wealth among its members. If the richest countries of the Union believe this to be an unbearable burden, they just have to limit the rate of absorbing new members. However, the distribution itself is the sine qua non of a functioning Union. It is its raison d’être.

When a unity based on the division of labor turns into a transfer Community – the worst of all future prospects

The convergence of living standards within a community may be based on a division of labor or on transfers. In case of the latter alternative there will be no greater cohesion but resentment and dissatisfaction among all parties involved. We may see this quite clearly in the return of a specter believed to be dead long ago: the image of the ugly German. This renaissance of old prejudices and stereotypes would never have happened had the European Commission looked at what happened in Eastern Germany on the one hand and in Poland and the Czech Republic on the other. The Czechs and Poles owe their amazing resurgence to their own efforts which they may rightly regard with pride. Not charity but these endeavors have bestowed new prosperity upon their countries. In contrast, many citizens of former East Germany still feel like second-class human beings, not despite but precisely because they are still supported by transfer payments from Western Germany. Charity without the prospect to gain respect and prestige through one’s own efforts has always been a fertile soil for resentment, denial of reality and backward-looking nostalgia (7).

The road towards a new and better Europe

In his before-mentioned statement Lester Thurow has shown, how the United States became a nation. On the one hand they protected their citizens against the outer world, on the other – so Lester might have added – they created a maximum of local democratic freedom and responsibility (just as Switzerland, the US has never been a transfer union). The European Commission however – supported in this regard by Germany, its most powerful member state – has chosen a different path. Economic protection against the outward world has been all but abolished, while local economic self-determination was sacrificed to authoritarian egalitarianism and a progressive incapacitation of regional as well as national parliaments. This development, which is now to culminate in a common fiscal union, will certainly not increase cohesion among European member states. Instead it will most probably lead to depopulation and impoverishment in the periphery – this has happened in Eastern Germany despite of most generous transfer payments.

If we want to save Europe from disintegration and Germany from a revival of evil stereotypes, we should raise our voice against such a development. Germany has certainly not deserved to act as a disciplinarian within Europe. It should not don the mask which its neighbors have learned to fear with good reason. Even if German harshness were tempered by German generosity, that is by lavish transfers, a transfer union can never been a right and lasting solution. In the long run it will only produce ingratitude, for one does not make friends with mere charity. A real turning point has to be different. In her economic preferences, Germany will have to make a choice between Europe and the rest of the world. That’s where a real and lasting solution is to be found (8).

1 Jeremy Rifkin, The European Dream.

2 See Niall Ferguson in: http://www.gerojenner.com/portal/gerojenner.com/Fukuyama.html.

3 This is the main subject in Jenner, Die Arbeitslose Gesellschaft, the title of which, unfortunately, is a misnomer as the gradual reduction of production costs does not necessarily cause unemployment.

4 La Repubblica 02/20/2012: Grecia, il Paese che affonda by Eugenio Occorsio.

5 Lester Thurow, Head to Head. Page 77.

6 See Hans-Werner Sinn, FAZ, February 18th 2012, We’re trapped.

7 See Marie Jahoda, Wieviel Arbeit braucht der Mensch? Arbeit und Arbeitslosigkeit im 20. Jahrhundert, Beltz, Weinheim 1995.

8 In its second part my book “Von der Krise is Chaos” (from crisis to chaos) tries to provide a possible outline of such a new order.