Topic: A different idealogy on a economic model
no photo
Sat 04/18/09 11:32 PM
Can the German economic model of hard work in a welfare-state provide America with a better solution to our economic woes?

The Obama administration is making its case that governments should be going into debt to fund stimulus packages. So here we see,

In an interview last week that was apparently directed at Washington's European partners, Larry Summers, the president's chief economic adviser, made it clear that the new US administration will once again be doing the thinking for everyone else in the future: "The right macro-economic focus for the G-20 is on global demand and the world needs more global demand."

http://www.spiegel.de/international/world/0,1518,613582,00.html

I have always been partial to what I've understood to be left politics. I was against the war in Vietnam. I have not found much merit in any of the American wars ever since. The left here in these United States has opposed those wars too. The invasions, the killing, the suffering,...it all has seemed unjustified.

We face many issues today. There are many things wrong with our economy, our society, and how we treat each other. I have been hoping that the Left provides different suggestions for us to consider. I have not been happy with a lot of what President Obama has been doing. Granted, I think he listens more, he's trying to sound fair, and he has a lot on his plate. He is not a layabout.

However, I think he does not have an abolitionist bone in his body. He's very corporate.

I want to consider what the Germans have been doing over these many years in economic and social policy as an alternative to Obama's responses so far.




I have argued that it is understandable to spend government money to keep people from starving in the moment. It is also prudent to not get too much into debt. There are bad consequences for creating a mountain of debt for yourself.

The Germans tell us that they don't want to keep borrowing and spending to improve credit and increasing demand in the economy. They have other ideas about how one should run an economy. There is much in the following discussion I find attractive,

What Obama Could Learn from Germany
By Gabor Steingart in Washington, DC

The United States is experiencing its worst crisis in decades. Obama is trying to fight it by preparing one gigantic economic stimulus program after the other. But the hangover is inevitable, and if the desired economic miracle doesn't materialize, it will be a massive one.

The most attractive thing about globalization is that it has enabled us to develop international tastes in our shopping. Our wine comes from France, our flat-screen televisions from Korea and our elegant shoes from Italy.

But you can also find good ideas for governing by shopping for them around the world. The catalogue of ideas is packed. Indeed, many countries have answers to the question on everyone's mind these days: "How do I rescue my economy?"

President Barack Obama: Should he take his cue from Germany's economic miracle of the 1950s?

But the new US president prefers American-made products. And even if the Senate has watered down the internationally contested protectionist provisions in the US economic stimulus package, "Buy American" remains a popular term in the heartland as Washington navigates the muddy waters of this crisis. For Obama, the obvious course was to opt for an XXL-sized stimulus package complete with a job-creation program, even if that meant a huge deficit. It is a concept that was developed and tested by former US President Franklin D. Roosevelt in the 1930s and 1940s.

FDR, as the Depression- and World War II-era president is commonly known, remains popular in the United States today. Obama describes him as his role model.

The idea works like this: You take money that you don't have, you let it rain down on the people and public construction projects start to spring up all across the country. Under FDR, the country built 900,000 kilometers of new roads, 77,000 new bridges and 285 additional airports. Under Obama, the country will see millions of new high-speed Internet connections, health insurance companies will obtain modern computer systems and the parks on Capitol Hill will be freshly landscaped.

It's a shame, though, that Obama hasn't shopped around a bit more. He could have looked to Germany for ideas -- its competing plan for rescuing the economy is certainly worth a look. It's cheaper and has a longer shelf life than a lot of the other products currently available on the intellectual market. It originated in the 1950s and is referred to as a "culture of stability."

It was the handiwork of former German Economics Minister Ludwig Erhard, better known as the father of the country's post-war Wirtschaftswunder ("economic miracle"). Erhard's model not only functions differently from FDR's, it also smells different -- namely of sweat.

His plan shuns excessive debt. His argument was that people would first make an effort when money became tight and, thus, more valuable. You get the best results, he found, if, in the tried and true manner of our forefathers, you work hard and don't forget to save. "The state can't afford anything that doesn't come from the strength of its own people," was the message. He also could have said: No pain, no gain.

The Roosevelt model is more generous in this respect -- one could also say more careless. The same rules apply which were standard until the beginning of the American real estate crisis: we'll give you the keys today, no down-payment necessary, we'll send you the bill later. Of course you can pay in installments.

The national debt under the Roosevelt administration stood in his first year in office at a moderate $22 billion. By 1940 it had doubled to $50 billion and in 1943 it was $143 billion. In Roosevelt's last year in office, he achieved his personal record of $260 billion.

Cheating the People

No US president governed on credit with such abandon as FDR. Obama, however, is now trying to emulate him. He has already asked Congress for $1.5 trillion in debt-financed public spending. Another $2 trillion could follow, if the banking sector continues to be unsettled.

But nobody should worry about the cost, say those who are trying to sell the FDR model. That is exactly the clever thing about this product: Everything pays for itself. If a country has enjoyed too many economic excesses -- so says the instruction manual -- it should simply keep partying. The merry reveler knows no hangover, as the Germans like to say.

And anyone who feels a bit unwell has drunk, not too much, but too little from the credit punchbowl. The limiting factor is not money, writes the Nobel laureate Paul Krugman, goading on the Obama administration, but the timing and the speed of the borrowing.

Erhard called such rhetoric "cheating the people." His key words were not consumption and credit, but pay and performance. He insisted, practically to the point of stubbornness, that work and only work is the foundation of prosperity: "We must either make do with less or work more." He felt that the third way, which leads to the vault of the next best bank, was a dead end.

His record is impressive, even from today's perspective. He gave Germany the longest economic boom in world history, from 1949 to 1966. During this period, the country, still recovering from the war, rose up to become a leading exporter. It overtook first the French, then three years later the British and as of 1976 the Americans. Germany's currency remained stable and its level of debt low. From the late 1950s onwards, there was full employment in Germany.

The FDR approach enjoys not nearly such a good reputation. If statistics were kept for the biggest flops in political concepts, it would be right at the top. The then Secretary of the Treasury Henry Morgenthau admitted that much himself.

In court and in his own diary, Morgenthau told the truth. Toward the end of the 1930s, the treasury secretary reached the following gloomy conclusion in his personal records: "We are spending more than we have ever spent before, and it does not work ... I say after eight years of this administration, we have just as much unemployment as when we started -- and an enormous debt to boot."

A Roosevelt without a World War

The Roosevelt model would be impossible to sell today if it had stopped there. But although Roosevelt was good at spending money, he was even better at warfare. And he was best of all at winning wars. In the same year that he set a world record for debt, he won the war against Hitler's Germany which had been imposed on him. But the funds which he had used mainly to support the armaments industry were subject to high interest after 1945.

American corporations moved into war-ravaged Europe and the country was able to export itself out of the credit hole. US firms enjoyed dazzling profits and the American middle class was born. Fifteen years after the end of the war, the debt burden was largely eliminated.

But the original version of the FDR model is -- thank God -- no longer available. Obama is a Roosevelt without a world war. The national debt which he is currently imposing on the country serves no higher purpose than to postpone America's hangover one more time.

In relieving the crisis, Obama is laying the foundations for another one which will be almost as big. But the hangover cannot be postponed forever. Unless a miracle happens, Obama will be looking pretty rough on the morning after....

http://www.spiegel.de/international/world/0,1518,605695,00.html

The attractive part of this article is the recognition by the Germans that there are no free lunches, and the accusation about the Obama administration that, I suspect, they think one can indeed get something for nothing. I would like the left to consider the German model. There is nothing wrong in recommending that our economy be based on honest work.

The other attractive thing about this economic strategy is that it has been in the service of what we would call a welfare-state where people have work, they have universal health care, and it has not been financing German armies in other countries, mostly.

I have argued that both Krugman and people like Schiff and Rep. Paul are correct. We can't let people starve when they aren't making enough wages to pay their bills, but we can't keep going into debt without having any reasonable expectation we will be able to pay it back. Yes the Obama people are doing some things to address the fact that people have dwindling incomes, but they aren't at the same time doing enough to prevent the same problems from happening again, nor are they doing enough to create stable permanent jobs here.

Paul Krugman just recently wrote about the problems he sees with Europe's inadequate response to the world's economic crisis. He says this,

The clear and present danger to Europe right now comes from a different direction — the continent’s failure to respond effectively to the financial crisis.

Europe has fallen short in terms of both fiscal and monetary policy: it’s facing at least as severe a slump as the United States, yet it’s doing far less to combat the downturn.

On the fiscal side, the comparison with the United States is striking. Many economists, myself included, have argued that the Obama administration’s stimulus plan is too small, given the depth of the crisis. But America’s actions dwarf anything the Europeans are doing.

The difference in monetary policy is equally striking. The European Central Bank has been far less proactive than the Federal Reserve; it has been slow to cut interest rates (it actually raised rates last July), and it has shied away from any strong measures to unfreeze credit markets.

The only thing working in Europe’s favor is the very thing for which it takes the most criticism — the size and generosity of its welfare states, which are cushioning the impact of the economic slump.

This is no small matter. Guaranteed health insurance and generous unemployment benefits ensure that, at least so far, there isn’t as much sheer human suffering in Europe as there is in America. And these programs will also help sustain spending in the slump.

http://www.nytimes.com/2009/03/16/opinion/16krugman.html?_r=2

It's not clear just from what Krugman says here what it is that the Europeans are not doing right except borrowing more and spending it in the ways that the Americans have been doing. One can understand why the Europeans would be hesitant to take advice from Americans.

After all, it was Americans who sold European banks a lot of bad mortgage loans as investments. It is the Americans now who have made it profitable to allow their industrial base to be siphoned off to slave states. And it is the Americans who are now doing to their economy, in the Europeans' mind, what was done in the 1930's which caused lots of inflation and other bad consequences.


nogames39's photo
Sun 04/19/09 01:17 AM
Just clarifying here:

There is no such thing as "government money". Government does not make money, it only eats the money. Government is a parasite, and as such, there is no such thing as government money.

What is purposefully mislabeled by this term, is the money taken from the people. Most of the time, the money is taken from one, to be spent on another, by another. So, what is hidden here is theft, or robbery.

Can "spending government money" ever create anything good? You tell me. Can one build anything good on stealing and robbing?

Sojourning_Soul's photo
Sun 04/19/09 04:37 AM

Just clarifying here:

There is no such thing as "government money". Government does not make money, it only eats the money. Government is a parasite, and as such, there is no such thing as government money.

What is purposefully mislabeled by this term, is the money taken from the people. Most of the time, the money is taken from one, to be spent on another, by another. So, what is hidden here is theft, or robbery.

Can "spending government money" ever create anything good? You tell me. Can one build anything good on stealing and robbing?


Sure, lets steal power from the Federal Reserve and rob them of their ability to control us.

Work for you? :banana:

nogames39's photo
Sun 04/19/09 10:17 AM
This is why Ron Paul was an anathema to so many supporters of the police state, and welfare.

They know, that it is through the FED, that they steal and rob, but they never acknowledge it.

All I've heard from these people so far, it their spare lie article, about FED "helping the economy to be more stable".

People such as these, are the most dangerous, as they are not ever honest.

no photo
Sun 04/19/09 01:45 PM
In the end what the article is saying that Germany doesn't believe in huge stimulus packages to help its economy. Although the governments surplus did give some stimulus packages to override its decline on export sales, it doesn't want to burrow from other funds to attain it.

This is the reason why Germany and France are hesitatent for their interests to take huge credit crunches to stabilize their economy as the G20 summit indicated dissappointing both the Prime Minister of England and President Obama.

As the article indicates it has a different approach in fixing its economy then what the US is doing today.


Sojourning_Soul's photo
Sun 04/19/09 02:34 PM
http://www.youtube.com/watch?v=eAaQNACwaLw

willing2's photo
Sun 04/19/09 03:51 PM

In the end what the article is saying that Germany doesn't believe in huge stimulus packages to help its economy. Although the governments surplus did give some stimulus packages to override its decline on export sales, it doesn't want to burrow from other funds to attain it.

This is the reason why Germany and France are hesitatent for their interests to take huge credit crunches to stabilize their economy as the G20 summit indicated dissappointing both the Prime Minister of England and President Obama.

As the article indicates it has a different approach in fixing its economy then what the US is doing today.



Unfortunately, Obama is attempting to bring America to it's knees.
Look at the other agendas also. He wants to add to our already stressed labor force, another 12 to 18 Million Illegals, he is shredding our Constitution, he allowed our Bill of Rights to be abolished, he gave Europe power to dictate how our country is managed. He wants too much control.
Sure, the State of the economy is dire. If we keep focus on just the economy, his other destructive hand is working overtime on his other agendas.

yellowrose10's photo
Sun 04/19/09 03:53 PM
flowerforyou