Duncan’s Economic Blog

Germany

Posted in Uncategorized by duncanseconomicblog on June 24, 2009

As may have become apparent, I’m becoming rather annoyed at German policy makers.

They seem, as Paul has noted, intend on free riding of the stimulus packages of others.

What’s more they then criticise those very same stimulus policies.

They are they considering passing an incredibly stupid balanced budget law.

As Snowflake5 has noted their policies are not working especially well.

But what really annoys is what my friend Vino said this morning in an email:

The thing I find really sad about the German situation vis a vis the US is that – if Germany has high unemployment people will blame it on their labour market/welfare state/social-market economy rather than on sado-monetarism. Bad news for the European social model.

He’s right.

6 Responses

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  1. Jane Pir said, on June 24, 2009 at 10:18 am

    I do not think that it is fair to call it “free riding” when the effects of stimulus packages are being forced on them – its beneficial to them but they did not ask for it and they are advising that they would not do this.

    As for a balanced budget law – Halleluiah. Democracy may be the best of all the bad options, but it does tend towards budget defects.
    It is in the politicians’ selfish interest to buy votes with other people’s money (and hence buy power for themselves) – If they can take money from 1 person and give it to 10 others then that’s a net gain of 9 votes. The selfish behaviour of the Politian’s over the expenses shines a light on their actual views on redistribution when dealing with their own money.

    A balanced budget laws will help to rein in this natural selfish tendency.

    • duncanseconomicblog said, on June 24, 2009 at 10:48 am

      Jane,

      In a recession the tax take falls as profits fall. Spending rises as more people become unemployed and claim benefits.

      How should a government, unable legally to run a deficit, respond? Cut other spending? Raise the remaining taxes?

      I’m curious.

  2. Jane Pir said, on June 24, 2009 at 1:51 pm

    Thanks Duncan, well, you provided the answer yourself. “Cut other spending and raise the remaining taxes”. ie Throw away the credit card.

    The UK gives a good example of a downward decline:

    * A welfare state that has created welfare dependency for many. I too was brought up in a poor street in a town ‘more like Glasgow than Glasgow is’. I have different view of the unemployed than you – for many people unemployment is a desperate circumstance, for many more in my street it was a choice.

    * Debt and interest on our debt gnawing away at our future.

    * An ever increasing proportion of our population are employed in the unproductive public sector being paid for by a combination of the productive sector and increasing debt.

    Basically the country is a mess right now.

    I belive the Germans are proposing a better way forward.

    • duncanseconomicblog said, on June 24, 2009 at 2:25 pm

      Jane,

      So, just to be clear, in the current situation – you think the UK government should be trying to close a 12.5% of GDP gap – right now?

      We’d have a full blown depression on our hands.

      • Jane Pir said, on June 24, 2009 at 2:54 pm

        It’s a shame that the government have brought us to this position.

        1 million extra people in the public sector (1 million less in the public sector would have been a better idea).

        Welfare dependency for many (the same people paying into the tax system would have been a better idea).

        Paying the interest on the accumulated public debt (Receiving the interest from our Sovereign Wealth Fund would have been a better idea)

        The Germans are just trying to avoid our current mistakes in their future. They are going for the better ideas. To answer your question specifically – I would not start from here. The current policies have brought this mess. The Germans are taking measures to avoid it.

  3. VinoS said, on June 24, 2009 at 4:12 pm

    The policies Jane was advocating – cutting spending and raising taxes in a depression – were tried in the 1930s. That’s why we had 20%+ unemployment. The Keynesian policies in the post-war era prevented this recurring. It is a shame right-wingers want to repeat history and copy Hoover/Baldwin


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