“The moral superiority of the Germans”

by on December 1, 2011 at 1:49 am in Economics, Education, History, Philosophy, Political Science | Permalink

Ryan Avent tweeted:

Dear @tylercowen, Germany and the periphery ARE morally equivalent.

How might a response go?  Not an argument that German citizens are morally superior to other Europeans; that would be false and indeed repugnant.  I mean the kind of “system-wide” moral judgments that progressives offer up when they judge the institutions of Denmark to be superior to the institutions of Mexico, of course without ever judging the residing individuals per se.  Let’s play at intellectual Turing test — with no commitment to endorsing these views — and draw up a short list of, dare I so label them, (ostensible) German moral superiorities:

1. When it comes to default, there is no moral equivalence of debtor and creditor.  The debtor is the one breaking the agreement and breaking his word.

2. When it comes to debt, the periphery countries simply don’t want to pay up.  Their national wealth is many times their gdp and thus much much greater than their debts, even for Greece.  It’s amazing how many people won’t come out and utter or recognize this simple truth.  Italy for instance doesn’t have to make a huge fiscal adjustment.

3. It is a privilege for a poorer country to be in an economic union with Germany, France, the Netherlands, and other wealthy EU countries, just as you might feel privileged to co-author a piece with a great scholar.  If the poorer countries have to engage in some economic sacrifice to stay on good terms in such a union, so be it.  There is also such a thing as catch-up growth, and it is robust in the broader world today, at least if a country is willing, like the East Asian countries have been, or for that matter Turkey and Brazil these days.  The sacrifices being asked from the periphery countries are quite small in comparison.

4. We did a deal with East Germany, and the terms of that deal violated a lot of precepts of economic theory.  It even included an overvalued currency for the poorer region and a long period of adjustment.  Yet we insisted up front that all dealings be done on the terms of the more successful region and culture, with very little compromise.  This transition, for all of its short-term flaws, will go down in the history books as a great long-run success.  In part it succeeded because it was all done on the terms of the values of the successful nations of northwestern Europe.  (I am surprised that this angle is not discussed more in the press, given Merkel’s own story.)

5. Economic unions do not succeed by lowering all members to the standards of the economically less successful and less responsible members.

6. If it wasn’t for us, would Greece, Spain, and Italy (plus Ireland and Belgium) all currently have technocratic, reform-oriented governments as they do?

7. If you are trying to estimate the future economic fate of a country, shouldn’t you put aside a bit gdp drops and the like, and instead look at what do people in that country esteem and which values are transmitted by their system of education?  Do read the Estonia story at the previous link.

8. The German emphasis on rules, and the attachment to the idea of an abstract order, worthy of loyalty in its own right, above and beyond any immediate personal connection or loyalty, is exactly what makes them able to run such a successful economy and successful social welfare state.  When it says “Don’t Walk,” they don’t cross the street, even if no cars are coming.  An economic union should be set up to support those principles, not tear them down, and social democrats should value this most of all.

Even if you disagree with these perspectives, they shape real world behavior.  And might you still bet on a country which stuck to them?  Be honest now.  Let’s go back into intellectual Turing test mode:

9. One clear warning sign of trouble is when you see “trade imbalances” put at the center of the argument, as if “being very productive” and “not being productive enough” were somehow the same kind of disease.

10. There is a view something like “Germany has benefited from the eurozone, and therefore it is obliged to…”, as if those arguments were stronger than the nine principles outlined above.  By the way, might left-wing American intellectuals occasionally engage in a bit of transference and view Germany as a stand-in for the American top earners, the American financial system, and so on?  It isn’t.

11. Another doozy is to think the problem is due to some weird German obsession with Weimar-era inflation, as if there is a need to apologize for an elderly uncle who went bonkers.  I would instead start with the simpler point that Germany does not want to transfer resources to countries which do not wish to pay back their creditors, and which will not commit to good economic policy in the future.

Let’s move out of Turing mode and back to Tyler.  I believe that the Germans have approached this crisis with some bad economic theories, a lack of understanding of how government spending cuts can be self-defeating in the short run, and a good deal of more or less deliberate self-deception about its partners in the union, not to mention Germany’s own ability and willingness to act “fully European.”  I’m also not sure that Germany has a path out of this which leaves their own financial system intact.  You can rack up the moral and practical minus points there in considerable number.  That said, I see a lot of intellectuals dismissing the perspective outlined above, rather than figuring out why it makes so much sense to so many people, not just in Germany.  I think the financial elites in the periphery countries themselves actually see it quite clearly.

The result is significant misunderstandings about what can happen and will happen in the eurozone.  Germany cannot and will not drop its moral perspective, even if there is some theory — and yes theory is the right word here, because no one knows these broad guarantees will work — of how a broader and far more costly commitment can set things right.

In reading American discussions of the eurozone, I am frequently reminded of earlier discussions of the Soviet Union.  Most outsiders simply didn’t realize how little social capital was left in the system, though some of the Soviet insiders did.  Might the same be true of the eurozone?  I’m not calling these countries corrupt, rather there may be remarkably little cross-national cultural capital, and remarkably little deep public support for a costly EU bargain, so little that many German (and other) insiders know that no grand bargain can be sustained or even seriously attempted.

I believe we need to be exposed to this moral perspective, and this intellectual Turing test, as a bracing slap in the face, as a wake-up call, and I see our unwillingness to do anything with this perspective, other than summarily dismiss it as a kind of tragic juvenile moralizing, as a sign of our own decline, right here in the USofA.

Addendum: This piece is actually pretty good.

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