A New German Sonderweg?

A New German Sonderweg?

There is so much talk these days about Germany?s economic Sonderweg (?special path?) that it seems wise to gain some perspective about what is going on.

Germany has gained attention recently for a number of reasons, most prominently its decision to go the ?austerity? rather than the ?Keynesian? route and its purportedly obstructionist role in the European Union?s crisis. While both of these claims have some truth on the surface, neither captures fully what is going on.

Paul Krugman has already discussed the relative balance between Keynesianism and austerity in contemporary German economic policy, so there is no need to go into this in much depth. What is worth noting, however, is that for a variety of historical reasons (not all of them valid), Germans have never been fond of Keynesianism, avoiding embracing it even during Germany?s miraculous economic recovery after the war and while building up an extremely generous welfare state. That Germany has once again decided to forego Keynesianism?at least openly?should therefore be no surprise to those who know something about Germany?s twentieth-century economic history.

That said, to call German economic policy or demands ?gratingly reminiscent of Republican talking points? (see Noam Schreiber?s article) seems silly, since whatever the Germans and their American supporters have said, they continue to spend way more than the United States on their welfare state, have carefully managed unemployment by paying firms to keep workers rather than firing them, and have no intention whatsoever of letting their deeply troubled banks fail. It is also worth noting that behind all the rhetoric of Germany?s ?austerity? generating a ?miraculous? economic recovery, a much more troubling reality lurks (again, see Krugman). Most strikingly, although Germany?s exports have been doing quite well of late, Germans themselves have not seen much benefit from this: their incomes and purchasing power remain stagnant and the relative health of the employment market is (as noted above) dependent on government efforts.

But perhaps more interesting (and surprising) than Germany?s superficial penchant for domestic austerity is the ways its actions have shaped the evolution of the broader European response to the crisis. As both Schreiber and, more powerfully, George Soros have noted, as the Eurozone?s most powerful nation and economy, Germany has played an outsized role in determining political and economic developments over the past years?and here?s where things get interesting.

Lately much has been made of the basic flaw in the EU?the disjuncture between its political and economic development. The early architects of the European project hoped (and expected) that politics would catch up with economics?that the continent?s political institutions would become as integrated as its economies?but alas, this has not happened. The dangers of this disjuncture became clear during the current crisis, when the common currency created differential problems for European countries, and the EU more generally was unable to come up with a coherent response to a barrage of economic issues. But the current crisis has brought up a second flaw in the EU?s design: its heavy dependence on a Germany that was bound to disappear.

The smooth functioning of EU institutions was, to a large degree, premised on a Germany willing to subsume its national interests to those of its neighbors? and pay a disproportionate share of the bill for constructing the new Europe. What we have seen in this crisis is that this may be as fundamental a flaw in the European project as the disjuncture between the political and economic development of the EU. During the current crisis Germany made clear that it will not go along with policies that seem good for the EU (in the short term) but directly go against what its views as its own national interests (like bailouts of profligate countries like Greece); relatedly, it will no longer foot the bill for new programs just because it is asked to.

So much of European integration?s progress over the postwar period was based on just these assumptions being true?i.e., that Germany would willingly adopt (or at least accept) the preferences of its neighbors (mainly France) and pay the bill for policies that would facilitate the growth and extension of the European project. That Germany is no longer willing to do these things should be neither surprising nor lead to predictions of some sort of German reversion to Evil Empire status. What this all represents is, of course, nothing more than the normalization of Germany, helped along by a changing of the guard at the leadership level and a financial crisis that has cruelly highlighted how different the economies and attitudes of Germans and many other Europeans are.

So, what does this all mean for the future of Germany and the EU? Well, fortune telling is always a risky business, but it seems clear that some long-standing shibboleths have finally reached the end of their natural lives, most importantly the idea that the flaws built into the European project will take care of themselves?that over time the disjuncture between politics and economics will be reconciled and that Germany will shoulder a disproportionate share of the political and economic cost of integration. Once we recognize that neither of these things is likely to be true, the European project looks both harder and more exciting. Harder, because the real problems or flaws in the project can no longer be avoided; more exciting, because dealing with them can no longer be avoided. Germany remains the necessary nation for Europe, but Europeans must realize that it is no longer sufficient.