Germany's Downhill Ride

Finally, the country's crisis is discussed in public

Steingart, Gabor (2004): Deutschland. Der Abstieg eines Superstars. München/Zürich: Piper, pp. 303, 13,00 Euro

Book Review in Internationale Politik, May 2004, No. 5, pp. 119-123

14.06.2004 · Reviewed by Jürgen Turek

The facts: Germany's unemployment rate is at 4,5 million, when adding the quiet reserve it is more like 5 to 6 million. Trend: consistent. Black market labor has reached, with approximately 17 % of the GDP, its highest level since the Federal Republic's coming into existence. Trend: increasing. The employer's costs on a high level. Trend: persistent. Fewer German company's go public. Trend: reaching zero. In 2002, the number of insolvencies rose 10%, not only because of new insolvency policies. Trend: restrained.

One could easily expand this list, insert additional numbers and link them to data from the areas of education and the pension system; as an increasing number of German publicists and experts does nowadays. En face such misery one can say, if nothing else: Germany's crisis has finally reached peoples' brains. To be sure, among the downhill rides in the economic and social spheres, it is impossible to ignore the problems that reputable voices have expressed in multitude to date. Since Meinhard Miegel's bestseller about the deformation of society meant a slap into the face of the German political elite, publications dealing with Germany as the sick patient appear with greater frequency. Gabor Steingart's smart and informative analysis is consistent with the current critique and, under the title "Germany. The Downfall of a Superstar," ironically refers to a low-quality, yet successful mass media show on German TV, where the performances of its protagonists Bohlen, Kübelböck & Co. stood for a descent into social decadence. Actually, Steingart and others are not only interested in showing undesirable economic developments but they also point out Germany's descent into a second- and third rate society; a circumstance that cries for remedy.

In Germany, he argues, the crisis of the social welfare state, associated with buzz words such as demographic time bomb, globalization, collapse of the employment market, overregulation and abuse of the social systems, is key to Germany's problems. For Steingart, the current reaction to the crisis is somewhat surprising given the many discernible heralds of the pending "social crash" that have appeared over the past years. Thus, he situates the roots of the decline in Adenauer's social and pension policies; a system that preferred a distribution-financed pension system over a capital-covered (saturated) system that excluded the money-making self-employed from the beginning. Adenauer's assumption that people would simply bear children [to cover the costs] never really held. Therefore, the causes of the crisis are deeply rooted in the post-war era. As the author claims, the original construction of the welfare state by Christian and Social Democrats was false; a mistake that was never corrected by subsequent administrations. Hence Germany, in its pompous social configuration, stepped into the globalization trap with open eyes and, facing the double burden of reunification and ossified structures, finds itself more caught up in the globalization struggle than ever before. To be sure, already the 1970s offered enough evidence of a shrinking employment market and the flow of capital has noticeably changed its course towards a global level. Since then, the data have only become worse: increasing unemployment, a growing budget deficit and weak rates of economic growth. But the country, Steingart argues, did not manage to pursue a different approach; instead, the repercussions of German reunification sped up the erosion process. His resume of the desolate situation is straightforward: A rise is only possible through a new beginning that will be strenuous for many.

What does this message mean? Remove the old chancellor and institute a new one? No. Clearly, the simple exchange of political personnel would not get Germany anywhere. More importantly, amidst the change issues of leadership, employment and property need to be addressed; with its foci being the modernization of the political economy, the initiation of economic growth in the context of globalization, the further development of the social welfare state; and not its elimination. Core elements thereof would involve the reunification of powers currently divided between the federal state and the Länder through a modification of Germany's federal structures, the introduction of a majority voting system, the separation of policies governing employment from social benefits as well as the ability to claim tax deductions for expenditures on organized services. And finally, as the author highlights: The necessity to eliminate social contributions that would oblige employees to focus on private means to secure their pensions. Together with a comprehensive tax reform, which would cut all aid and classify employment and property in three categories, sustainable change may be in reach.

Steingart not only thinks radically, but also systematically. He presents a coherent and brilliantly written analysis that paints a realistic picture of Germany's future; granted it demonstrates reform spirit. Certainly, a book with much appeal to an audience who is frustrated with the present situation.

These impressions are strengthened by another wonderfully concise work by the Darmstadt's economists Kilian Bizer and Werner Sesselmeier: Reformprojekt D; an informative and persuasive analysis that takes additional social aspects into account. The authors investigate structural problems and approaches to reforms across five central policy areas. The employment market, education, family, society, and the tax system. Up front, they highlight the major challenges that the German government faces today: Instead of pursuing individual changes in job market policy, immigration policy or tax policy, it is vital to create a perspective that subsumes the reform efforts in each policy area and combines them into one comprehensive strategy.

Their well-developed diagnosis states: The four pillars - standardized labor relations, one-wage-family, guaranteed standard of living, full employment - are shaking in the face of evolving conditions such as globalization, service-oriented structural changes, demographic changes due to higher age of the populace and its numeric decrease, changes in the job market and a diversification of life styles.

Based on those findings, the authors develop the central reform objectives: economic growth and full employment. At the same time, they suggest the need to modify the concept of the social welfare state to fit the changing contexts and conditions; a necessary step to ensure its basic functioning while reaching development and employment aims.

Job market policy plays a key role in this scenario due to its potential, as an integral element of a comprehensive strategy, to ensure higher employment levels and to lower the burden of the social systems. Closely tied to developments in the area of employment is family policy, which should advocate an easier fellowship of child care and the job. Again, the separation of policies governing employment and social policy is vital. Finally, the tax system should be more investment-friendly and simplified in order to create a transparent, growth-oriented, and employment conducive system. Moreover, the education system is asked to do its share and grow more responsive to the demand and technological challenges. Last but not least, German federalism with its inherent veto mechanisms in the making of legislation receives its fair share of critique.

Apart from those broad recommendations for Germany's recovery, the authors offer more detailed insights and a number of concrete and realistic short-, mid-, and long-term steps and solutions in the process. For example, they cover the process of tax simplification by advocating a change in long-term structural tax policy ranging from direct to indirect taxing mechanisms. Or the decartelization of the federal and Länder levels that can be reached, in the short-term, by the limitation of the obligatory agreement directive of the Bundesrat, and in the long-term, by the reduction of the financial equalization policy among the Länder and on the local level, whereby the latter should strengthen the competitive element of federalism.

Thus, the authors develop numerous problem-solving approaches for their "Reformprojekt D." To be sure, small-scale individual reforms won't solve the problems; only a far-reaching and systematic socio-economic strategy can lead to success. A proposal that, according to Bizer and Sesselmeier, will never fit into one governmental reform package. More importantly, the approach should focus on the development of a comprehensive strategy that leads and shows the way, followed by individual reform steps.

Interestingly, a review of the works presented as well as some others suggests considerable overlap with respect to the conceptualization of reform initiatives among publicists and scientists. And they don't revolve around the ridiculous and sometimes overly emphasized battle between so-called neoliberalists and globalization critics. The gravity of the situation is as compelling as is the fact that nobody is seriously interested in challenging the historically grounded social component of the market economy. With the result being that the intellectual elite grows tighter together and seeks - more energetically than ever - to detach itself, e.g., from the unions' desperately outdated, dogmatic and fearful ways of thinking; and all that in a heated sociopolitical environment where the intellectual battle may soon spill over and infect the rest of the population.

Another contribution to the debate is Christoph Keese's book, "Rettet den Kapitalismus. Wie Deutschland wieder an die Spitze kommt." The chief editor of the Financial Times Deutschland suggests that the facts of the status quo demand citizens to contribute to Germany's economic and sociopolitical recovery; but this time in a different fashion and both mentally and financially.

If interested in strategies about more growth and innovation, one should consult Franz-Walter Steinmeier's and Matthias Machnig's work "Made in Germany '21". Frank Schirmacher's "Blockbuster" also offers informed and pointed opinions for one of the most pressing of Germany's contemporary and future problems: Ageing and Life with Age. For him, a militant revolution of the consciousness is a prerequisite to reverse the process of aging. In the face of the current situation, he seeks to plot against the biological and social terror caused by fear of ageing. Although his plot intentions appears overly dramatic, the analysis is essentially right - suggested by the reviewer, who's no longer residing among the youngest.

References

Steingart, Gabor (2004). Deutschland. Der Abstieg eines Superstars. München/Zürich: Piper, pp. 303, 13,00 Euro

Bizer, Kilian and Werner Sesselmeier (2004). Reformprojekt D. Wie wir die Zukunft gestalten können, Darmstadt: Primus, pp. 176, 16,90 Euro

Keese, Christoph (2004). Rettet den Kapitalismus. Wie Deutschland wieder an die Spitze kommt, Hamburg: Hoffmann und Campe, pp. 302, 19,90 Euro

Steinmeier, Frank-Walter and Matthias Machnig (2004). Made in Germany '21. Innovationen für eine gerechte Zukunft, Hamburg: Hoffmann und Campe, pp. 575, 14,90 Euro

Schirrmacher, Frank (2004). Das Methusalem-Komplott, München: Karl Blessing, pp. 217, 16,00 Euro

Related Information