Saturday, February 25, 2012

Fourth Reich Rising?

I remember recently thinking of how quickly the depictions of a newly imperialistic Germany after the Cold War's end (for a while, popular with thriller novelists like Larry Bond and Harold Coyle) proved passé. However, the news coverage of European economic affairs during the past year increasingly seems to echo this, with alarmed talk of a "Fourth Reich" becoming a commonplace, and not at all limited to countries like Greece facing harsh austerity measures as the price of a bail-out. British right-wingers are now routinely publishing such rhetoric in mainstream venues, as in these pieces by Simon Heffer and thriller writer Frederick Forsyth, who claimed that Germany is creating a new empire in which countries like Greece, Italy, Spain, Portugal and Ireland are turned from manufacturing competitors into colonies (his term) which will "provide cheap labour, raw materials, agricultural produce and a ready market for the trinkets" produced in the German metropole. Quite rightly, historian Richard J. Evans recently wrote in The New Statesman that "We haven't seen this kind of language since the 1990s, when German reunification led to a spate of Germanophobic commentary in politics and the media."

The hysterics point to Germany's economic strength, the popular view of which represents quite the turnaround from the disdain once fashionable among orthodox economic thinkers. Germany, of course, is not just the largest national economy in the EU by a significant margin (more than a third larger than the number two country, Britain), but in per-capita terms, the biggest manufacturer among the major economic powers ($9,300 per head, compared to $8,200 for Japan, and $6,000 for the U.S. in 2009), and by far the biggest manufacturing power in the EU in aggregate terms (out-producing the next two largest manufacturers, Italy and France, combined) – but so it has been for a long time.

What is more novel is the country's export performance in the last decade, which has made it the world's second-largest exporter (after only China, and actually ahead of the U.S.), and given it a consistently favorable balance of trade. One might also add that its central government budget deficits and unemployment have been (relatively) low in recent years, even after the outbreak of the 2008- crisis (the two figures put at 1.7 percent of GDP and 6 percent of the work force for 2011 by the CIA's World Factbook, figures the United States can only envy).

Looking at such data one might forget that Germany's economic and industrial weight has actually receded since the early 1990s, both globally and within the EU – a fact reflecting the country's slow economic growth (less reflective of the "Eurosclerosis" theory than the broad stagnation of the world economy since the 1970s), the ascendancy of East Asia (and especially China), and the frantic expansion of the European Union (which has seen Germany "offshore" much of its production to Eastern Europe).1 One might forget, too, that the largest part of those trade surpluses comes from trade inside of the EU, and that here at least, this export-led strategy (which has led some to compare Germany with China) is bumping up against its limits, as the debt crisis shows how unsustainable those surpluses really are. And of course, one should remember that Germany is itself the bearer of one of the world's largest external debt burdens, behind only the U.S., U.K. and France in this regard, equal to more than 150 percent of the country's GDP – making it bigger than the U.S.'s in relative terms (if considerably smaller than those of the other major EU economies).

As this situation suggests, Germany's present position on the continent seems at least as much a question of the weakness of its European partners as its sometimes exaggerated strengths. While Germany, like other mature industrial states, has seen manufacturing fall as a share of employment and Gross Domestic Product (down to 21 percent now, from 24 percent in 1992), its neighbors have suffered deeper deindustrialization (the figures for Italy, Britain and France are 17, 12 and 11 percent, respectively) – too much, as the trade imbalances demonstrate. It also seems to me that the celebration of Germany's export boom reflects an overeagerness on the part of some to find validation for neoliberal prescriptions in the country's recent steps in that direction (or what at least look like such steps, as some interpret the matter differently) – the same neoliberalism that, far more than some predatory mercantilism, seems to be the defining feature of the austerity packages the European Central Bank is imposing on countries like Italy and Greece.2

The result is that while Germany has been more successful than most in holding on to its position as an industrial power (not a minor or unimportant accomplishment), its current position is no basis for the fantasies of German empire so many writers are spinning out – even if that were an actual object of the country's policy, which is highly implausible barring some incredible break with reality (and even more implausible, ideology) in Berlin. It is even questionable where anything like economic health of any but the most partial and tenuous kind is concerned. In its emphasis on advanced manufacturing Germany has the prescription only half-right; there needs to be a commitment to full employment and rising wages as well, such as prevailed in the first half of the post-World War II era, not just in Germany, but across the developed world - and no plausible increase in exports to China can substitute for this, especially given that the country faces a far graver version of the same problem internally.

In short, the real problems facing European economies are elsewhere, and in the end, the overheated rhetoric strikes me as just a public relations matter, an argument that those who are Euroskeptics on principle, or simply opposed to the policies continental governments have imposed during the fiscal crisis, like to use simply because it is something easier to understand, and more evocative of a visceral response, that the more complex (and more divisive) issues really at the heart of the matter.

1. According to the UN data I cited in my Parameters article last year, Germany accounted for 8.3 percent of Gross World Product, and 9.7 percent of world industrial output, in 1992. By 2008 those figures had fallen to 6 and 7.4 percent respectively – a drop of roughly 25 percent.
2. This is not to dispute the fact that such policies have generally worked against developing nations, and favored developed ones, but the beneficiaries have tended to be selected economic interests in the latter, rather than countries as a whole (just as the developed world has seen its economic growth stagnate and its living standards eroded in the same neoliberal rush stunting, or even reversing, the development of poorer countries).

"Twenty Years After the Cold War: A Strategic Survey": A Short Version
New Review: The Next Decade: Where We've Been . . . And Where We're Going, by George Friedman
Review: The Second World: Empires and Influence in the New Global Order, by Parag Khanna
Review: In Praise of Hard Industries: Why Manufacturing, Not the Information Economy, is the Key to Future Prosperity, by Eamonn Fingleton
My Writings on the Recession (A Listing)

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