Capitalism, ordoliberalism or neoliberalism made in Germany?

Capitalism, ordoliberalism or neoliberalism made in Germany?

Anglosaxon goverments, especially since Thatcher and Reagan were seen as main drivers of neoliberalism in the world. However, there is a new debate if German goverments also played a decisive role in the spread of neoliberalism in the world and especially after the Euro crisis.

In his contribution “Neoliberalism made in Germany How the German government pushed for neoliberal reforms abroad to protect its own economy”. Pavlos Roufos is questioning the mythical glorification of the German Rhineland capitalism and analyzing its real economic policy:

“The relationship between neoliberalism and Germany is anything but easy. In 1938 a group of liberal economists, including Wilhelm Röpke and Alexander Rüstow, coined this term at a meeting in Paris, which stood for an alternative to the contemporary alternatives of state planning and closed economic areas. But after the Second World War the term disappeared again. Many countries pursued economic policies influenced by Keynesianism. An international system of fixed exchange rates and capital controls, known as the Bretton Woods system, was created under the leadership of the United States. The economic policy consensus was a balance between state intervention and markets; one spoke of »embedded liberalism«. Even parts of the German left contributed to spreading a glorified image of capitalism regulated in the interests of the common good. It was only after the economic and political upheavals under the British Prime Minister Margaret Thatcher and the US President Ronald Reagan that the term neoliberalism emerged again from oblivion. But as the political scientist Thomas Biebricher writes in his recently published book “The Political Theory of Neoliberalism”, it has since been “almost without exception his critics who use the term”. In Germany there is also the fact that neoliberalism is often perceived as a school of thought and economic policy linked to the Anglo-Saxon countries, which is actually alien to the German economy – the corporatist »Deutschland AG« with so-called social partnership and welfare state. Even parts of the German left adopted this idea and thus contributed to spreading a glorified image of capitalism regulated in the sense of the common good, which was only destroyed by the unleashed neoliberalism of our time.

The most prominent proponent of this view is Sahra Wagenknecht, a politician of the Left Party, who in her book »Freedom Instead of Capitalism«, published in 2012, refers positively to the economic compromise of the post-war period – this was »expressly conceived as an alternative to the model of unbridled capitalism«. In the meantime, however, “all positive ideas of the market economy are dead”, since “Thatcherism” and unbridled capitalism have prevailed in Europe. The money that would be needed for productive investments is now “gambled away” in the worldwide casino. The sociologist Wolfgang Streeck, one of the supporters of Sahra Wagenknecht’s so-called collection movement »Stand up«, argued in a similar way. Neoliberalism means that “capital is breaking free from the national bondage in which it had to spend the decades after 1945,” he wrote in 2017 in the magazine New Left Review. If one understands neoliberalism as the triumphant advance of Anglo-Saxon laissez faire finance capitalism, which undermined the economic sovereignty of the nation states, the return to “embedded capitalism” and the social market economy of the post-war period does indeed appear to be an attractive alternative.

But that would mean to overlook the role that the German state in particular has played in implementing neoliberal restructuring in Europe and in the world, namely because it to protect its domestic economic model – which is primarily based on the export industry and on the class compromise which made surpluses possible. The political scientist Julian Germann advocates this thesis in his recently published book “The Unwitting Architect: German Primacy and the Origins of Neoliberalism”. In it he analyzes the so-called social market economy of the Federal Republic of Germany’s post-war period as an »outwardly oriented development model« that »recruited capital and labor for a global export offensive«. The success of the industry made the class compromise possible. To protect this model, the German government repeatedly advocated neoliberal reforms, initially abroad. The “Nixon shock” in 1971, when the US government under President Richard Nixon lifted the gold peg of the US dollar and thus contributed to the end of the international system of regulated exchange rates, was partly due to West German politics. The US dollar was the key currency of the capitalist world, but because more and more dollars were circulating around the world, the US gold reserves no longer covered the money supply. At the same time, government spending rose steadily because the US government wanted to finance the expansion of the welfare state and the Vietnam War and ensure full employment. In May 1971 the West German government announced that it would abandon the link between the Deutsche Mark and the US dollar. This decision would “put healthy pressure on our partners to agree on a common stability policy,” said a representative of the West German Foreign Ministry at the time. The Federal Republic wanted to protect itself from the effects of the expansive US financial policy and ensure price stability. In August 1971, Nixon surprisingly announced the end of the convertibility of the US dollar into gold.

A few years later, the US government under Jimmy Carter propagated a new internationally coordinated program of increasing government spending. But Chancellor Helmut Schmidt proposed a modest growth target of just one percent, which should be achieved through tax cuts rather than through government spending. This anti-inflationary policy was supposed to protect the stability of the market and the exports of the German economy. This also pushed the USA to take a deflationary course: instead of full employment, price stability became the decisive goal. The chairman of the US Federal Reserve, Paul Volcker, raised the US key interest rate sharply, which in 1979 triggered a sharp recession, the so-called Volcker shock. In Europe, too, German politics turned against Keynesian crisis solutions. In 1975 the Italian government tried to overcome its economic crisis by increasing government spending, but reliance on foreign credit stood in the way. Germany, the United States, Britain and France pushed Italy to accept a loan from the International Monetary Fund (IMF), which demanded cuts in the national budget and the exclusion of the Italian Communist Party from any ruling coalition. In the same year, high inflation jeopardized the British Labor government’s Keynesian program. Germany again refused to support the British currency, so that in 1976 the British government was forced to accept an IMF loan and to cut government spending. Long before the euro crisis, Germany supported austerity as a strategy for crisis management in other European countries. Even then, according to Germann’s thesis, German politicians understood any protectionist, state interventionist and inflationary crisis solution as a threat to the open markets and stable prices on which the success of the German export model was based.

This pressure to adapt only reached Germany with a delay. With the common currency in the euro area, Germany was exposed to new competitive pressure at the turn of the millennium. In order to combat high unemployment without burdening the competitiveness of industry through further government spending, the labor market has been made more flexible. At that time, Streeck defended the creation of a low-wage sector as necessary for the »overhaul of the ‘German model’«. “In the core industrial area, Germany is still one of the most competitive countries,” he wrote in 1999 in Der Spiegel. “As well as it holds its own on the world markets”, German industry cannot “absorb the growing number of those (…) who are looking for employment today”. In order to fight unemployment, an expansion of the service sector is necessary, which is only possible with a “rethinking of the ideas of justice that stem from the industrial society and the full employment economy of the post-war period.”

With the economic crisis of 2008, which was reflected in a sovereign debt crisis in the euro zone, Germany was able to take on the familiar role of implementing neoliberal reforms in the periphery, while signaling to its own population that this would protect the stability of the domestic economic model. According to Germann, the EU austerity policy not only protected German banks that had previously lent profitably in the periphery from losses, but also fitted in with the long-term attempt to integrate the periphery of Europe into the »global chains that were run by German exporters are dominated «. The devaluation of the periphery, which was forced during the crisis, helped “to lower the costs for German industrial companies that produce there or purchase parts from there, and to improve the competitiveness of German exporters in global markets.”

Interesting article on the subject of capitalism / neoliberalism / ordoliberalism. I believe the ideal-typical mystification of the Deutschland AG and its role in the neolibaralization is true. However, the alleged goal of German neoliberalism abroad is to protect the welfare state at home, which is theoretically different from Anglosaxon states and more Calvinist neoliberalism as they reject the idea of a Scandinavian or German welfare state at home-And it is true that Germany already at the time of the Deutschland AG and Rhineland capitalism was one of the key drivers for austerity programs abroad since the IMF programs, in which Germany was one of the IWF board leaders, were already neoliberal and austerity politics, but more directed against 3rd world countries in Latinamerica and Africa, at the periphery of global capitalism and not yet at the centers. On the other side the author exxagerates the influence of Germany´s economic policy on the USA, as for example the gold standard was abolished, when France wanted gold for its US debts during the Vietnam war and the USA couldn´t deliver it anymore, because of rising state debts and expanding world trade and the beginning of the globalization.. But any other state at this time could have demanded gold instead of dollars and have toppled the gold standard at this tipping point. Nevertheless, there is a difference between Ordoliberalism by Röpke, Rüstow, Eucken  and Co and the ideas of Mt. Pellin and  Hayek Society, Milton Friedman´s  Chicago Boys  and the other thought leaders of neoliberalism like Thatcher and Reagan that went much further or as Hans Kundnani already in 2015 wrote in his contribution “Neoliberalism and ordoliberalism”:

“One of the things that has persistently puzzled me over the last few years is the disconnect between the Anglo-Saxon and German debates about the euro crisis. The mainstream view among Anglo-Saxon economists is broadly Keynesian: they see surpluses as a problem as well as deficits and therefore argue it is not only debtor countries that need to adjust. But the only German economists you hear making such arguments are those such as Heiner Flassbeck who are perceived as being on the far left. (Flassbeck was the state secretary in the German finance ministry during the short-lived tenure of Oskar Lafontaine at the beginning of the Schröder government. Lafontaine subsequently left the German Social Democrat party and became one of the leaders of the Linke, or Left party.) It seems as if, in this respect, Germans are to the right of the Anglo-Saxons.

If that is true, it is particularly puzzling because the German economic theory of ordoliberalism is generally thought to be to the left of, and more moderate than, neoliberalism. The theory of ordoliberalism is associated with the idea of the Sozialmarktwirtschaft, or social market economy, and more generally with the German economic model (“Rhineland capitalism”), which is often thought of as being more “social” than the supposedly more brutal Anglo-Saxon version of capitalism. And yet, if Germany’s response to the current crisis is based on ordoliberalism at all (something that, as I suggested in a previous post, is not entirely clear), it sometimes seems to collapse into neoliberalism. So what is the relationship between neoliberalism and ordoliberalism? Is ordoliberalism an alternative to neoliberalism or a version of it?

What makes this even more confusing is that ordoliberalism was itself originally known as neoliberalism. In fact, the term “neoliberalism” was first used in a positive sense by the exiled German economist Alexander Rüstow at the Colloque Walter Lippmann in Paris in 1938 to refer to an alternative to classical liberalism, which, following the Great Depression, was perceived to have failed. At the same time, Rüstow rejected the planned economy of Nazi Germany and the Soviet Union. His idea of a “third way” was picked up by the Freiburg school around Walter Eucken – the group of economists we now describe as ordoliberals. It was only much later that the term “neoliberalism” was used in a negative sense by left-wing critics of General Augusto Pinochet’s economic policy in Chile and then applied to the economic policies associated with Margaret Thatcher in the UK and Ronald Reagan in the United States in the 1980s.

The relationship between ordoliberalism and neoliberalism is particularly interesting in the light of the critique of the European Union by German left-wing intellectuals such as Wolfgang Streeck. Streeck sees the EU as a neo-liberal project – in fact, in his book book Buying Time, he describes Friedrich Hayek’s 1939 essay “The Conditions of Interstate Federalism” as a “blueprint for today’s European Union”. It is not exactly clear how and when Streeck thinks the EU became a neo-liberal project. But what is striking, as I argued in a review of the book for the Times Literary Supplement, is that he suggests that what might be called the “neoliberalisation” of the EU has been driven by Germany rather than the UK as you might expect. In particular, he sees the creation of the single currency and the German-led response to the euro crisis as the crucial steps in this neo-liberal transformation of the EU.

If ordoliberalism – which was originally a theory about how to run a national economy rather than a single currency area – has indeed informed Germany’s approach to Europe, it is perhaps above all in the emphasis it places on rules. As Jürgen Stark (the economist who represented Germany on the executive board of the European Central Bank until he quit in 2011 in opposition to its bond buying programme) put it in an op-ed in the Financial Times the other day, ordoliberalism is based on the idea that “markets needs rules to be set and enforced by government”. The problem, however, is that the eurozone is quite different from a democratic nation state, where the rules are set by governments that have been elected by the people and therefore have legitimacy. In the eurozone, the rules are the outcome of power relations between states and, since the crisis began, have come to be seen as instruments of coercion by creditor countries and above all Germany.

German economists influenced by ordoliberalism believe that, within this framework of rules, the market should function freely without state intervention. As Stark put it in his op-ed, “individuals should bear the risks of their own decisions”. When applied to the eurozone, this idea – the “liberal” part of ordoliberalism – seems to treat countries in the eurozone as the equivalent of individuals, or companies, within a national economy. Based on this “principle on individual responsibility”, German economists such as Stark oppose debt mutualisation and believe the market should be left to discipline debtor countries in the eurozone. Whether or not this makes sense in economic terms – Stark obviously thinks it does – it seems to me not so much “social” as marktfundamentalistisch, or market fundamentalist. In the context of the eurozone, ordoliberalism seems to be not just a version of neoliberalism but a rather extreme one.”

Another commentator  wrote about the relation between ordoliberalism and neoliberalism:

“What do you mean “to the right”? When you look at UK conservatives in the European Parliament they pursue radical “pro-business” policies while Austrians and Germans pursue “pro-market” policies.

Ordoliberalism does not mean fraternization with business stakeholders but quite the opposite. The rules engineer a market under which business operate and the market mechanism unfolds or “is made to unfold”, because the creation of a functional market requires intervention. Unlike the pro-business fraction that worships the big bulls and ultimately power, ordoliberals let’s the cows harvest on their grass, milk and slaughter them.

Ordoliberalism is Kantian reason plus economics.

The “too big to fail” argument can be reduced to “too big”, in other words the market concentration needs to be combated so that an enterprise may fail, the market diversified so that the risk can be contained. Strategic dependencies of an economy, on specific banks, on Putin’s oil, on software providers like Microsoft and so forth have to be reduced. Economic sovereignty is the goal.“

This debate already reached the Anglosaxon woeld and Julien Dumont summarizes the points of view about Germany´s neoliberalism after the Eurocrisis at the London School of Economics (LSE):

The Other Neoliberalism: German ordoliberalism after the Euro crisis

Ordoliberalism has garnered attention of late with developments surrounding the Eurozone crisis, most notably in terms of Germany’s response. Now perceived in some quarters as an influential doctrine in European politics, the ordo-liberal tradition began as a rather parochial German affair. First developed around and during the Second World War, Ordoliberalism grew out of the work of economists and legal theorists associated with the Freiburg School, such as Walter Eucken and Franz Böhm. At its core, the ordo-liberal tradition converges around the idea of an economic constitution. Recognising the contingencies borne out of the free market, ordoliberals are committed to robust state intervention in the form of a concrete set of rules directing socio-economic activity. In this respect they are easily distinguishable from neoliberals, with whom they share an embrace of the market economy. Amongst their policy prescriptions, ordoliberals give a central importance to price stability, an intelligible commitment in light of the deep social, economic and political trauma of the Weimar and Nazi era.

Widely seen as constitutive to the economic policy of post-war West Germany, Ordoliberalism carried a deep currency in the Adenauer administration, not least with the tenure of future Chancellor Ludwig Erhard, then Minister of Economics. The German Wirtschaftswunder, or economic miracle, was quickly associated with ordoliberal prescriptions. More recently, ordoliberalism has come to be linked with German attitudes to, and management of, the European sovereign-debt crisis. The insistence on an obligation for strict budgetary commitments and fiscal responsibility have been traced to the ordoliberal spirit. It is in this context that a number of contributors, amongst which all four speakers on the panel, have explored ordoliberalism both in terms of its intellectual development and impact on today’s politics in the recent volume edited by Josef Hien and Christian Joerges: Ordoliberalism, Law and the Rule of Economics.

The first speaker, Associate Professor David Woodruff of the LSE’s Department of Government, began by drawing parallels between the central theses of ordoliberalism and the work of Karl Polanyi, the Austro-Hungarian economic anthropologist. Both he suggested, had been concerned with the destructive consequences of a mismanaged laissez-faire economy, namely the rise of fascism. However, where Polanyi identified laissez-faire itself as the root of the problem, the ordoliberals focused on its management, with a specific focus on the price mechanism. From this, Professor Woodruff holds, stemmed a will to constrain state intervention in limiting the supply of uncompetitive policies, with a view to mould and fix a morally appropriate market order.

Interestingly, the second speaker, Professor Albert Weale of UCL, focused on the particulars of these policy prescriptions in their historical context. Looking at the work of economic historians, Professor Weale narrowed down on the important role played by corporatist groups in, counterintuitively to ordoliberal cannon, making a success of German ordoliberalism. Specifically, he explained the crucial impact of unions in effecting wage restraint in Germany, a decisive factor in gaining a competitive edge. This, he suggests, indicates the reliance on good sense amongst all socio-economic actors for ordoliberal policies to flourish, a factor found lacking at the European level, which accounts at least partially for the current contentiousness of the ordoliberal tradition.

Professor Michelle Everson of Birkbeck, University of London, provided a more macroscopic take on the role and meaning of ordoliberalism. In her view, it represents a bridge between law and economics. She suggests ordoliberalism entails a rejection of the economy as an objectively knowable material reality, with an implicit dismissal of scientism and socialism as chimeras. This viewpoint consequently distinguishes ordoliberalism from all those claiming to know how to ‘do’ the economy, including those of the ilk of the Davos elite.

In the final intervention, Professor Jonathan White, of the LSE’s European Institute, gave a view of ordoliberalism in connection with political agency and the politics of emergency. Here, the point was made that when ordoliberals offer an injunction to constrain economic activity, they do so by limiting political discretion on economic matters. Following the idea of an economic constitution, the moment of agency is located in the past, whereby a foundational decision has been made in favour of a specific (ordoliberal) type of market economy. Professor White further focused on the complications that arise with contingent situations requiring a greater level of discretion than is allowed. The argument was put forward that, perhaps unexpectedly, ordoliberalism is equipped to deal with such challenges by resorting to the notion of exceptionality. Accordingly, the necessary discretion can be achieved by resorting to reasons internal to ordoliberalism, justifying the suspension of normalcy. Here the affinity between binding rules on one side and the politics of emergency on the other is made clear, and affinity which Professor White purports is typical of the ordoliberal spirit, as well as of the political response to the Eurozone crisis. The EU’s fiscal compact for instance can be seen as a foundational act of political discretion, justified by a necessity threshold and establishing a new set of rules, with the stated intent to avert future such manifestations of political agency. Interestingly, Professor White concluded by drawing a disanalogy between this aspect of ordoliberalism and the contemporary populist phenomenon, characterising the latter as the politics of volition par excellence, with the promise of unlimited political discretion a key source of its appeal.

These four interventions conjure a more complex image of ordoliberalism than is sometimes allowed. Rather than serving as the definite economic doctrine of the German dominated Eurozone, ordoliberalism appears instead as an important reference point, as a constituent part in the language of justification deployed in Eurozone politics.”

However, it is a little bit ridiculous to portray Germany as the leading world economic power that dictates the global framework of capitalism and leads the other nations. It has great influence in the EU and thereby in the world, but the main driver of neoliberalism have been undoubtley the Anglosaxon goverments under Thatcher and Reagan and to put the responsibility for neoliberal excesses on the German economic policy. And the core idea of neoliberalism was the slim state, deregulation and privatization of all markets, even the financial markets which lead to the financial crisis in 2008 and was afterwards transformed in an Eurocrisis. And austerity programs already existed under the IMF in the 70s with the USA playing the leading role in it. However German Social democrats under Schröder and British Socialdemocrats under Blair´s “Third way” followed the path of Reagan, Thatcher, Friedman, Hayek, the Mont Pelerin Society, the Austrian and not the German ordoliberal school.. In Foreign Pollicy Quinn Slobodian, associate professor of history at Wellesley College and the author of Globalists: The End of Empire and the Birth of Neoliberalism. doubts if the explanation for Germany´s economic policy can be explained by a fixed dogmatic ideology or mantra and he also asks if Germany will adapt a new model in the future:

“We All Live in Germany’s World   How the German government accelerated the 20th century’s economic march toward neoliberalism.

Why do the Germans do what they do? Since the global financial crisis, Chancellor Angela Merkel’s government in the European Union has seemed to alternate between bad cop and compulsive hoarder. Berlin forced Greek governments to accept punitive austerity measures, blocked the issuance of Eurobonds, and most recently balked at the need to spend heavily at the European level in response to the coronavirus, until it was almost too late. With near-zero interest rates and crumbling infrastructure at home, Germany still refuses to spend even as the new Biden administration passes a stimulus bill of “planetary scale.”

Is this neoliberal seppuku? An opposition to the expansionary state so complete that it would rather perish than run a deficit?

There is no shortage of fodder for explanations based on the ideological and the irrational. The CDU all but copped to accusations of “sado-monetarism” in late 2019 when they tweeted a meme of the “black zero”—the German symbol for a balanced budget— in a leather dominatrix hat with the winking tagline: “We admit, we have a little fetish.”

Anglophone audiences have been especially hospitable to the idea that there is something peculiar, even pathological, about the behavior of the Germans when it comes to matters of money. When Michael Lewis turned to scatology and the history of Weimar hyperinflation to explain the German “preternatural love of rules” in a Vanity Fair article in 2011, he foreshadowed a decade of takes to follow.

Are there better explanations? In a new book from Stanford University Press, Unwitting Architect: German Primacy and the Origins of Neoliberalism, Julian Germann suggests there are. Tracking the rise of the German economy from its Cold War division to reunification in the 1990s, he makes the case that we need neither hackneyed theories of national character nor appeals to baked-in theories of “ordoliberalism,” nor nightmares of wheelbarrows full of money, to account for the state’s actions.

We can explain it all by a much simpler fact: Germany is an export nation and would like to stay that way with as little internal disruption as possible.

A century ago, John Maynard Keynes wrote that “the German machine was like a top which to maintain its equilibrium must spin ever faster and faster.” Since its rise to the world’s leading exporter of industrial goods in the late 19th century, Germany has spun outward, focusing on producing for markets beyond its borders, succeeding in the first version of a transition so many would try to emulate later: moving from trinkets and toys to machines to, finally, machines that make other machines.

After the Nazi catastrophe and its very different vision of continental autarky, the Federal Republic launched a ballyhooed “return to the world market,” to cite the iconic title of Economics Minister and later Chancellor Ludwig Erhard’s 1953 book. With help from liberalized trade with the nations it had very recently fought to the death, and the demand boost from the new American war on the Korean peninsula, West Germany returned to its outward-facing stance.

And there it has stayed. Although the United States was the behemoth of postwar globalization, the nation also benefits from a vast domestic market. Germany has been much more reliant on trade as reflected in a trade-to-GDP ratio three times of America from the 1970s to the present. In the 1980s and again in the 2000s, Germany even surpassed the American giant in the value of its exported goods.

It is in the defense of its status as Exportweltmeister, Germann argues, that we can find the explanation for German actions. The country has never sought to create “replica Germanys according to a single ideological blueprint,” as has sometimes been alleged. On the contrary, its goal has been an entrenchment of difference on the formula of “social market economy for me but not for thee.” The black-zero fetish, in other words, is not the twisted expression of Lutheranism but an all-too-reasonable attempt to maintain export-oriented growth while maintaining a class compromise at home.

As told in Unwitting Architect, the story matters for more than just Germany: In the country’s efforts to defend its export model, Germany has helped to accelerate the movement to what we now call the neoliberal order.

Germann zooms in on a series of turning points, most of them in the 1970s. The first is what is known in shorthand as the “end of Bretton Woods” when the United States stopped converting dollars into gold in 1971, launching the era of fiat money and floating exchange rates. Germann follows the work of other scholars to show that the earlier German decision to float the mark, and their unwillingness to prop up the dollar, must be recognized as a necessary condition for the U.S. move.

In other words, the closing of the gold window, often seen as an expression of American hegemony and unilateral power, was rather a sign of its weakness, and dependence on the cooperation of its partners, most importantly, France and Germany.

Germann sees the Federal Republic as the spoiler in further efforts to respond to the crises of the decade that followed. The 1970s were a period of inflation but also attempts to practice an expansionary Keynesianism beyond the scale of the nation, as Italian Eurocommunists and social democrats like Olof Palme and Bruno Kreisky responded to the parallel mobilizations for a New International Economic Order by the G-77 bloc of poorer nations at the UN.

Fearing imported inflation that would undermine its export model, Germany helped to block the campaigns of global reformists (which, one might add, had little chance of success in the first place) and, along with the United States, to push the IMF into a renewed role of financial disciplinarian, beginning with the loan to the British in 1976 that helped discredit the Labour Party for two decades.

In the run-up to the other iconic moment of the decade—the decision by Fed chief Paul Volcker to float interest rates and produce the so-called Volcker Shock—Germann also credits social democratic chancellor Helmut Schmidt’s intransigence (typically dismissed by scholars) with narrowing the space of U.S. decision-making. Thus, it was Schmidt who helped force Volcker’s hand toward the move that would drive rates up to close to 20 percent and trigger the Third World Debt Crisis, another mile marker on the path to the neoliberal order.

For Germann, the 1970s were a dry run for what he calls “the Janus-faced character of German crisis management,” as the export champion pushed measures that controlled inflation and ensured price stability in Europe and beyond while preserving a generous social state at home and “wage restraint in exchange for job security.”

By his account, German policymakers acted not out of a universalistic vision of “rolling back the frontiers of the state” to unleash “the magic of the market,” as the rhetoric of Thatcher and Reagan would have it, but a much more pragmatic rearguard defensive move against what they saw as something that would endanger their global competitiveness.

After the Cold War, the Federal Republic sought to continue their balancing act as European integration expanded to include a common currency and eventually the absorption of the former communist states to the East.  The Eastern European hinterland of low production costs for high-value German exports became a key part of the national model in the 2000s, even as the balancing act began to tip toward squeezing social prerogatives at home.

In the wake of the Hartz IV welfare reforms led by Third Way social democrat Gerhard Schröder, as sociologist Oliver Nachtwey has shown, the working poor have nearly doubled and the country has becomes characterized ever more by a dualized labor market: an inner circle of the unionized few and a widening penumbra of a flexibilized precariat.

Against its reputation as a softer, gentler “variety of capitalism,” Germanys’ union density was in the bottom half of global rankings by the 2010s, around 17 percent to the U.S. 10 percent, and five percentage points behind the U.K.

Deflation and falling demand within the EU due, in part, to Germany’s dogged opposition to expansionary policy has posed ever less of a problem as Germany pivots further east. The Federal Republic was an early arrival to liberalizing China, becoming its second-biggest trading partner after Japan already by 1970. When Germann finished his book, China was Germany’s third-biggest export market after the U.S. and France. By the time it arrived on bookshop shelves, it had risen to number two.

A new Comprehensive Agreement on Investment between the EU and China signed, significantly, independently of the United States just before President Joe Biden’s inauguration, indicates that trade will continue to flow in this direction. Beijing’s fashionable 798 District, built in the abandoned factories constructed by East German engineers in 1957, now hosts Audi’s Research and Development Building part of the Volkswagen Group, the largest brand in China by sales.

Germann’s “Janus-faced” formula offers an attractive solution to the riddle of German political economy, where critics blame everything on ordoliberalism while ordoliberals themselves insist on their own marginality. It also helps explain why resistance to deviation from the Black Zero status quo can seem so bipartisan—or polypartisan, as the case may be. Recall that the 1970s actions were presided over by Social Democrats rather than Christian Democrats.

It’s best to avoid dwelling too much on book titles but one could quibble that “unwitting architect” runs the risk of casting German politicians as creatures of a hardwired destiny. While Germann inveighs against “ideational” explanations, the German low-inflation export model is an idea too, albeit one calcified into a way of life apparently without alternative.

But change might be afoot, with rhetoric reshaped by the exigencies of pandemic response and the attempt to woo voters ahead of September’s parliamentary election. SPD finance minister Olaf Scholz recently blocked the reappointment of one of the few card-carrying members of the ordoliberal Freiburg School, Lars Feld, from a third term as chair of the German equivalent of the Council of Economic Advisers. One of those who remains has called for a reform of the “debt brake,” which has embedded the Black Zero in the German constitution since 2009. The Green Party, currently polling in second place, have an electoral platform demanding the replacement of the debt brake with a “carbon brake.”

Under the pressure of discontented voters, looming ecological threats, and demands for the reterritorialization of supply chains, we may find that Germans have something more than the single idée fixe described in this book at their disposal. Whether they will then be able to reinvent the economic model that has anchored its domestic class compromise and served its wealthy so well for most of the last century remains to be seen.”

The present discussion should focus more on the topic, if US president Biden´s new economic program, including a New Green deal,Corona rescue programs, infrastructure and stimulus program and proposed transatlantic New Silkroad will bring a paradigm shift from neoliberalism to a new Keynesianism. Bidenomomics instead of Reagonomics. Janet Yellen has made it clear how much all of this is part of a departure from Reaganomics by declaring that the USA will raise taxes for companies and also advocate minimum international taxation – in order to reduce tax competition and the many tax havens which, like hardly anything else, reflected the slipped conservative-liberal dogma of sacred competition. It is still unclear whether all of this will come through – and how many compromises Joe Biden will have to make with those in his own party who are (still) reluctant to change. Even the huge sums of money should not be enough to make America as little unequal again as it was in the post-war period – before the Reaganomics came. It’s not just about state money, but also about better taming the financial markets. There were times in the United States when every additional dollar on extremely high incomes was taxed up to 90 percent (without communism breaking out or the world ending). Despite these limitations, Bloomberg columnist Noah Smith suspects, the tenor, breadth, and pace of Biden’s economic ideas strongly suggested “that we have begun a new paradigm” – an era that could have as far-reaching as the one to them Reagan and Thatcher once stood. Just one that might end much better for people, the climate and the economy, because it corrects the historical nonsense of a mantra that was all too state neurotic and one-sidedly aimed at the privileged anyway. Bidenomics as a replacement for Reaganomics. However, Biden shows how a left can combine social, ecology and identity policy and it would be interesting how Wagenknecht would comment this. However it remains to be seen if this is a lasting paradigm shift or if the Republicans or Trump or Pompeo (who is now commentator in Fox News and gets hyped by parts of the Republicans as new US presidential candidate for 2024) return and roll back the whole Biden program and return to neoliberalism or if in the event of a war only an arments Keynesianism remains and the social justice program is canceled as Lyndon B. Johnson´s Great Society during the Vietnam war And the perspective of a New Green Deal in Germany, maybe under a Green chancellor Annalena Baerbrock  and the New Green Deal of the EU as well as China´s New Silkroad might contribute to the paradigm shift from neoliberalism towards a new global Keyneisanism.

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