WE'LL HAVE A BETTER VIEW OF THE ICEBERG IF WE MOVE THESE DECK CHAIRS:

What the Change in Germany Means (Frank X. Vogelgesang, January 26, 2004, Mises.org)

Now it seems clear that 2003 ended with a negative compound growth rate, while unemployment has risen to over 10%. As for the BA, after calls for its abolition following the 2002 scandal subsided, the various stakeholders rolled up their sleeves and started to "reform" the bureaucracy. So far, the only clearly visible result is a new name (from "institute" to "agency"), a spanking new website and, as surreal as it may seem, a few thousand new public employees, hired to take on the new tasks arising from the "reform." Unemployment is rising? Hey, spend more public money on the labor office!

So, nothing has changed, has it? Well, yes and no. After getting re-elected, the German Chancellor announced his reform "Agenda 2010." In short an assortment of piecemeal changes in tax, labor, social, and regulatory policies. Since after the 2002 election majorities are such that the CDU (Christian Democrats) and FDP (Free Democrats) opposition control the upper
chamber (Bundesrat), much political haggling ensued. Laws proposed by the government did not get ratified and under the German system were being sent to a "reconciliation committee" (Vermittlungsausschuss), where representatives of both Chambers submerge themselves in what has become known as the "dark chamber" and try to hammer out a compromise.

The compromise which after two weeks was announced in early December amid much fanfare, for practical matters does not amount to much: move forward half of a tax reform that has already been written into law by one year; finance the 8 to 9 billion Euros in forgone taxes with 30% of new debt, the sale of several entities still in state hands (like airports), and a timid reduction in subsidies. Also part of the deal is to make it easier for companies of up to 10 people (current threshold stands at five) to lay off people, and a reform of the crafts and trade regulations.

In other words, this package cannot be considered a profound structural change of German society, much less a clear departure away from the all encompassing state and toward more individual liberty and responsibility. The biggies, for instance, in labor market reform, like doing away with industry wide wage standards, were not touched.

However, the December compromise in my opinion is remarkable for two reasons: first, it made clear to a lot of people that the current constraints on freedom brought about by a suffocating state and ubiquitous regulation does not, to use a popular image, lie over the country like a wet
blanket. Rather the system that has been built up over the past decades compares to a cancer whose metastases have spread everywhere.

Second, though, it shows that something has started moving. Take the proposed reform of the crafts and trade regulation. Let us remember that in Germany you must be trained and certified (Meisterzwang) according to a certain system to be allowed to carry out some 90 odd different crafts. Without the title you cannot operate a barber shop or run a painting
business.

Does the meagerness of such "reforms" really suggest a nation coming to grips with its problems, especially when the main ones are demographic and religious?

Posted by Orrin Judd at January 26, 2004 09:21 AM