September 19, 2005

LEAVE OUR STATE ALONE:

German vote deadlock hits markets: Investors have expressed dismay at the inconclusive outcome to Germany's general election, sending the euro and share prices lower on Monday. (BBC, 9/19/05)

Economists believe sweeping reforms are needed to tackle Germany's economic problems and that Sunday's result - in which the opposition Christian Democrats (CDU) secured three more seats than the Social Democrats - has not provided a clear mandate for change.

"The hopes were not high for a clear winner based on polls last week but the poor showing of the CDU suggests the German people were against further pro-business reforms," said Greg Gibbs, an analyst at Royal Bank of Canada.


Combined with the "no" votes on the EU constitution it demonstrates how little interest continental Western Europe has in the reforms everyone recognizes it needs if it is to have much of a future.


MORE:
Electorate puts off hard decisions (Judy Dempsey, 9/18/05, International Herald Tribune )

As an east German who spent 36 years living in a Communist-run centralized economy, Merkel had felt the deep urge to redefine the role of the state in a united Germany. For some Germans, even inside her own Christian Democratic Union party, it was too much and too soon.

Gero Neugebauer, a political scientist at the Otto-Suhr-Institute in Berlin, said, in discussing Merkel's pro-market stance, that she "is more suited for a really liberal party which does not exist in Germany. She is too liberal for the Christian Democrats. There is a deep social element, indeed almost social democratic in character, which is inside the Christian Democrats and its sister party in Bavaria, the Christian Social Union."

"The Christian Democrats are not ready for reforms," Neugebauer said. "Perhaps the Germans are not ready for them either."

During the election campaign, Chancellor Gerhard Schröder and Joschka Fischer, a Greens leader and foreign minister in Schröder's coalition, had played on the public's fears of reforms.

"The voters rejected the cold, asocial policies of Merkel," Fischer said Sunday night. "They did not want a government that would introduce such policies that were unsocial and would not protect the environment."

Posted by Orrin Judd at September 19, 2005 8:41 AM
Comments

U.S. citizens have demonstrated how little interest they have in the reforms that everyone recognizes the Social "Security" programme needs, so it's not just apathetic Western Europeans who resist necessary modifications and rollbacks.

Further, the Japanese, whose culture and society is faster-dying in your estimation, just voted for a massive overhaul of their financial system.
Right after that happened, you decided that the election was REALLY a vote about PM Junichiro Koizumi's appeal, rather than on whether to go forward with the reforms.
So, even when these moribund societies DO rouse themselves to change, they get no love from you.

"The voters rejected the cold, asocial policies of Merkel," Fischer said Sunday night. "They did not want a government that would introduce such policies that were unsocial and would not protect the environment."

It's a good thing that the Germans are protecting the environment, since their social policies are going to lead to a significant number of retirees living in the woods.

Posted by: Michael Herdegen [TypeKey Profile Page] at September 19, 2005 9:57 AM

Michael:

We raised SS retirement ages years ago, under the Reagan/Dole reform, and with our unique population growth face no problem funding even the current system, but will reform it further anyway. Meanwhile we reformed Welfare completely and passed HSAs and education vouchers in just the past few years. We've obviously a ways to go but are getting there as quickly as could be expected given the opportunity Bill Clinton squandered and the ability of Democrats to filibuster for now.

Koizumi won not just because of his charisma but because the opposition parties fell into the Merkel trap and accused him of not being reformist enough. However, he's not likely to get much done before he leaves next year and there's no one coming behind him to push for further reform.

Posted by: oj at September 19, 2005 10:17 AM

Henry Morgenthau is smiling

Posted by: Robert Schwartz [TypeKey Profile Page] at September 19, 2005 10:36 AM

The longer that social welfare engineering programs remain in effect, the harder it is to reform them to reflect reality.

Germans reached a stalemate in the election. Evidently, needed reforms were too much to accept. The fear of losing inordinate welfare support and unworkable labor rules causes such policies to continue, even if they're unsustainable. The overall cost to German life is coming in the near future, and it won't be pleasant for Germany.

Posted by: John J. Coupal at September 19, 2005 10:39 AM

Then again, Thatcher wasn't exactly swept into #10 on waves of universal acclaim, either.

If Merkel has learned the right things, she may yet push things through. It's early yet.

Posted by: Mike Earl at September 19, 2005 10:54 AM

[W]ith our unique population growth [we] face no problem funding even the current [SS] system...

Hardly.
You'd better run those numbers again.

If we invite those 90 million Mexicans into the U.S. within the next ten years, then you'll be right, but there's precious little chance of that occurring.

Barring an enormous influx of working-age immigrants, America WILL have greater difficulty supporting retirees than we do now, necessitating a choice between three somewhat unpleasant fixes - raising taxes, cutting benefits, and borrowing more.

Posted by: Michael Herdegen [TypeKey Profile Page] at September 19, 2005 11:08 AM

Whoops, completely spaced the most likely fix: Running the printing presses at warp speed, and inflating away the onerous promises of the past.

Posted by: Michael Herdegen [TypeKey Profile Page] at September 19, 2005 11:11 AM

The Free Democrats did way better than expected, and they are consistently the boldest reformers. This indicates something else is going on in Germany. Merkel seems to have been a poor campaigner in general and did not go down well with the typical CDU/CSU faithful. A better leader may yet emerge.

If a coalition of the CDU, Free Democrats, and Greens does not emerge, expect another round of elections with the CDU/Free Democrats being the clear winners.

Posted by: Chris Durnell at September 19, 2005 12:32 PM

Those 90MM Mexicans will become 90MM+ hard working Americans. Bienvenidos amigos.

Posted by: at September 19, 2005 12:44 PM

Michael:

All you'd need to do is raise taxes, raise retirement age and means test benefits and the program wouldn't face any serious financial troubles for at least a hundred years. Real reform would be better, but tweaks will be ample.

Posted by: oj at September 19, 2005 1:02 PM

"The cold, asocial policies of Merkel..."

And Joschka Fischer has given such warm fuzzy feelings to all Germany.

The sad truth is, the SDP and its allies will be saying the same thing when unemployment hits 15%.

Posted by: jim hamlen at September 19, 2005 2:35 PM

If I remember correctly, Germany had this high unemployment problem once before, they ran the printing presses, got hyperinflation . . . well, let's just say it wasn't pretty how it all turned out.

Posted by: Mike Morley at September 19, 2005 3:28 PM

Somewhere in Germany, there is a charismatic Turk just biding his time.

Posted by: ratbert at September 19, 2005 3:44 PM

Deliberate inflation is just a way of cutting benefits, though I don't know whether it would work, what with the automatic COLAs.

Posted by: Bill Woods at September 19, 2005 4:43 PM

Before the election, I read the Turkish immigrant vote would turn this election toward Schroeder, but I haven't seen anything about it in the post election analysis?

Posted by: erp at September 19, 2005 7:18 PM

oj:

Oh, is that all ?
Should be a piece of cake, eh ?

Wonder why Bush hasn't done it yet. Perhaps he really is stupid and incompetent.

While I agree that it's simple, you have a funny way of defining "harder than anything being done now" as "easy".

Posted by: Michael Herdegen [TypeKey Profile Page] at September 19, 2005 8:28 PM

Michael:

There is no crisis. Making it even less of one would be an odd way to try and get folks to back serious reform. A Third Way solution would be better, but we can make the Second Way work for another century.

Posted by: oj at September 19, 2005 8:33 PM

I agree that there is no crisis in SS that cutting benefits won't cure. (Raising the retirement age for those already in the workforce is a benefit cut).

To say that there is "no crisis" is to revert back to Orrin-speak, where any word can have any meaning.

Posted by: Michael Herdegen [TypeKey Profile Page] at September 20, 2005 2:13 AM

And thus no meaning.

Posted by: Michael Herdegen [TypeKey Profile Page] at September 20, 2005 2:14 AM

Fill in your definition of crisis here and SS won't meet it.

Posted by: oj at September 20, 2005 7:26 AM
« FROM WIN TO WIN: | Main | ALL ABOUT THE OIL: »