The three German fears

Branko Milanovic on why three global trends - runaway inflation, wrecking of democracy, and the rise of antisemitism - are dominating political conversations in Germany.

I spent an extremely hectic and intellectually stimulating week in Berlin. Despite my reasonable following of German politics (nobody interested in Europe can afford to ignore German politics) I was unprepared for the extent of the malaise that appeared in almost every conversation. During that week, I gave a talk on my new book “Visions of Inequality”, had a presentation on global inequality and a panel discussion with the Confederation of German Trade Unions, and participated at the opening of a website on wealth inequality in Germany. I thus met people from different walks of life: academics, trade unionists and people close to the ruling SPD, researchers of inequality, several journalists who interviewed me, and even several politicians who gave talks at various occasions. But neither in their public talks nor in private conversations, could I fail to observe a large dose of pessimism.

What were the topics that fueled the pessimism? Here is an approximate list: inflation and dearness of energy, economic stagnation (near zero growth), the rise of the extreme right, political paralysis, loss of exports to China, decline of German car technology, high wealth inequality, imperfect assimilation of foreign-born population, inefficiency of German railways, dark streets in Berlin (saving of energy), full political dependence on the US. One could go on depending on the person I talked to, chance movements of conversation, and the daily mood.

To a foreign observer who might have disembarked into Germany not knowing much, that pessimism seems exaggerated. On the positive side of the current ledger one could list the overall wealth of the country, acceptance of more than 1 million Syrian refugees and almost as many from Ukraine, and full employment. Yet the negative tones dominate.

I think that the pessimistic mood dominates not only because of the current wars in Ukraine and in Israel/Palestine, and general uncertainty that has enveloped the world, and Europe in particular, but because of the resonance of current concerns with the events from one hundred years ago in Germany. It seemed to me that the current events played on three important German fears: runaway inflation, wrecking of democracy, and the rise of antisemitism. All three are grounded in the Weimar period, and like a person who has been once poisoned, the fear of a similar outcome is not assessed by the actual strength of the current “poison” but by past memories.

The fear of inflation that largely destroyed the credibility of the Weimar republic is well known. It has been behind extremely cautious German monetary and fiscal policies ever since the end of the World War II. The difference between the inflation of 1921-23 that attained at its peak the monthly rate of 30,000 percent, and the current single-digit annual inflation is enormous. Yet, the present inflation is driven by the rise in the prices of staples like energy and food. Its impact—however small in numbers—seems disproportionate. It affects poorer segments of the population much more than the rich.

This in turn raises, more acutely than before, the issue of wealth inequality and redistribution. Despite many years of social-democratic rule and an extensive welfare state, German wealth inequality is very high. According to SOEP household survey, 39 percent of the German population has zero (or quasi zero) net financial wealth, and almost 90 percent of the population rather negligible net financial, or non-housing, wealth (reflected in the fact that their monthly income from property is under 100 euros per person). This makes German wealth inequality (depending on the metric one uses) equal or even greater than the very high US wealth inequality.  A feeling that many large fortunes are hidden or enjoy tax shelters thanks to different European schemes and tax competition between the EU countries, adds to the feeling of unfairness.

The second fear is that of fragility of democracy. That fear too seems, on the face of numbers, vastly exaggerated. But the full establishment of the Alternativ für Deutschland as a stable parliamentary party with about 10% of the vote, and not a passing fad like the Republicans in the past, serves as a reminders of a non-negligible chance of a sharp movement to the right, or of the right’s indirect influence on the coalition governments (of whatever hue they may be). There is of course no direct denial of democratic way of government by the AfD, nor (it would seem) any likelihood of them coming to power as a dominant member of a coalition, but the inchoate fear that one detects is more like a concern of a gradual erosion of democracy along the lines of what has happened in Hungary and perhaps in Poland. Both the form and some essential features of democracy may be retained but other essential features may be gradually diluted.  

The third fear is, in a way, the most irrational but does not seem to me absent. Germany’s strong, and perhaps excessive, support for Israel in the current war in the Middle East has its obvious roots in the Shoah and the atonement for those crimes which the German public opinion and politicians have since the establishment of the Federal Republic put on a level of an almost core principle, equal to democratic governance and judiciary independence. The irony is that an excessive zeal in atonement might lead to the unquestionable acceptance of policies that lead to crimes committed against civilian populations. Germany thus faces an almost Greek-like drama: the desire to correct for past misdeeds may lead to the acceptance of current misdeeds.

The three fears displayed in the already gloomy atmosphere of the European global economic decline, unremitting immigration pressures from the South that Europe is unable to accommodate (as shown by the closing of frontiers in Nordic countries), its energy dependence, and absence of a distinct political voice, made me look at the unusually dark streets in Berlin—and indeed at well-lit and cheerful clubs and restaurants—with a somewhat greater foreboding than they deserve.

This first appeared on Branko's blog and was reposted with permission. 

Photo by Arthur Brognoli