USA Munchau just wrote a most important analysis on why are Germans so darn ignorant of basic Keynesian and Monetary economic theory:
The wacky economics of Germany’s parallel universe
He goes on about how Germans just seem completely out to lunch on the most basic economic canon. That what are accepted ideas of Keynes and Friedman, by both right and left, the German leadership and economic academia are strangely oblivious or ignorant about - even with the proximity to Austria.
He recaps "ordoliberalism", a supposedly unique economic theory to Germany based upon the terrible toll the chaos and economic disruption of the 1920s and 1930s caused to Germany, providing a German wise knowledge of the reality of how all economic policy not based on balanced budget and careful stewardship of the currency value will lead to chaos and upheaval.
"The Germans have a name for their unique economic framework: odorliberalism. Its origins are perfectly legitimate – a response of Germany’s liberal elites to the breakdown of liberal democracy in 1933. It was born out of the observation that unfettered liberal systems are inherently unstable, and require rules and government intervention to sustain themselves. The job of the government was not to correct market failures but to set and enforce rules."
This is rubbish. The German's themselves do not believe this and likely they are amazed the rest of the EZ and OECD is taking this hog-swill seriously.
Munchau does get the history right though, in terms of when this "odorliberalism" first appeared and when it gained ascendancy in the German economic policy formulation. And to note this history and to consider the markers and timing gives important insight into Germany today, the state of the EZ, and what is to be done going forward.
It is my belief that "odorliberalism" is a deliberate recidivist policy by the German power to return to the bad old days of perceiving a need to dominate Europe, to seek expansionary room, only this time not agrarian "lebensraum" but now "econsraum" to where peace can be maintained with the German people, especially the working class by finding markets for their extra productivity and finance the state programs that allow the state to subsidize wages in the form of percs and employment stability. That this "econsraum" is required so as to have the German worker accept low rather homogeneous wage levels yet maintain productivity and to not concern themselves with the good fortune of the state centric capitalistsand financiers. A "grand bargain", if you will. That this was especially critical when the unification of Germany seemed likely as such across the board deal was required to absorb the near shattered E. German volk. So goes the laudable start to national application of "odorliberalism".
Munchau provides the odorsliberalism history, starting first immediately after WWII and coming from the still relatively intact Bundesbank and the mainstay of the German "center right" - it was the policy of the rentiers and national state capitalists still formed in national capitalists collectives with a troika of banking, insurance and industry grouping. Competition was not the issue, the issue was to, always with patriotic fervor, to revive the German economy. To pull Germany our of the ashes, that at all costs order and a state collective policy between capital and workers was required. That the chaos rooted in the liberalism of the the 1930s was what allowed the madman Hitler - who no one knew what he was about until after the war - to gain control. This is of course nonsense. As Keynes sketched out effortlessly in "Consequences" written in 1919, it was not the liberal ideals that delivered Germany to Hitler, but the crazed effort for the victors of WW I to extract revenge and then homage from Germany in the form of monstrous repatriations and severe curtailment of all heavy industry - especially coal and steel. That "odorliberalism" was not a response to this liberalism danger but in fact to continue with the national socialism agenda of the coalition between state, labor and industrialist collectives - or "corporatism". That after the end of WW II, the only group of volks still left who provided the world with WW II were ensconced in the Bundesbank, and while the winners went after the more obvious war capability of Krupp, Messerschmidt, Bayer, IG Farben, and others - all those who sponsored and dealt with Speer - they left pretty well alone the financial arm of the German war machine, especially the Bundesbank. Most of the "bad" industrialist also survived WW II pretty well intact and Speer was not hung by piano wire, only jailed. The occupiers, facing the now aggressive USSR quickly returned Germany to almost the same industrial and financial structure it had before and during WW II.
Odorliberalism was the "banner" and is fascism - or "national socialism. Full stop.
The brilliant "good Germans" like Adenauer immediately countered the "odorliberalism" fascists by working closely with the Frenchman Jean Monnet and with, at that time USA support, used the Monnet Plan framing to dispense Marshall Plan funds and start the plan's execution with the various industry and defense and monetary groups that were the early precursors to the EZ, with the European Coal and Steal - the European Coal and Steel which effectively kept the Ruhr power base from the "odorliberalism" folks. This followed with the long line of basically CDU, Adenaur's party, controlling the German economy and occasion swings to the left. Keynes was well understood and the economic savior of Germany was to be integration and cooperation and eventually the "United States of Europe". Then the big problem was not Germany but French exceptionalism in the form of Gaullism, and UK nostalgia for when they could enter a room without the Yanks and matter. But with liberal French and UK support, and just common sense that "odorliberalism" was all fine and allowed, placated with nonsense about the DM, the Monnet Plan financed by the Marshall Plan was the way to go to lift Europe out of the ruins created by Germany, with many of the German war leadership still ensconced and position of power in the leading industrial executive offices, banking and insurance. Especially in the Bundesbank.
This led to where Kohl and Mitterrand joined hands at Verdun in 1984 and swore eternal fidelity of both countries to Europe and to each other - the hand holding was unscripted and moment of greatness for them both.
and culminated in 1991 both proposing a corps strength W European army that would coordinate with NATO, perhaps even be a member of NATO, but be another important institutional marker on the way to the "United States of Europe". That phrase, "the United States of Europe" were oft mentioned by Kohl and Mitterrand and the Socialist and CDU of Germany. Kohl, as late as only a few years ago, felt the USE was necessary to allow the full integration of a post-reunified Germany. Mitterrand felt this was the route so as to maintain French relevancy, to contain Germany and to offset the USA.
But at the same time Germany reunification occurred, the "odorliberal" croud in Germany surged ahead and it was "odorliberalism", nicely cleansed to talk about the pragmatic costs of absorbing the bankrupt East Germany and to address how Germany had become the "sick man of Europe". This was the primary platform of Schroder.
At the same time France, often to do with bizarre levels of corruption, went through chaotic change of government and the revival of the anti-USE Gaullist party.
As Schroder embraced "odorliberalism", he found a willing Gaullist party to team with. And also Schroeder found the German center of balance had swung several hundred miles East and the primary concern was not the USA, in anycase, but now Russia. There is also something strange of this focus on Russia, often the more important factor for foreign and international economic policy for Germany than the USA, so strange that Schroeder retires as a director in the inner sanctum of Putin's power base - Gazprom - and then even though the party of Kohl comes back with his so called protege Merkel, Merkel is never to say "United States of Europe" and is in more frequent contact with Putin than the USA or France. This eventually ruptured her relationship to Kohl to the point the great man
of Europe talks about what a naive barbarian Merkel is, in a book he authored forthcoming. He has, for history sake, disowned Merkel and finds her a traitor to the great German European dreams and she has adopted the Russian centric and "odorliberalism" of Schroeder. I strongly suspect that the impact of powerful legacy Stasi files now in Putin's hands transfixes Merkel and limits her ability to carry on the USE dream, she is compromised and has been co-opted by the neo-fascist of Germany.
Further more, Schroeder, using "odorliberalism", and carrying on with the shrewd conversion rate Kohl was able to secure for the Ostmark, or DDM to the the DM of basic use of 1:1 and then a still very rich 2:1 for substantial savings of blocks and then 3:1 for speculators. This dramatically cheapened the DM post 1990 as was considered a massive "give-away" to the East German people by the West Germans. But it was incredibly shrewd if Kohl had the Euro in mind. By cheapening the DM prior to the Euro, and than maintaining that relative cheapness, Germany entered the Euro at levels, 1.955 DM per EUR, bizarre in terms of any sort of comparison to productivity or purchasing power parity to the the rest of the to be EZ countries. The DM should entered the EUR at a much richer level, say 1.2 or 1.3. However the justification of the incredible rich conversion of the Ostmark to reunify Germany, and the large turmoil of the other reserve currencies in the 90s after the re-unification - such as Soros "raid" on Sterling - all masked this entering into the EUR at such a favorable term pretty well unnoticed.
It is interesting to note that the ideals of odorliberalism were ignored by all in reunification with East Germany, but then again that was under Kohl's watch. Schroeder, as soon as the DM absorbed the DDM, quickly made odorliberalism his platform for all things EZ, such as the ways and means of the ECB, the making of transfer payments taboo, and the insistence or at least taking the high grand in balanced budgets or parsimonious response to any stress in terms of deficit spending. This odorliberalism now not only swing control to the national capitalist-workers alliance of old, but also was used as a cudgel to coral the rest of the EZ to respond with maximum efficiency for Germany to the very cheap DM entry to the EUR.
And, it worked incredibly well, in the end hamstringing the peperipherals not allowing any remedy to imbalances but reduction in employment. And whenever either a federalist answer, reverting to the Monnet-Kohl-Mitterrand United States of Europe, with the ability of federalism to remedy gross imbalances by ways others than massive unemployment, or whenever the stressed economies try to seek remedy through fiscal deficits and spending, Germay howls the "odorliberalism" rant, now not just a German device to secure power for the corporatist elite via a pact of labor to industry, but "the way" that all of the EZ should adopt.
In short, Germany has moved from the greatness of Kohl's federal Europe to the neo-fascist economics, now called a much less frightful odorliberlism of Merkel.
So this is where I find a person as smart as Munchau disingenuous, perhaps. Maybe he is such an arrogant man that he thinks the lack of understanding Keynes and Friedman in Germany must mean they are crazily naive and ingorant. That they never ever even cracked open Keynes. That is of course nonsense. If there is one trait Germany has shown ever since Bismarck organized the modern state of Germany in 1871, it the ability of the elite in all forms, labor, industry, finance, and academia to conspire. To figure out a master plan for the master volk and then stick to it. That Germany should lead.
The USA is complicit in this Fourth Reich. As the EZ crisis blew out, various Washington DC agencies reached out to find out what was the problem, what was the reason of the crisis. It became apparent that the reason was Germany using the absence of EZ democracy in the strait jacket of a no-transfer remedy confederacy. The highest in the USA understand this and know well the role Germany is taking, their dominant powerful position in Europe, completely at odds of even a few years ago as professed by Kohl. That a 180 had taken place from the spirit of Adenauer back to the spirit of Hitler or Napoleon - take your pick. Bismarck always was clear that hegemon of all of Europe and econsraum was not for Germany. Hitler of course changed that, citing the national glory ("will") that is central to fascism. But the USA also realized that despite the shift to Putin, the USA controlled the area in the end, for Germany could proceed as it was with odorliberalism imposed upon all the EZ as long as Germany did not have to pay for security, the Euro Corp Kohl and Mitterrand envisioned, correctly, as required for the United States of Europe. And the USA realized that if the United States of Europe did form, it would have such a Euro Corp, that the USA must leave Europe, that the EZ crisis would vanish and a powerful state every bit the equal to the United States would appear. This country as a democracy would be a blessing for the USA, but what if old bad ways emerged of Napoleonic or Hitler type? So instead of calling Germany down from odious odorliberalism and their rape number II of Europe, the United States instead went great lengths to understand when do the unemployed youth of Spain, Portugal, Italy and Greece start civil war and insurrection. The results decided upon are not yet reached, so as to prevent the United States of Europe forming, odorliberalism is allowed to carry on an pummel Europe.
This ability to dominate Europe for the sake of provincial German interests was of course suppose to have been dashed with WW II. But Germany to my mind is showing it still is morally corrupt by selfishly and blindly and conveniently embracing ideology that suits German hegemony over all of Europe. Odorliberalism is simply this century's version of the current tract. Folks like Munchau are either innocently naive or complicit in this still obvious national characteristic of Germany. Germany must be curtailed and returned to the peace settlement of WW II, the Monnet Plan and in short order, the creation if the United States of Europe.