Saturday, March 10, 2012

German Anti_Keynesianism

Simon Wren-Lewis is puzzled by Germans.

I comment.

In support of not just " the inflation of the Weimar Republic, or the Depression that followed" I note that the Great Depression followed after 6 years of stability (and the post WWI inflation lasted only 5 years with a definite pause in the middle). Only with very distant hindsight do they seem linked. Also, long after the hyperinflation and before Nazism Bruning seemed rather devoutly anti-Keynesian (not that he necessarily knew who Keynes was). There seems to be a problem with cause and effect. It seems more reasonable to say that German anti Keynesianism caused Nazism than the other way around.

The unemployment figures don't seem so mysterious to me. A natural candidate explanation is the German job sharing program which allows firms to put workers on part-time, pay them part of their former wage, and have the state pay the rest. Such workers are not counted even as partly unemployed. I's sure there is a heated debate about how important this program was. But it does deserve a mention.

I'd also note that, back in 2009, German policy makers argued that Germany didn't need discretionary stimulus, because their generous social welfare system was a more potent automatic stabilizer than anything in the USA. The figure also implicitly contrasts Germany's failure to stimulate with severe austerity in other OECD countries. The Keynesian guess (your guess for example) is that Germany should be doing rather better than Greece, Ireland, Portugal, Italy, Spain or (Cameron's) UK. You are not puzzled by German overall economic performance, nor should you be.

Ignoring talk and focusing on dollars and Euros, one might ask what anti Keynesian Germany ?

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