Wednesday, 30 January 2013

Brüning, Brüning and no end

Of course, Wolfgang Münchau was not the first to make the Brüning comparison. In fact, there have been lots lately. I don't want this blog to become 'Brüning central', but Albrecht Ritschl's Brüning comparison of last year merits a brief discussion. It's a good one with a detailed argument.

Ritschl's is a version of the 'Helbich Brüning': in order to meet the reparation obligations of the Young plan Brüning was obliged to impose budgetary discipline. The measures were unpopular because they were imposed by foreign powers and a result of the Versailles treaty. This played into the hands of radicals and, as Ritschl put it, 'we know how that ended'.

This is a valid point and in the current context it's certainly good to remind the German public of the political consequences that can result from financial diktats imposed by foreign powers. And also of the futility of such diktats from the creditors point of view. After much to-ing and fro-ing and much political damage done only very small amounts of reparation were ultimately paid.

However, I think we need to ask how important the reparations really were. Let's consider a counterfactual: what if all reparations had been cancelled before Brüning came to power? Would that have prevented his rise to power as an unelected chancellor and the implementation of his ill fated austerity programme? Probably not. There were strong pressures to implement austerity that were entirely independent from the reparation issue. The mainstream of contemporary economists believed that excessive wage increases were threatening capital accumulation (see this post) and employer lobbies were pushing hard for a non-parliamentary government with a deflationary agenda (see this post).

It is important to remember the extent to which the dynamics that led to Brüning's policies were home-made because it also sheds light on the current situation. At the moment the international dimension of Germany-plus-some-allies pushing austerity on the European periphery is important and results in critical political tensions. But the Montis of Europe are not only puppets of Angela Merkel. They usually genuinely believe in the policies they implement. This is similar to Brüning was by no means only following orders from Paris and London but whose own economic and political views led him to do 'the necessary'.

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