Thursday, 24 January 2013

Monti and the 'Weisbrod-Brüning'

There is a third way in which historians look at Brüning, which is mainly based on the work of Bernd Weisbrod. Let's see how similar Monti is to the 'Weisbrod Brüning'.

In a nutshell, Weisbrod's argument goes like this: the socio-economic order of the Weimar Republic was founded on a historical compromise between economic elites and trade unions. In the middle of the revolutionary chaos of 1918, employer associations and unions signed the so called Stinnes-Legien agreement. Employers accepted the trade unions as legitimate representatives of workers, agreed to a system of collective bargaining about wages, accepted a system of elected representatives in companies and conceded that the eight hour day was to become the norm. This agreement marked an epochal change and was a huge success for the unions. However, it was not a love match. Employers signed because a the agreement seemed preferable to the nationalisation of their companies by gun-toting bolsheviks. As soon as the situation had calmed down, employers tried their best to get out of the agreement and/or water down its content. This often developed into an attack not only on specific provisions of the agreement, but on the political foundations of the state that was built on the foundations of the Stinnes-Legien agreement. Many on the employer side saw the Weimar Republic as a half-socialist  'trade union state' that needed to die if free enterprise was to live. Undermining the power of this state and specifically removing the social democrats (SPD) from government was therefore a main objective. Employers wanted a government formed of bourgeois parties that was willing and able to roll back the power of the unions and social legislation. However, even if they overcame internal division the bourgeois parties were never able to muster enough votes to form a government. The only way forward was therefore a government without parliamentary support that pushed through a reactionary economic agenda with the help of presidential decrees. The first government of this type was Brüning's. And although he duly did what he had been called for, he quickly fell out of favor with employer associations because he still relied on parliamentary toleration by the SPD. The rest is, well, history...

How does the 'Weisbrod Brüning' compare with Monti? There are some interesting parallels. The debt problem in Italy has a different history from that in most other GIPSIs (Greece, Italy, Portugal, Spain, Ireland). Public finances in the PSIs (Portugal, Spain, Ireland) were in good shape until recently, when they had to bail out their banks. But in Italy, as in Greece, public debt has been run up over decades in the post war period. In Italy mainly since the early 70s. In this period, expenditure for the welfare state increased rapidly, but taxation did not keep up. This was in large part due to the political context. Italy was the only western country--together with Chile--in which an election victory of the communist party was a real possibility. Left wing terrorism added to the political pressure. However, while the christian democratic governments of the time were forced to expand welfare provisions, they were not willing to go against the interests of their constituents and tax businesses and higher incomes according to expenditure. Like the Weimar Republic, post-war Italy was in part founded on a socio-economic compromise that one side the political spectrum only accepted out of fear. Ever since there have been attempts to wiggle out of this accord and the mountain of public debt is the most visible manifestation of these attempts.

However, since the early 1990s the communist party has unraveled in Italy and left-wing terrorism does not post a serious threat anymore. Direct attacks on the historical compromise on which the Italian welfare state was founded are now possible in a way that they were not before. In Weimar Germany, a non-parliamentary government, led by a liberal economist was rolled out to roll back the 'trade union state'. The parallels to the current situation in Italy are evident.

I think, looking at the Monti-Brüning comparison in this way is quite enlightening. But I doubt that Münchau had the 'Weisbrod Brüning' in mind when he wrote his piece.

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