A survey on behalf of the Sueddeutsche Zeitung indicates that German
economists are much more American in their thinking than is presumed –
with a rising trend.
By now an increasing number of economists believe that debt reduction
strategies work better when the economy is doing well – a view taken by
US economists like Paul Krugman and Joseph Stiglitz
The majority of German economists support the European Central Bank in
buying government bonds against the open resistence of the Bundesbank
and leading orthodox economists in the country. Rising interest rates
are not seen as a good instrument to fight against speculative bubbles.
Whenever asked to comment on US American economists Wolfgang Schäuble
promptly reacts with a sour tone. The feeling is reciprocal. The Federal
Minister of Finance has not learned anything from the crisis, complains
Paul Krugman – hence, the Nobel laureate seems to be representative of
the majority of his guild from the other side of the Atlantic and the
English Channel: The Americans versus the Germans; the Germans versus
the British.
Since the beginning of the financial crisis the trenches are steadily
being dug deeper, so it seems. There we find the Anglo-Americans who are
always in favor of providing cheap money to bring the economy out of
the crisis. Here we find the keepers of strict monetary and fiscal
policies, defending the Minister of Finance, who pin their hopes on
higher interest rates and rapid cuts in the budget: those are experts
like the Bundesbank president Jens Weidmann, the Director of the Munich
based Ifo Institute HansWerner Sinn and the head of the official German
Council of Economic Experts Christoph Schmidt.
Do German economists think like the German government?
This is what the cliché purports. The reality is different: at least
there is no such clear-cut opinion among experts in Germany. This is the
result of a survey of more than 1000 German-speaking economists.
According to this survey many supposedly typical German positions are
becoming increasingly controversial in the country – and the judgmental
opinions of some of the star experts are no longer capable of winning a
majority. German professors are much more American in their thinking
than might be expected. The tendency is even rising, as shows the major
survey conducted by the Internet portal
WirtschaftsWunder in cooperation with the German economics association (Verein für Socialpolitik).
For months there has been a hail of criticism by US economists
regarding the alleged German mania to urge countries in crisis to make
hard budget cuts and sharp tax increases – be reminded of the emotional
impact of the hot-button word
austerity. The accusation, dismissed stoically by the German
federal government and others, is shared by at least one in five German
colleagues. And another fifth of the German-speaking economists say that
the reservations expressed overseas are warranted; that however, Europe
had no other choice. Only 12.6% believe the official German policy to
be correct in all respects.
Only five years ago in the previous survey just under 18% of German
economists found that governments could manage to fundamentally
stabilize the economy by spending money to a greater or lesser extent
depending on the economy and by going into debt to some extent. Since
then the percentage of those holding this view has doubled to 36%. More
than half of the experts believe that boosting the economy makes sense,
at least in exceptional cases like the global recession after the Lehman
crash in 2008. Not even one in ten today is strictly opposed to this
approach. In the first survey in 2006 – before the onset of the
financial crisis – almost one in three believed that straightening out
the economy would be a futile endeavor. At that time the share of
supporters amounted to little over 12%.
Almost 70% agree with Krugman
What has clearly increased among German economists is the proportion of
those who say that government debts can better be reduced at times when
the economy is doing reasonably well, as Krugman and others have
vehemently pointed out. In the meantime nearly 70% of the German
economists agree with this position; in 2010 the rate was just over 60%.
That too does not correspond well with the rigid Swabian doctrine
according to which spending must be reduced and taxes increased
regardless how well or badly the economy is developing. A burning issue –
precisely this issue has been dividing the experts these very weeks
when it comes to saving Greece. Is it better to first make severe cuts,
or should the economy rather be stimulated, albeit as an accompanying
measure, through providing cash flows?
Even more striking is the wide gap between the German-American clichés
and the survey with regard to the crisis strategies of the central
bankers. In the last years Germany's directors of the central bank have
time and again opposed to reducing interest rates or to purchasing
government bonds whereas US American and British colleagues have done
since the onset of the financial crisis. Axel Weber und Juergen Stark
even resigned in protest over this matter.
Even in this question the majority of German economists adopt a
pragmatic American approach. In the survey around two-thirds said that
the monetary watchdogs have to intervene as the lender of last resort in
order to prevent a panicky sell-off in markets. One in five even
considers this measure to be a good one without reservation; almost half
do so with some reservation. In the minority at 27% the sympathizers of
the Bundesbank reject such a measure completely.
1002 Researchers
Only few researchers are well known to the public as is the case with
Ifo Director Hans-Werner Sinn or Jens Weidmann, the Bundesbank. What
about the rest of them? What do Germany's economists think about those
ongoing major controversies in the discipline, about the financial
crisis and about their guild's waning reputation? Some 1002
German-speaking economists gave answers to these questions. The survey
was created and evaluated by the Internet portal
WirtschaftsWunder in cooperation with the German Economists Association (
Deutsche Ökonomenvereinigung), the Association for Social Policy (
Verein für Socialpolitik) and was based on two previous surveys conducted by the
Financial Times Germany
in the years 2006 and 2010. These had in turn also included some
questions employed in a 1982 German survey and some questions from
comparable surveys conducted in the United States. Between April 28 and
May 27 responses came from almost one third of the association members,
who primarily work at universities, at research institutes and at banks.
The same applies to the highly sensitive question whether the
purchasing of government bonds by the European Central Bank (ECB) is
compatible with its mandate. Critics like the Ifo Director Sinn have
been ranting about this for months. Here, too, the orthodox appear to
have no majority. Only 36% of Sinn's colleagues think that ECB Director
Mario Draghi should not even have started purchasing government
securities. More than half of them agree with the opinion of leading US
economists: This was an appropriate decision – even though the central
bankers have, according to the opinion of every third respondent, in
formal terms exceeded their mandate. The end justifies the means.
The survey's result on this issue seems to be indicative. This week the
European Court declared the ECB intervention to be legal. The next
decision is up to the Federal Constitutional Court. Until the present
the large majority of the highest German judges have, in their hearings,
consulted economists with a proximity to the Ifo director and his
negative stance. According to the survey, the categorical
NO in Germany appears to be a minority position today. At the
hearing in 2013 there was only one person defending the ECB: Marcel
Fratzscher, Director of the German Institute for Economic Research (
DIW) in Berlin.
But why is there now this American shift in German thinking?
Even with regard to one of the Americans' favorite topics, German
economic professionals do not come across as German as one might expect
according to the cliché: Germany's major export surpluses. For years,
economists like Krugman and Joseph Stiglitz have complained about the
magnitude of German exports compared to their purchases in other
countries - in 2014 they reached a record high of €220b - instead of
providing stronger boosts to the economy and increasing imports. This
criticism has been refuted by the federal government and the Council of
Experts with an air of annoyance. According to the survey only a solid
fifth of German experts deem the trade surplus to be unproblematic.
About 30% admit that it poses a problem, but that this problem needs to
be solved primarily by those who export too much and import too little:
the deficit countries.
One in three believes, as many US colleagues do, that this imbalance is
problematic and that it is the federal government's responsibility to
help cut back the surplus, for example by ensuring that people are able
to spend more of their money which then will lead to more imports –
resulting in a waning imports shortage. Nearly 40% of the German
economists say that domestic impetuses should be strengthened on a
permanent basis.
The question remains why Germany's economists are so much more
Anglo-American than they are believed to be. Of course, reality often
differs from the appearance of things. Only a few economists actually
are known to a broader public, and they are the ones shaping the image.
Another explanation is that America still sets the standards
academically. Anyone with career ambitions is expected to publish their
articles in US journals. This is the reason why professors frequently
relocate, at least temporarily. Only a few years ago, in 2010, nearly
45% of the respondents stated in the survey that they had never worked
abroad. Since then the rate has dropped by nearly ten percentage points.
Meanwhile two-thirds of the scholars have left the home country of
regulation for a longer period of time.
Whoever has spent time in the USA seems to have come to appreciate one
particular advantage: a professor of economics will find it much easier
to go into politics and then return into academic life in the States
than in Germany due to its complicated public services law. More than
half wish that this would also be possible here. Of course, the odds are
that our Minister of Finance will not appreciate such an extent of
American influences.
Copyright: Sueddeutsche Zeitung Digitale Medien GmbH / Sueddeutsche Zeitung GmbH
