Monday, October 29, 2012

Merkel's real agenda: mugging the poor

Why has Angela Merkel cast herself as the empress of austerity?

The consensus among pundits seems to be that she is focused solely on her political career. To have any real hope of being re-elected next year, the pundits say, she cannot show mercy towards Greece.

Undoubtedly, there is some truth in the argument. But I'm not convinced it encapsulates the full story.

A clue to Merkel's real agenda can be found in a speech she gave to the College of Europe in Bruges during 2010. Opening the academic year at this elite institution, Merkel bragged of how she had persuaded German politicians to take "unusual and previously unimagined routes in order to help Greece and thus to ensure the stability of the eurozone as a whole". It was vital, she added, that the "rescue package" for Greece was accompanied by "ambitious reforms" in order to "insist that countries which caused such a crisis will have to take action themselves in the future".

Those few short lines are riddled with fallacies. The predatory lending of German banks was a far bigger cause of the crisis than public spending in Greece, Spain or Ireland. And Merkel has some chutzpah in claiming to "help" Greece, when she is destroying it.

Weakening welfare

Perhaps, though, it is her reference to "unusual and previously unimagined routes" that is most telling. Merkel contended that these steps were necessary to realise "the vision of a union that enjoys enduring success through a way of life and social model which unite competitive strength with social responsibility".

During the campaign leading to her election as chancellor in 2005, Merkel's economic advisor was Paul Kirchhof. An advocate of radical tax cuts, Kirchhof has been actively involved in the INSM, the initiative for a new social market economy. Financed by trade associations representing the metal and electronics industries, the INSM was set up in 2005 to push for a weakening of the welfare state.

Merkel's scope for implementing the policies favoured by the INSM was limited in her first term in office. She led a coalition with the Social Democrats, who were averse to Kirchhof's recommendations.

Circumstances were to change dramatically after she was re-elected in 2009. Not only was Merkel able to form a government with the right-wing Free Democrats, the troubles besetting the eurozone presented her with the chance to go down "unusual and previously unimagined routes".

As it happened, the routes had been "imagined" before then by the INSM and its kindred spirits at the Konrad Adenauer Stiftung (KAS), a "foundation" affiliated to Merkel's Christian Democrats. In November 2009, the KAS organised a conference with the grandiose title "60 years of social market economy: formation, development and perspectives of a peacemaking formula". The daunting 272-page report on the event's proceedings attributes the term "social market economy" to a 1946 paper by the economist and anthropologist Alfred-Müller Armack.

Pushing an open door

An attempt to achieve "seemingly conflicting objectives, namely economic freedom and social security", the concept has been described by KAS as a "new variant of neo-liberalism", an ideology which holds that the most important purpose of the state is to defend private property rights. A simpler way of summarising this thinking is: governments should hold back and let the rich get richer.

What is particularly striking about the KAS paper is that it presented the current economic crisis as an opportunity to "renew" the "principles and fundamental ideas" behind the social market economy. Far from confining this debate to Germany, it urged that the concept be applied globally to "reinvigorate the philosophical and economic standing of liberalism in general".

The KAS evidently feels like it is pushing an open door. Its publications emphasise that the Lisbon treaty commits the EU to develop a "competitive social market economy". As part of its proselytising, the KAS has produced a video where three good-looking flatmates explain the core ideas using fridge magnets. "Basic provisions, fair play, everybody is happy," one of them concludes.

The use of the word "social" is a form of sugar-coating for what amounts to a full frontal assault on hard-won rights. The INSM fulminates regularly against minimum wages and demands that health insurance be opened up to greater competition. This can only be interpreted as an attempt to make life more difficult for the poor and unemployed. In a decent society, every individual should be entitled to the same level of health care. The INSM wants to base the quality of medical service we receive on our ability to pay for it.

Merkel has also been reported to have obtained informal advice from Jeffrey Gedmin. A former big-wig of the American Enterprise Institute, Gedmin has spent much time trying to convince Europe to become more like the US. In a 2005 opinion piece for The Financial Times, he wrote about the "employed and unemployed alike happily indulging themselves" by sipping "over-priced café lattes". He mused about whether a changing economic situation might give "people the swift kick they apparently need".

If it's true that he was counselling Merkel, then she appears to have paid attention. Like a schoolyard bully, the chancellor has taken delight in kicking the weakest. The jobless and the elderly in Greece definitely did not cause the crisis she has blamed on their nation. Yet she keeps mugging them to put in place an extreme plan long in the making and dusted down when the time looked right.

•First published by New Europe, 28 October - 3 November 2012.

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