There is a very nice article on the German economists written by Jacob Soll and published in the NY Times. It describes the disconnect between German economists and basically the rest of the world. Here is one main passage:
Clemens Fuest, of the Center for European Economic Research, who has advised Mr. Schäuble, kept reciting numbers about Greek debt and growth, and said the Greeks had failed at every level over the past several years to manage their debt. He believed they should simply be thrown out of the eurozone. Henrik Enderlein, of the pro-European Jacques Delors Institute, said that Greece should stay in the eurozone, but only if it applied more austerity and better management. Daniel Gros, director of the Center for European Policy Studies, theorized that Greek debt and economic woes could be countered only with better export numbers.
As the author points out, nobody sees Germany as being responsible. Not for creating the euro zone institutions in the first place, not for imposing austerity policies that killed the Greek economy. These policies were not part of the euro zone treaties, they were imposed because some “experts” thought that they would be helpful. When people argue against the “Germany as the victim”-economics put forward by the above mentioned professors, they are seen as left-wing, Keynesian pro-Russia/anti-German idiots. This is a group, which my experience from reading their stuff tells me, is ideological to the core.
Here are the main wrong beliefs of the typical German economist as I see them:
- Economics is a morality play
- demand does not matter (forgotten lesson: spending creates incomes and not spending destroys income)
- the market “works” (full employment independent from macroeconomic policy)
Having successfully erased other schools of economic thought from German universities, “die Herren Professoren” are very self-assured and haven’t taken critique seriously for decades. Without any intellectual competition, the outcome had to be expected. The author of the NYT article writes: “When I mentioned that many saw austerity as a new version of the 1919 Versailles Treaty that would bring in a future “chaotic and unreliable” government in Greece — the very kind that Mr. Enderlein warned about in an essay in The Guardian — they countered that they were furious about being compared to Nazis and terrorists.” Let me just add that this does not surprise me. (With this bunch, it is hyperinflation that scares them.)
It is an unpleasant coincidence that when macroeconomic crisis hits the euro zone the largest country does not have a functioning discipline to rely on. Greece had about 25% unemployment in March 2015, with youth unemployment at 49.5%. What “Europe” will stand for in Greece and other countries will be completely different from the generations before. Europe will have to reinvent itself based on her traditional values or risk a return to the Middle Ages. The NYT article ends with the author pointing out that countries that see themselves as victims – like Germany – make no good leaders. I would like to add that countries are not the actors, but politicians are. Political change could change this assessment very quickly.