Sara Moore, Author of How Hitler Came To Power comments on:
‘Will Keynes be buried once and for all’
by Mark Littlewood Director General of the Institute of Economic Affairs
11 July 2011
Sara Moore, Author of How Hitler Came To Power on 4 August
I am a historian. I have therefore only read the Economic Consequences of the Peace and Keynes’s plea for Germany to be given a smaller war reparations bill to pay under the new Young Plan reparations agreement of 1929. However, Wikepedia tells me that Keynes’s General Theory asserts that a market economy tends naturally to restore itself to full employment after temporary shocks.
I suppose that Keynes is referring to an open market economy in his General Theory. In the Great Depression strong Germany had a manipulated economy. In 1930 Chancellor Brüning stated his intention to increase taxes and lower wages in a bid to rid Germany of war reparations and debt. As Germany was so strong all its neighbours were subjected to deflation too, which was only abandoned after reparations bills were abandoned and Hitler came to power (defrauding all Germany’s former trading partners in his rush to full employment.)
No-one seems to know about Germany’s deliberate policy of deflation in the Great Depression. This is worrying as Germany’s new aim is to balance its budget by 2015. No-one has suggested that Germany has any political motives for its present zeal for saving but as Germany has used deflation for political ends before we are justified in asking: ‘Why now?’
Michael Petek on 5 August 2011
I looked at the Wikepedia entry myself a couple of days ago and I don’t remember that comment …. Don’t be too hard on the Germans, though – thrift is as much a national characteristic as the disposition to hard work.
Anonymous on 8 August 2011
On the contrary, I feel every sympathy for the German lower middle classes, whose income has till recently been squeezed.
In the Great Depression German wages were reduced and taxes hiked while the German Reichsbank was sitting on 40% cover for every bank note in circulation.
Outsiders had no means of knowing how rich the Reichsbank’s was so Germany was able to use its citizens misery in its propaganda campaign against paying its dues.
There is no modern equivalence for such drastic deflation. However, according to data from destatis.de, Germany had over 12% unemployment in January 2005 and again in April 2006. Many Germans are, therefore, still poor and have scant sympathy with over-borrowed Southern Europe.
But that does not mean that Germany as a country is poor. In today’s more open society outsiders may have more of an inkling as to whether the German Bundesbank has enough money to tide over Southern European countries, such as Greece and Portugal – and even Spain and Italy – until they get their spending under control.
However, whether it has enough money to bail out the whole of Southern Europe or not, it is still using its deluded citizens in its campaign against payments until Southern Europe meets its requirements. After all if its recalcitrance leads to a another economic crisis (as it did in 1931) the hedge funds, the ratings agencies and the bankers will take the blame!