SODOM & GOMORRAH: The German chancellor Angela Merkel is one of the few world leaders who isn’t being completely idiotic about the financial and economic crisis brewing in Europe. Much to the ire of others, Merkel has resisted political pressure to adopt a more inflationary policy because she feels it would be bad for Europe. The Economist has recently joined her list of critics.
In this week’s Charlemagne, the British paper argues that Merkel is misreading history. The hyperinflation under the Weimar Republic left a deep scar on the German psyche; the moral that is preached is that hyperinflation was the result of an insane policy and that economic chaos created political instability and a second world war. A sound monetary policy is key to avoiding a similar outcome.
The Economist argues that hyperinflation didn’t lead to Hitler’s rise to power, but depression and mass unemployment did. Hitler’s Keynesian-like policy of building freeways and rearming Germany solved the problem, so the story goes.
There are two flaws with this argument.
First, it’s a little disturbing that such an intelligent paper can, without cringing, point out that Hitler independently came up with a Keynesian theory of economic stimulus and that modern Germany, Europe, and the rest of the world should follow suit because it worked. There’s a problem when your policy recommendations follow Hitler’s lead. I would also argue that the wanton destruction unleashed by World War II and the Holocaust probably resulted in a net decrease in Germany’s economic position when all was said and done. But even if it did work out, I think that cheaper pharmaceuticals do not justify using slave test subjects to produce them. I know controlling the cost of health care has always been a concern, but there’s more to politics than money.
Second, and in line with the argument that there’s more to it than money, I find the claim that economic conditions created fascism is very shallow. The existence of even one martyr proves that humans are not a couple of missed meals away from genocide. The existence of a human history that included economic hardship without a holocaust proves this as well.
Other factors create insane ideologies. I suspect that modern society’s shallow insistence that money is at the root of all action probably isn’t helping.
On the economic side, Merkel is correct to fight inflation. It’s not a choice between inflation and depression; inflation creates depression. Neither inflation nor depression create fascism, though, but that doesn’t take away from the fact that inflation and depression are painful.