The competition for which nation can have the worst post-2008 economic policy is a stiff one. The United States has literally left free money on the table for years. Argentina is monetizing its debt, and inflation is a serious problem as a result.
But the victor in these failure sweepstakes is undoubtedly Germany, with its till-death-do-us-part love of austerity and tight money. German political and economic pressure has created a continent-wide depression that is now worse than that of the 1930s. Though Germany has managed to avoid the worst of the crisis itself, it is also just barely staying out of recession, and letting its own infrastructure rot for no reason. And now German policymakers are moving to quash the only tentative, hesitant action to fight the depression that is on deck.
These actions are not only grotesquely immoral and wasteful, they directly call to mind Germany's greatest failure as a society: the rise of Adolf Hitler. Nazism was birthed from the economic calamity of the Great Depression, and German elites are repeating the mistakes that paved the way for Hitler's rise.
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So what is under discussion? The European Central Bank, only about 6 years too late, is considering some monetary stimulus in the form of quantitative easing. As Steve Randy Waldman argues, QE is a crappy policy that is nonetheless much, much better than nothing. Fiscal stimulus through public investment and/or transfers is better. But as the Eurozone shows today, no stimulus in the wake of a financial crisis is a straight road to depression. Unemployment is at 11.5 percent across the Eurozone, and still at Great Depression levels in Spain and Greece. Those numbers have been improving with glacial slowness. On current trends, Spain might reach full employment in 25 years — and that's if the Eurozone manages to avoid a triple-dip recession, which looks increasingly unlikely.
But Jen Weidmann, the head of the Bundesbank (Germany's central bank) thinks QE is too risky:
There has perhaps never been such a perfect encapsulation of the blinkered philistine pig-ignorance that has characterized German economic policy since 2008. A focus on debt as the only important economic indicator. Utter lack of concern with a world-historical depression. An anti-democratic desire to stuff objectively useless neoliberal "reforms" down the throats of nations that wouldn't stand for it otherwise. And blithely ignoring the evidence that QE, in fact, would probably do at least some good. (Hey, just compare the U.S. to Europe.)
Germany has been down this road before. Most casual observers of the EU will tell you that Germany will never support QE because it's deathly afraid of the kind of inflation that enabled the Nazis to swoop in and assume power. The only problem is, that myth is off by 6 years or so.
Germany had licked hyperinflation by 1924. The Great Depression didn't strike the Weimar Republic until late 1929 — and when it did, it was deflation, not inflation, that shocked the German economy. That year, newly-appointed Chancellor Heinrich Brüning implemented a savage austerity policy by decree. It was a massive failure. Unemployment soared, eventually topping 30 percent by 1932, and the Nazi party leapt to first place in the elections. Though there were many other causes behind the rise of Nazism — the complicity of German conservatism being a big one — the abject failure of democratic institutions to provide employment for the masses was the single most important root factor. Mass unemployment discredited the Weimar regime and democracy itself, dramatically enhancing the political viability of Hitler.
The major economic difference between then and now, of course, is that the Eurozone depression is mostly happening outside of Germany. Things might change if unemployment starts to skyrocket inside that country — though by that time it might be too late for the European project. And as Wolfgang Münchau details, practically the entire German political spectrum is in thrall to some crackpot economic doctrine called "ordoliberalism" that nobody else thinks is remotely credible.
But one thing is clear: fascism is back on the march across Europe. Nearly full-fledged fascists have the run of Hungary, and have made alarming strides in Greece, while the extreme right is gaining strength in France and the UK. If Germany wants to avoid creating the next fascist dictator, it could start by putting fellow Eurozone citizens back to work.
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