A Post-Merkel Post-Mortem

Hans-Werner Sinn

Project Syndicate, September 29th, 2021, The Japan Times.

However one regards the outgoing German chancellor's 16 years in office, her departure marks the end of a political era. But, ultimately, rather than trying to steer events and public opinion, she too often allowed herself to be carried by them.

After 16 years in office, Angela Merkel is stepping aside as Germany’s chancellor. While other countries’ presidents and prime ministers have come and gone, Merkel has remained in power for four electoral terms, generally enjoying high public-approval ratings. But with her Christian Democratic Union (CDU) potentially heading into opposition following Germany’s September 26 federal election, how should we evaluate her long reign?

As the daughter of a Protestant clergyman who had relocated from West Germany to communist East Germany out of personal conviction, Merkel enjoyed privileges there. She was allowed to attend university in East Germany, participated in exchange visits to Moscow, and belonged to her country’s communist youth elite (FDJ) until the age of 35, when the Berlin Wall came down. When the West German CDU established itself in Germany’s new eastern states ahead of the 1990 federal election, then-Chancellor Helmut Kohl recruited the canny young politician to the party. Merkel almost immediately rose to high office, and eventually became party leader. Following the 2005 election, she replaced Gerhard Schröder as chancellor. Although Merkel did not grow up in a market economy, she ran against Schröder as an economic liberal and pledged to expand the labor-market reforms he had pushed through. Due to the high wage-replacement incomes provided by its social security system, Germany in the early 2000s had the highest unemployment rate among low-skilled workers of all industrialized countries and, intermittently, the lowest growth rates in the European Union. Many considered it to be the “sick man of Europe.” Schröder’s reforms were a huge success because they enabled the country to regain its economic health – ironically, under Merkel – and reduced unemployment in all segments of the labor market.

But Merkel herself did not contribute to these economic achievements, because she decided not to follow through on her election promises after noticing that they were not playing well in the media. So, whereas Schröder had reduced the quasi-minimum wage implied by wage-replacement incomes, Merkel introduced a legal minimum wage. Over the years, Merkel increasingly turned away from free-market policies, instead adopting the traditional positions of the Social Democratic Party (SPD) and sympathizing with the Green party’s neo-dirigisme – positions that were closer to her mindset. This enabled her to win over left-wing voters, but damaged the core brand of the CDU, which had stood for the federal republic’s free-market orientation since World War II. So, while Merkel pushed the SPD to the left and kept the Greens in check, she vacated so much space on the right that a new political party – the far-right Alternative for Germany (AfD) – emerged to take important votes away from the CDU. To be sure, Merkel was a master at balancing various political positions in both domestic and foreign affairs. She cooperated deftly with opinion leaders and consulted weekly with pollsters. More than any of her postwar predecessors, she dispensed with any policy of her own and instead aligned herself with the views of the mainstream media. But while she managed to translate the favor she thus curried into success at the ballot box, economic rationality and what the German sociologist Max Weber called the “ethic of responsibility” often fell by the wayside.

For example, Merkel responded to the media hysteria triggered by the 2011 Fukushima disaster in Japan by deciding to phase out nuclear power, even though it should have been obvious to her that without nuclear energy, Germany wouldn’t have a credible strategy for fighting climate change. And because she has since been forced by the EU and the Greens to agree to Germany phasing out all fossil-fuel sources as well, she leaves behind a country that is heading for a major . Likewise, when Europe in 2015 faced the prospect of a large influx of refugees from the Middle East, she allowed herself to be moved by media images and opted for an open-border policy that greatly roiled the Eastern Europeans and the British. When then-UK Prime Minister David Cameron asked Merkel to support his suggestions for limiting social migration in Europe in order to help keep the United Kingdom in the EU, she refused. The flood of refugees subsequently helped to tip the scales in favor of the UK’s 2016 Brexit vote.

Like all postwar German chancellors, Merkel deserves praise for seeking reconciliation with France. She forged amicable relationships with all four French presidents with whom she dealt. But the carte blanche that she gave the European Central Bank for its policy of bailing out international investors – at France’s insistence – was problematic. It allowed the ECB to circumvent the Maastricht Treaty, which prohibits monetization of national debt. The ECB’s measures overrode the market discipline – higher interest rates – needed to prevent highly indebted countries from borrowing excessively. If rising national-debt burdens bring about higher inflation in the coming years, Merkel will be partly to blame.

Lastly, because of its low birth rate, Germany – like many European countries – faces substantial demographic problems that pose a serious risk to the stability of its public pension system. Merkel was always aware of this problem, but was unwilling to pursue substantial reforms that the mainstream found uncomfortable. The one potential exception was her refugee policy. However one regards Merkel’s record in office, her departure marks the end of a political era. But the ultimate assessment of her remarkable political endurance will be mixed, because, rather than trying to steer events and public opinion, she too often allowed herself to be carried by them.

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