BUSINESS WATCH

A sobering German experiment

Peter C. Newman December 10 1984
BUSINESS WATCH

A sobering German experiment

Peter C. Newman December 10 1984

A sobering German experiment

BUSINESS WATCH

Peter C. Newman

The one government that has spent most of the past year following (almost to the letter) the Mulroney-Wilson formula for economic recovery has been Chancellor Helmut Kohl’s administration in West Germany.

The Bonn conservatives (CDU) have dramatically reduced federal budgetary deficits and slashed public spending. They really did wrestle inflation to the ground and institute a tough but pragmatic monetary policy, and they have kept wage settlements below cost-ofliving increases. As a result, corporate profits and capital expenditures by private sector investors are both showing healthy increases.

But unemployment, at nearly eight per cent, is double 1980 levels, and there is no improvement in sight. This is particularly discouraging in a country where full employment had become so taken for granted that nearly three million “guest workers” had to be imported from the poorer countries of southern Europe.

Because of the jobless army of more than two million, domestic demand is falling, and it is only the continued health of German export sales that is maintaining overall growth. The country’s gross national product is expected to inch up three per cent in 1985, with inflation down to an insignificant 1.5 per cent. The Council of Economic Experts in Bonn predicts that during the next 12 months 300,000 new jobs will be created, but that the increase will be more than offset by the slower pace of the steel and construction industries, resulting in a net increase of about 100,000 to the unemployment rolls.

These are disturbing figures when viewed against the policy objectives of the Mulroney government. What if the Canadian economy follows the Progressive Conservative prescription, and we still fail to nudge our unemployment totals below 11 per cent? This is particularly relevant in light of the Bonn government’s emphasis on productivity and research—two of Mulroney’s major priorities.

During a brief tour of West Germany and many conversations with some of the private and public sector officials who make the important decisions, I was told that fully 2.8 per cent of the gross national product is spent on original research and development—an annual expenditure of $25 billion. That’s significantly more than in Canada, but nevertheless the economy remains stagnant and little more than a standing start has been made in the restructuring that will be required to provide longterm solutions.

Most German businessmen are much too busy making and spending money to worry very much about politics or social problems. The country’s new aristocracy finds its psychic roots not in misty legends of the Weimar Republic or the

horrors of the Third Reich but simply in the possession of goods and money. They hog the inner lanes of the autobahns, impatiently blinking the headlights of their Mercedes to push past the chugging Volkswagens.

One school of thought among these privileged burghers is that the only way to solve the problems of the German economy permanently would be to reunite its two parts, severed at the end of the Second World War. Ever since Willy Brandt’s Ostpolitik (“Eastern policy” for improving relations with Moscow), this notion has won increasing support on both sides of the electrified barriers now separating the two Germanys.

“The final answer to unification,” says Klaus Bolling, a leading member of the Social Democratic Party who served as Bonn’s official representative in East Berlin for three years, “will ultimately depend on the perceived interests of the Soviet Union and the United States. We are not interested in any policy of confrontation. As long as Ronald Reagan talks about reducing the Soviet Union to a regional power and harps on the idea of Communism as an evil empire, that will be reflected in the permanent division of the two German states. We need the kind of new approach being championed by Helmut Schmidt and Pierre Trudeau which recognizes the Soviet Union’s legitimate desire for its own security.”

Bolling and his colleagues regard Erich Honecker as a patriot attempting to use his extremely limited leeway to strengthen East Germany’s (the GDR’s) lifelines with the West. The recent Moscow-inspired cancellation of his intended visit to Bonn was a sign that he had gone too far. The two countries are meeting on how to reduce acid rain, and the GDR has become a “secret” member of the European Community by shipping some of its manufactured products to West Germany, where they qualify as Common Market goods.

History aside, the greatest forces for German unification are Dallas and Dynasty (renamed Der Denver-Clan). Every Tuesday and Wednesday night TV viewers on both sides of the border watch the soap operas in such numbers that those two days of the week ha,ve been renamed Dallas for Dienstag (Tuesday) and Denver for Mittwoch (Wednesday). Three-quarters of East German homes can tune into West German television to catch the capitalist antics of J.R. Ewing and/or Krystle Carrington. Linda Evans has become the West’s most effective secret propaganda weapon.

It’s not just the plot lines of Dallas and Dynasty that turn on the GDR viewers. The ads they see, with West Germans walking into showrooms to choose their new limousines, are in sharp contrast to their own situation—waiting periods of 36 months for inferior rattletraps.

Because of its artificial division Germany is no model for Canada to follow, but many lessons on how not to revive the economy can be learned from that country’s current economic woes.