Sunday 19 February 2017

The Teutonic Embrace

Bernhard von Bülow (1849-1929), who served as Reich Chancellor from 1900 to 1909, gave his famous speech on Germany’s “place in the sun” when he was foreign minister. His vision of Germany as a colonial power became the ideological foundation of German naval expansion, which began shortly after that.

German industrious zeal over the last hundred years despite the experiences of two world wars had never deserted the German sense of achievement.  German dominance in Europe, until recently was thought a thing of the past, but recent economic activities raised eyebrows in many political circles and suspicions abounds that the resurgence of German hegemony is casting its shadows over Europe yet again. This essay will focus on the historical evidence that contributed to this thinking and the evidence we have today.  This piece will attempt to demonstrate that with careful monitoring by Berlin of German fiscal and banking policies, Germany has protected its currency behind the Euro where German capital is dominating Europe and profits from the misery of the austerity measures it helps to impose.

Von Bulow though he presented himself as the guardian of Bismarck’s heritage was no Bismarck.  In 1865 serving as Chancellor under Kaiser Wilhelm I, it was the genius of Count Otto von Bismarck with the aid of unifying force; Prussian military power and success in the war against France in 1870–71 brought together the Deutsche Zollverein a federation of 25 states.  Then he went on by alliances to achieve for the German industrial powerhouse, political and economic superiority in Europe. Then came, Weltpolitik, the Wilhelmine Keiser foreign relations idea was to transform Germany into a global power through aggressive diplomacy, the acquisition of overseas colonies, and the development of a large navy. The origins of the policy can be traced to a Reichstag debate on 6 December 1897 during which German Foreign Secretary Bernhard von Bülow stated, "...We wish to throw no one into the shade, but we demand our own place in the sun."

As before, at the turn of the Twentieth Century, modernization and globalisation for Germany so today means domination.  Chancellor Otto von Bismarck seized colonies for Germany in the mid-1880s to exploit class antagonisms created by industrialisation and to build a strong foundation of support for the new Reich so is the present Chancellor of Germany Angela Dorothea Merkel attempts to control European currency for continued industrial expansion unhindered.  As before German leaders operating from The Reichstag thought they can dictate terms to a prostate enemy so today German Bundestag dictated austerity measures against an almost bankrupt Greece. 

Mitteleuropa; a concept for middle European economic union under German hegemony, was the brainchild of Friedrich Naumann in 1915. Naumann’s concept envisaged economic and cultural cooperation of the region’s inhabitants in the formation of a free trade zone.  Mitteleuropa denotes both a direction in German economic and political thought and the title of the most popular wartime (WWI) utopia.  It was a replacement to the slowing down of imperialist colonial expansion to provide alternative markets for continued German industrial development.  It was also a divisive policy providing an impetus to the nationalist movements among the ethnic structures in Europe to look at Germany for leadership.  Soon enough early into the Great War in 1916, it took on imperialist colours in the shape of territorial expansion starting with Poland.  Mitteleuropa prioritised the displacement of Poles and Jews to resettle Russian Germans in the newly acquired areas fusing initial economic ideas with the ideology of the German Lebensraum (Living Space).

Fast forward to 1933 we find Hitler’s growing fascination with the United States and increasing efficiency.  Its success, together with concern that Europe in general, and Germany in particular, would be relegated to an inferior status primarily because they lacked American dynamism and the massive internal market provided by the North American landmass. Germany’s expansion to the east to gain Lebensraum would provide a source of raw materials and create an internal market of American proportions while building an upwardly mobile workforce educated enough to achieve that aim. The Nazi views were “that a superior people (German) always have the right to conquer and to own the land of an inferior people.”

 And so we see the dominance of Germany in Europe once again in 2017 taking hold using the Euro as a tool for subjugating its ‘partners’ but within its entrails a mechanism for global domination. The new American administration has already indicated that it is preparing for global economic and currency war. The White House claimed that Germany is using its money to “exploit” its neighbours, particularly southern European neighbours and the United States. The White House evidently thinks of the European Union and the monetary union that established the euro currency, as essentially a mechanism to protect German interests and extend German power.  It holds German capital domination of Europe responsible, in the event, it has placed in its crosshairs the Deutsch Mark. 

To find out what got us here we take a quick short look at recent currency history.  Before the emergence of the Euro, we had the European Monetary System (EMS).  In the 1970's the American Dollar was weakening with much of world capital going to Germany which propped up the Deutsche mark exerting inflationary pressure on the German economy, weakening scopes for German exports.  Linking the Deutsch mark within a union of other European currencies hedged its currency from extreme evaluations either way. In a sense, the Euro is akin to a European German currency standing in opposition to the Dollar, an international currency underpinned by unlimited printing.   Since wage inflation in Germany was much lower than the rest of Europe, it stood to gain most than other European countries.  Distrusting the Dollar was no longer an option but imperative, so releasing the European currencies from a monetarist straitjacket was essential to minimise the volatility.  While protecting its industrial powerhouse, the Euro today maintains Germany’s grasp for European economic primacy where it had failed a century earlier. 

What this means, of course, Germany is able to build massive exports and current account surpluses. In recent years this has become of great concern to the American administration since they believed that such German under consuming of goods and services placed a brake on the world economy as a whole.  The IMF estimates Germany’s 2017 surplus as 8.1 percent of GDP with a policy of keeping the Euro low, in an export-driven economy, is no more than keeping the Deutsche mark lower than it should be.  The new American administration is distraught because it can not get at the Deutsch mark since it is fenced in by the Euro.   
Here is the catch.  Germany, easily biggest economy in the euro area keeps building up its reserves through its exponential exports drive and growth, holding steadfast to the Euro from disintegrating while through a system of money transfers it props up failing economies.  The German central bank, The Bundesbank today holds almost €1 trillion euros (see chart) of claims against the troubled economies of Greece, Ireland, Italy and other EU ‘partners’ in what is termed TARGET2 system of claims. At the same time, such unrelenting financing has become too big for it to go backwards if that happen claims on German banks can cause a severe breakdown to German economy posing real threats to the German industrial powerhouse. However, the position is firmly grounded by politicians and academics, who say that if the European Central Bank (ECB) interferes it would be an illegal monetary financing that violates German law. Germany today enjoys an economic utopia chiefly of its own making the rest of Europe could only envy.  If Angela approves then, Europe endorses this is how it is going thus far, but could Mittleuropa last?

For the one thing, the drums of the currency war are not about to miss a beat, and the Dollar is far too arrogant to let an upstart such as the Euro to spearhead world economies. The second point, I believe to be far more damaging is the drum roll of history. Envy, jealousy or the pressures of austerity has produced resentment and claims for past wrongs need to be justified.  Germany’s insistence that loans from Berlin…must be repaid in full – and with interest” – says the German chancellor, Angela Merkel.   A Christian Democrat, no less, as are the president of the European Commission, Jean-Claude Juncker.  Such monolithic sounding statements stands in stark contrast to the American and other European countries approach to wave away the hefty war reparation payments imposed on Germany after the two world wars. With the modern dystopia, of a North - South divide in Europe, I don’t see a way out for the troubled economies of the southern region.  Without easing the austerity measures, the disparities of income will widen, and the resulting anger will prove to be the primary cause that will eventually see the fragmentation of the European Union.  


Unknown said...

Dear Fred: Thank you for posting this. I think you may be on to something that I confess had escaped me, an American, given our recent electin and the person we and the Kremlin elected. I agree with you there is a historical pattern to Germany's national behavior and the reemergence of (perhaps never buried) Germany's insatiable appetite toward economic and political dominance in Europe.

The one flaw in the ointment, to quote an Americanism, Fred, is America's insistance that its European allies in Nato start paying more toward European defence as well as the recent trend toward putting and end to the free trade the Western poweres have prosletized for the past 40 years.

As country after country gas seeba very reak drio in the standard of living of its citizens the temptation to protect its industries from cheap foriegn goods is simply too tempting to there electorates. In Europe, unification has seen a division between the industrial north and agricultural (former socialist) south.

Even accross thousands of kilometers and one ocean, we in America, noted the Tuetonic bullying Greece experieced during its financial troubles a few years ago. I am certain the experience was noted by Spain, Italy, and the newest members of the EU, the former socialist states in the East.

It came as no surprize that Germany set the conditions for Greece's bailout, shoving France aside and leading to a possible "Frexit" if the National Front wins a majority in the Luxemboug Palace as seems likely in a few months.

I predict, such seccession from the EU will put Germany in an extremely vulnerable position as Europe and the West rebuild their economies and return to an internally focused society as they reject imports and put up tarriffs and other protectionist measures.

This will cause huge worker dislocation in Germany and indeed much of the world, forcing her to face shifting realities with few allies. The result, as we have seen during the 20th century, speaks for itself.

I do not believe protectionism works, mind you, Fred. But neither does German style effiency if it means its neighbors have very real fears, and some not so real ones. of a Germanic ruled EU.

If that happens as it appears to be happening the entire concept of a European Union will be at risk.

OUFI said...

Hi Gary, thank you for your response.

From a distance of just over a century, a clear pattern emerges in view in the consistent nature of German hegemonic intentions towards Europe. For the Germanic race, it seems Imperialism runs along their grain and historically one can go even earlier than Bismarck right back to the formation of the Prussian presence by tracing the dynasty of House of Hohenzollern.

That said Imperialism throughout the centuries has translated as galvanising force generating a thrill for power. Despite the British claim to the transfer and instilling of knowledge, civilisation and Christianity. Nations' drive for greatness is to overpower their neighbours through territorial gains (USSR/Russia), economic strength and Race ( Germany), Trade (British) religion and Racial (Ottomans) and or as in the case of the United States Consumerism.

The difference with the Germans is that they go about it in the rather less subtle way. Thier robust nature and their warlike attitude eventually give their game away.

We don't hear much of Imperialism these days but I believe it is alive and kicking it never seems to leave the human psyche