Elections in Bavaria: Huh.

Bavaria also had elections this weekend. (I posted about the campaign last week.)

Surprise: the Christian Social Union, which has ruled Bavaria without a break since forever, lost big. For the first time since 1962, they won’t have enough seats in Parliament to rule alone; they’ll have to take on a partner, most likely the FDP.

The big winners were the small parties — the FDP, Free Voters, Left/Linke, and Greens. Die Linke dididn’t quite reach the 5% threshold for getting seats, but they put on an impressive show anyway, jumping from nothing to 4.3%… not bad for a bunch of ex-commies plus Oskar Lafontaine, running in a rich, conservative Catholic state.

So what does it mean? Continue reading

Blonde on blonde: State elections in Bavaria

So we have state elections here in Bavaria this week.

Yeah, I know. Bear with me, I’m going somewhere with this.

There are political signs here and there around our small town, but not as many as you’d expect. A surprisingly high number are for the nationalist, anti-immigration Republican Party. I say “surprisingly” because the Republicans only got between 2% and 3% of the vote in the last election. On the other hand, that’s compared to less than 1% nationwide, so I guess they’re focussing their efforts in a state where they have some small chance.

I suppose I should talk about how the Landtag is dominated by the CSU, and has been forever, and about the internal power struggles there, and what it’s like living in a de facto one party state. But, eh, don’t feel like it. So instead I’m going to talk about blonde children in campaign ads. Continue reading

Pay no attention to the huge machine tool behind..

This fascinating post, part of a series on Chinese manufacturing that’s been picked up by BoingBoing, seems to be missing one very significant point. Yes, it’s all very cool; precision-machining billets of cold steel into incredibly perfect moulds that will be used to injection-mould the Chumby, blasting off the rough edges with an electron gun, then polishing them by hand.

But there’s nothing Chinese about that honking gurt machine tool; it’s a Röders TEC RP800, as in Röders GmbH, a 210-year old family metalworking firm from Soltau that boasts it’s both a leader in high-speed routing (the kind with steel bits, not digital ones..) and also a manufacturer of kitchenware favoured by the Bauhaus. They started making the machine tools for their own use, but developed it as a line of business after inventing a guidance mechanism that permitted them to work around 100 times faster. They also make moulds in China on a line of their own machines, in order to deliver to manufacturing clients there quickly; a curious invertion of the recent trend to bring textile manufacturing back closer to European or North American markets, in order to turn around new designs faster.

The Mittelstand, clearly, endures: even if the idea of handing over the company to the 29-year old heir might take some swallowing, Warsteiner beer probably won’t.

Review: The Wages of Destruction, Adam Tooze

Adam Tooze, who (it says here) is a senior lecturer at Jesus College, Cambridge, has a book out; The Wages of Destruction: The Making and Breaking of the Nazi Economy. It is getting some very good reviews, and this one will be no different. Tooze’s thesis is that the Nazi German economy was a more powerful factor in many decisions taken by the leadership than hitherto assumed, that its structural weaknesses were determining in the failure of Nazism, and that Nazism itself can be understood as an effort to escape them by a combination of will and technology. The first is fairly original, and certainly controversial, the second is hardly controversial (although it is surprising that it still needs restating; the image of impregnable fascist might dies hard), and the third is both new and highly controversial.

Tooze begins with a discussion of Germany’s economic problems and relative place in the world whilst passing through the Depression. He provides an excellent account of Stresemann’s policy in terms of a special relationship with the United States, importing US capital to develop German industry and help cover the reparations bills to France and Britain. At the same time, he argues, closer economic ties to the US were also a means of forcing the US government to press the European Allies over the reparations issue; France and the UK were insisting on the cash in order to cover their war debts to the US, so being as close as possible to the US meant that Germany could count on US support in a crisis, on the principle of being too big to fail.

America in German eyes is a main theme of the book, and a little-remembered sub-theme of Nazi discourse more generally. Not only were leading Nazis concerned about the potential power of the US, they both idealised what they took to be the unique efficiency of 1920s US industry, and demonised what they took to be the decadence and miscegenation of US society. It was the era of Josephine Baker, Al Capone, and Henry Ford, and all three icons were lapped up by Weimar culture, just as US bankers (Jew York, verdammtnochmal!) lapped up Weimar industry’s short-term paper. Stresemann and his fellow liberals, and the Social Democrats, thought the answer to America was to preserve the international political and trading structure; perhaps with a European community in the far future.

The Nazi response was to shake the structure until it fell down; the economic history of the 30s in Germany is one of continuous foreign exchange crises, mitigated by a succession of increasingly inconsistent expedients. Hjalmar Schacht, as Reichsbank president, is the figure most associated with this – it is perhaps worth noting that he was himself half-American, but didn’t use his other two Christian names (Horace Greeley) very often. A telling detail is that, as each crisis passed, the Bank and the ministries of finance and economics convinced themselves that this time, things would get back to normal. Memos for a return to multilateral trading, a relaxation of administrative controls, and a slowdown in armaments spending would be drawn up, and immediately ignored as Hitler, and the various groups either working towards the Führer or trying to take advantage for their interests, concluded that their survival of the crisis confirmed the rightness of their course.

According to Tooze, who provides a considerable quantity of statistical evidence for this claim, the work-creation programme created little work; after all, actual spending on the autobahns and public works projects was not all that great, and the total demand for construction workers was limited. Fritz Todt’s new reinforced concrete building methods were capital-intensive and required specific skills, rather than hordes of labourers. What got Germany back to work was rearmament, and Tooze argues that much of what is thought of as civilian investment was actually more like disguised military investment, or investment in war-supplying industry. It is well worth pointing out here that Tooze is excellent on the corporate world of Nazi Germany, and especially the fast-growing influence and power of the top technical executives of big industry (especially chemicals and aeronautical engineering), who made up something like an independent technocratic lobby in their own right. J.K. Galbraith’s technostructure comes to mind; this may have been the most malevolent and evil manifestation of it ever. Even the big coal and steel men, who generally went along, were frequently horrified by Nazi policy; not so Junkers, BASF, Bosch or IG-Farben, who were not only profiting from arms sales but benefiting from massive state capital investment into the latest technologies in their research divisions.

As a rule, steel and forex were the limiting factors, and hence swung conservative; chemistry and engineering were convinced that all could be achieved with enough budget, will, and steel. But it wasn’t their job to find the steel or the sterling, so their ambitions ballooned to deranged proportions. By the Munich crisis in 1938, Germany was nearly bankrupt – after a summer of currency crisis, the Reichsbank was able to get away a succession of huge bond issues in the relief afterglow, but ran into a wall when the market refused the fourth loan. Only by paying suppliers 40 per cent of their contract prices in tax credits could the Reich roll over its short-term loans; at the same time, the vast consumption of steel by the war industries meant that the State Railways were struggling to keep going. The forex question even put a crimp in anti-Semitism; right up to the war, the Reichsbank was required by its charter to convert anyone emigrating from Germany’s marks into foreign exchange. And even though the total wealth that could be seized from the Jews was risibly tiny, it far exceeded the available cash. Tooze argues that one of the motivations of Kristallnacht was to scare them into leaving without their money; even that was a problem, as so much plate glass could only come from Belgium, which meant it had to be paid for in hard currency and cash on the nail.

By 1939, the Reichsbank was reduced to commissioning secret studies to estimate the mark’s exchange rate; the economists who carried them out concluded that the concept was now meaningless in the light of dozens of mutually incompatible side-deals with Germany’s trading partners. Germany paid 72 per cent over the world price for Peruvian cotton, and 10 per cent over market for petrol from the same source; 63 per cent over market for Dutch butter, but Danish butter was paid for at the world market price (there must have been plenty of butter moving from Denmark to Holland…).

The upshot was that the decision for war, and then the decision to take the offensive in the West, and finally the decision to take the offensive into Russia, were at each step driven by a logic of economic bootstrapping. War, and the consequent loss of world trade, had a serious initial impact on the German economy; inflation threatened to burst out of control, there was a constant struggle between interests over short-supply assets, and a key feature of the German economy caused deep discontent. This was uneven development; Tooze argues strongly that Germany’s apparent economic might concealed a long tail of poverty, not just in the hard-arse Mietskasernen of the working class but also among the peasantry.

Peasants were a key Nazi constituency, as well as occupying an important place in ideology; unfortunately this image of virtue didn’t translate into grain all that well. Agricultural productivity was poor, with a toxic cocktail of absentee landlord estates and tiny plots that barely supported their tenants. Most of the Nazi solutions to this started off with the idea of a class of farmers with secure tenure of farms big enough to make a good living, but wanted the excess peasants to stay on the land for reasons of mythology. Ominously, the answer was to put them on someone else’s land. Here, the appalling figure of Herbert Backe, State Secretary and later Minister of Agriculture, stands out; Backe wrote a PhD thesis years before entering office on the Russian grain business, in which he explained that the superior people without space must get rid of the Russians in order to secure the Ukraine’s surplus and settle enough of their urban working class to overcome the unrooted, degenerate tendencies created by the modern nomads, that is to say the Jews.

Hilariously, the examiners threw this manifesto for genocide back in his face; terrifyingly, he had it reprinted and issued as part of Wehrmacht formation commanders’ briefing material for the invasion of Russia. Tooze makes a good case that Backe’s elevation to the Ministry in early 1942 was an important catalyst in the decision to launch Operation REINHARD, the extermination of the European Jews; it is well-known that one force encouraging ghettoisation the year before had been other Nazi proconsuls’ tendency to herd their own race enemies into the Government-General of Poland, which was slated to be reduced in population. However, one hitherto underestimated fact is that Backe’s revised grain allocations at the same time foresaw a dramatic change; rather than being a net importer of food, Hans Frank’s fief was to become a major exporter.

The reason why this was so important is simple; although the conquest of western Europe turned a very bad economic position into a tolerable one with considerable potential, Europe was far more globalised than the Nazi economists assumed. Oil is the canonical example, but Europe also imported a lot of animal feed, and also British coal. Problems with transport, and the planners’ inability to come up with a settlement of coal supply between the mighty interest groups concerned, exacerbated the feed problem. As agricultural productivity fell, so did productivity down the mines; it probably would have done anyway, French communists not being likely to bend their backs any harder for German fascists, but hunger is enough to explain the droop in coal output per hour. The Foreign Ministry put forward schemes for a European community, but in the prevailing climate of hubris this never stood a chance; the government far preferred a more exploitative option, the centralised clearing system under which exporters to Germany were paid by their own central bank, which then charged an account with the Reichsbank. German exports in the other direction were meant to be set off against this; however, the Germans simply ran a permanent overdraft.

This permitted a substantial theft of goods, services and assets; it also created a powerful incentive not to produce. The upshot was a European economy operating massively below capacity and a German economy running red hot, with a continent-wide shortage of key inputs. Soviet trade, under the Molotov-Ribbentrop pact, matched part of the difference, but the Soviet government demanded its price, especially in terms of technology transfer. Trade with allies and neutrals, meanwhile, had the serious disadvantage from a Nazi viewpoint that it was actually trade; it required matching exports, which for political reasons were a priority claim on resources.

Hence, the crisis; with the occupied territories only a marginal benefit, and much capital investment not yet producing, Germany was faced with the rapid spin-up of US production. Where to go for the next bootstrap, before US industrial power took effect? Russia, clearly. Tooze’s book may be a final slam-dunk demonstration for the “functionalist” view of Nazism, dominant since the 1980s, which argues that the regime’s internal politics, shared assumptions, and the incremental radicalisation caused by a succession of crises drove Germany into war and genocide, rather than a clear rationalist design. Independent decisions, taken for different reasons, mutually reinforced each other.

This is no longer controversial, but there is much in the book that is. For example, Tooze vigorously criticises the common idea that Germany never attained the same level of civilian mobilisation as the UK, that the Nazi government “protected” civilian living standards at the expense of the war effort and the occupied up to the declaration of “Total War” in 1943. In fact, he argues, there was very little slack in the economy; if anything was being held back from war production, it was because the early war years were years of massive capital investment. This investment, he claims, explains the surge in armaments production from 1942 onwards that is usually ascribed to Albert Speer. It was the pre-war dynamic between the Luftwaffe, the Führer, and the industrial technocrats writ stupefyingly large, combined with a new emphasis on the entrepreneur as leader. (Of course they were not entrepreneurs, but technocrats managing huge state-funded projects; they thought of themselves as Unternehmer, though, and Nazi propaganda lionised them as such.)

Some of this was wasted, of course. There was the fabulous Flugmotorenwerke Ostmark, a scheme to build a gigantic aero-engine plant in Austria to match the output of Ford’s new plant next to River Rouge (it could as well have been to match Rolls-Royce’s at Barnoldswick, but it had to be American); it never produced more than 198 engines a month compared with a target of 1,000. But in the same industry, Daimler-Benz was able to upgrade one of its own facilities from 300 DB605 engines a month to 1,200, at a fraction of the cost. (The UK war economy had a similar experience with the state-financed shadow factories; Rover and Vauxhall never really got the hand of aero-engines, especially not the jet program, but things improved immensely when the whole thing was slung to the real experts at Rolls-Royce.) And who knew that the Buna synthetic-rubber plant next to Auschwitz still produces about 5 per cent of the world’s synthetic rubber? The installation, never completed during the war, was first robbed of the fancier chemical engineering bits by the Russians and then rehabilitated by the Poles; even if there is no Hitler in uns selbst, there may be some Hitler in your tyres.

So there should be no surprise, then, that the German war economy pulled out of the Moscow crisis in the winter of 1941; it was the capital formation whatdunnit. Tooze has ample statistical data to underpin this, but I am less sure of his conclusions regarding another of the classic controversies. In nearly all British accounts of the second world war, the author takes sides regarding one or more of the morality, effectiveness, and wisdom of the RAF’s strategic bomber offensive against Germany; it’s an identity-creating decision for any British historian. AJP Taylor is the leader for the opposition; he argued, on the basis of J.K. Galbraith and George Ball’s US Strategic Bombing Survey results, that not only was it wrong, but it was also incredibly wasteful, sucking up almost one-quarter of UK industrial production and failing to seriously interrupt the German war effort. Still less did it deliver the crushing blows to morale the airpower theorists promised. And no branch of service offered its members a shorter life expectancy.

Tooze argues, against Galbraith, that the bombing was indeed effective. Specifically, he cites the “Battle of the Ruhr” in the spring of 1943 as essentially being enough to stop the growth of German armaments production in its tracks; and he has a graph to support this, with a little explosion at the inflection point (presumably there isn’t a carbonised ironworker’s corpse in MS Excel’s clipart file). He also quotes various people’s reactions to the destruction of Hamburg with a slightly distasteful enjoyment, hence the rather harsh finish to my last sentence. In fact, he goes as far as to conflate the Ruhr and Hamburg, although Hamburg can’t have been the key point because it’s not a steelworks town and it never has been. And anyway, the bombers didn’t win the war in 1943, nor 1944 or 1945 for that matter. What went wrong? Tooze argues that the mistake was Bomber Command’s – although he doesn’t say so. But it was Bomber, and particularly “Bomber” Harris, who shifted the target from the Ruhr to Hamburg, and then on to Berlin. Harris and his staff didn’t want to disrupt industry, after all; they wanted to “dehouse the German working class”, which they believed would lead to revolution or at least chaos. So this counterfactual would have required a different Bomber Command; one that didn’t believe in airpower theory, and therefore probably wouldn’t have existed. This is not mentioned, even though Tooze repeatedly and approvingly quotes the phrase “dehousing”.

More importantly, he argues that RAF Bomber Command could simply have kept bombing the Ruhr at the rate of May 1943 indefinitely; but there was a reason why the Battle of Berlin was called off at the end of February 1944. Quite simply, the Nachtjäger had won and the RAF’s loss rate was running permanently well above the rates its infrastructure was scaled to support. Even the Ruhr battle had an aggregate loss rate of 4.71 per cent; the Oberhausen raid on June 14th hit 8.37 per cent, and nowhere could be more of a Ruhr target than Oberhausen. The RAF Air Historical Branch thought that “Bomber Command was approaching perilously close to the unbearable, or at any rate the insupportable, sustained casualty rate during the Battle of the Ruhr”; it’s worth remembering that each cohort of crews faced that average rate every time they went out, for a tour of thirty missions. It wasn’t a question of finding enough aircraft, but enough people. The figure of 30 was meant to represent the point at which the individual reached a 50/50 risk of death, and once the loss rate went past a critical figure this datum line, as it was known, moved closer and closer. And the rate went progressively higher over time; the Berlin battle had an average of 6.44 per cent, the last Berlin raid 8.88 per cent, the raid on Nürnberg six days later a knockout 11.94 per cent.

Something changed, and it wasn’t just targeting; the Luftwaffe completely redesigned its tactics, command and control, and equipment between the spring of 1943 and the autumn. The tightly-controlled “Zahme Sau” system was replaced by the free-rein “Wilde Sau”; new airborne radar meant that the night fighters began coming out halfway across the North Sea to meet the bomber stream. Of course, this could just be the sort of operational history that economic historians don’t bother with; but you would think that costs are a pretty important concept in economic history. Further, Bomber Command competed for resources primarily with the U-boat war, with RAF Coastal Command; but there’s nothing here about this.

Tooze returns to the bombers, later on, as the bombers returned later on; apparently, in the autumn of 1944 “the war-winning airfleet was now ready”. It seems rather late; and, we read, “the correlation between the area bombing of Germany’s cities and the collapse of its war production was loose at best…the wanton destruction of German cities could disrupt production but it could not bring it to a complete standstill.” In between these sentences we learn that far from submitting to the “operational stranglehold” claimed for the Ruhr in 1943, the Krupp Gußstahlfabrik in Essen kept going through the bombs until its electricity supply was wrecked in October, 1944; war-winning, indeed. Further, he argues that it was actually the massive attacks on the railways in this period that did it; which isn’t the same thing as bombing steelworks two years earlier.

But despite this, there is no doubt whatsoever that this is a major contribution. (It’s notable that the sections that deal with bombing are the least well-referenced in the book.) In conclusion, what stands out is that the Third Reich was fascinated by the United States, perhaps even more than the Soviet Union; Hitler spoke of the Volga as Germany’s Mississippi, and various SS Schreibtischtäter of treating its inhabitants as “Red Indians”. The size of the proposed empire was frequently compared to Canada or Australia. It is clear that a major motivating factor for many leading Nazis was a wish to escape from an increasingly integrated world economy, and a matching desire to have a Grossraumwirtschaft to match the people seen as controlling the world economy; Tooze’s book leaves the disturbing sensation that this is us.

Gay creationists in government

Hessia’s education minister Karin Wolff has recently drawn attention for proposing that school biology lessons include the biblical creation story. Now she has drawn attention by outing herself as gay. All too many politicians pander to creationists; and some out themselves. But it’s pretty rare, I’d think, that the same politician does both.

Wolff will have needed a bit of courage to come out; but probably not too much. There are some homophobes in Germany, and I suppose Wolff’s conservative Christian Democratic Union is where they’d feel most at home. But even CDU people, for the most part, won’t be much bothered. (It’s public knowledge, for example, that the CDU mayor of Hamburg, Ole von Beust, is gay; the Union wouldn’t dream of sidelining him. His title is misleading, by the way. Because Hamburg is both a city and a federal state, von Beust is no mere mayor but head of a state government.)

By coming out, perhaps Wolff hoped to draw attention away from the creationism flap. The Frankfurter Rundschau, by contrast, suggests she outed herself as a tactic against intra-party opponents — by announcing she is a lesbian, she makes it harder for enemies within the CDU to criticise her without appearing bigots. Well, ‘maybe’ on both counts. But perhaps Wolff simply thought, ‘This is who I am, I’m not ashamed of it and I’m not going to hide any more.’ If that’s the case, good for her.

She still needs her ears boxed over the creationism thing, mind you.

A (positive) German shock?

Eurozone Watch has two articles about Germany and Italy that offer support for an optimistic view of the European economy. For a start, Sebastian Dullein argues that a comparison of Germany today and the US after the early 90s recession shows that Germany might be on the brink of a productivity surge. Dullein argues that labour productivity growth at the moment is being depressed by the re-absorption of the long-term unemployed, which also happened in the US in the early 90s. He quotes a figure of 7.6 per cent for productivity change (per employee, rather than per hour worked) in the metalworking industries (in Germany, a term that covers most of the industrial sector), which is positively stellar – after all, the US didn’t pass 2 per cent per-hour until 1998, well into the boom.

He also criticises Wolfgang Munchau for arguing (in essence) that there had been no structural reforms that accounted for productivity growth, and therefore that there was no growth. At this, I think I heard J.K. Galbraith’s ghost chuckle into his martini – it is indeed a fine example of all that is wrong with economics as a discipline that one can argue that we must all reform because there is a crisis, the evidence of that crisis being that one’s reforms have not been adopted.

An alternative argument would be that there was not all that much wrong with German firms in the first place. It is suggested that R&D spending is too low, but Dullein argues that it’s picking up. And anyway, their products can’t be that bad, as the rest of the world wants to buy German exports more than anything else. He also notes that there has been a wave of capital investment since 2002.

This possible German shock is already reverberating interestingly. Italy, for example, is experiencing better economic times, with growth picking up and strong industrial order books – especially on orders from France and Germany for capital goods. The growth is despite an increase in the tax take, with the result that the government is likely to have a chunk of change on hand. The OECD and the EU Commission would rather like to see that used to cut the monster public debt, still running at over 100 per cent of GDP. But the political situation might make that unlikely.

That might be the good news, though. When wasn’t the Italian government up to its eyes in debt? And it’s almost traditional that political turmoil in Italy is accompanied by good economic news. The difficult bit, though, is that Italian inflation is running somewhat slower than German – this implies, of course, an improvement in the terms-of-trade. Probably, Italy has done some internal disinflation, being unable to devalue – but this implies that wages have suffered relatively. The question is how to redistribute the benefit of the German shock without killing the golden goose.

Funny, it doesn’t look like Kansas…

Though creationism does rear its ugly head from time to time in Europe, it is largely a fringe phenomenon. Unlike in America, even most religious Europeans accept evolution as an obvious fact, viewing the biblical creation stories (yes, there’s more than one) as, at most, poetic metaphor. So it’s easy for us over here to indulge in a superior smile when we observe the antics of those primitive American bible-thumpers.

At least in Germany, we shouldn’t be so quick to smile. Continue reading