Paul Krugman: Bad Behavior in Europe is Coming from Germany

December 8th, 2014
in Op Ed

by Dirk Ehnts, Econoblog101

Just to let you know that Paul Krugman has in last Friday's column (Being Bad Europeans) joined the ranks of those arguing that Germany's low wage policies - Hartz IV and whatnot - are the major cause of the euro zone disaster:

I'm not denying that the Greek government behaved irresponsibly before the crisis, or that Italy has a big problem with stagnating productivity. But Greece is a small country whose fiscal mess is unique, while Italy's long-run problems aren't the source of Europe's deflationary downdraft. If you try to identify countries whose policies were way out of line before the crisis and have hurt Europe since the crisis, and that refuse to learn from experience, everything points to Germany as the worst actor.

Follow up:

Well done, Mr Krugman! The German economists, nevertheless, are still in denial. Hans-Werner Sinn blames the TARGET2 payment system, others warn of moral hazard and government debt as morally bad, and still other created the party "Alternative für Deutschland", which has given Germany its most non-extremist right-wing party. Last year, when former German chancellor Gerhard Schröder appeared in front of the German economics association's annual meeting, he got a round of standing ovations.

Germany - and Europe - are finding it very difficult to get their act together intellectually. Scientific advice has lost to loyalty once and again, and the social sphere has led to self-confirmation by closing the ranks and getting most of mainstream journalism to uncritically repeat talking points instead of fulfilling the duty of the watchdog. Let me end this with a quote from Karl Popper to highlight that there are European intellectual traditions which are clearly worth reviving:

  • If we are uncritical we shall always find what we want: we shall look for, and find, confirmations, and we shall look away from, and not see, whatever might be dangerous to our pet theories. In this way it is only too easy to obtain what appears to be overwhelming evidence in favor of a theory which, if approached critically, would have been refuted.
    • The Poverty of Historicism (1957) Ch. 29 The Unity of Method

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