Constraining Germany. Distributional Conflicts, Discursive Depoliticization and Insulation from Change in Post-Crisis German Economic Policy

This paper maps growing pressures on Germany to switch to accommodative economic policies and reduce its destabilizing balance-of-payments surplus – and investigates how its policymakers insulated themselves from these pressures. Germany’s saving-investment imbalance engender distributional conflicts on three levels. First, wage restraint lead to domestic income redistribution from workers (who consume a larger share) to firms (who save a larger share). Second, on the Eurozone’s level, unfettered German capital outflows contributed to the crisis, but the adjustment burden was shifted onto debtor countries. Policy change in Germany remained a ‘hidden’ alternative for the periphery forced to choose between unacceptable euro-exit and self-defeating austerity. Third, excess German savings had deflationary effects on the global level, further depressing already weak demand, exacerbating liquidity traps of trading partners. The paper contributes to the literature by identifying a specific German mode of ‘discursive depoliticization’, one of the themes highlighted by the workshop proposal. It analyzes elite-level discourse and media narratives to find evidence for the abovementioned distributional conflicts: criticism arising from adversely affected actors on all levels, countered with a discursive depoliticization strategy rendering Germany’s surplus a natural, unalterable market outcome. Constraints from markets and international financial institutions are inherently asymmetrical – cannot curb creditors’ excess lending, only debtors’ excess borrowing – sealing the ‘no alternative’ discourse. European coordination could solve this deadlock, but the EU, although taking steps in the direction, proved unable to constrain its strongest member. Credible ‘re-politicization’ may come from two other sources, however: diplomatic pressure from trading partners or electoral pressure from domestic constituents. But domestic resistance of trade unions and opposition parties is weakened by German export competitiveness itself: even with excess savings, Germany avoided high unemployment throughout the crisis by relying on foreign demand. In a demand-constrained global economy, this is righteously criticized as a beggar-thy-neighbor strategy.