Joe Nocera has been a welcome addition to the New York Times op-ed page since his start there as a regular some months ago. On Tuesday he wrote another fine column, this one (“Germany Cuts Off Its Nose”) on why the current German leadership is on a path to do what he thinks, in retrospect, will look completely insane––not to mention counterproductive for Germany's own interests. Germany needs to bail out Europe’s insolvent euro zone economies, he argues. It should have done it with Greece when the problem was still small, but it had better do it now lest the euro zone itself collapse. He writes: “Don't they realize that the collapse of the euro zone––unthinkable year ago; perhaps inevitable now––will hurt Germany much more than Greece?”
The Germans don’t have a lot of good choices right now, but basically Nocera is right. The Germans need to do for the European Union now what the U.S. government did for the U.S. economy after September 2008 by setting up the TARP program. Just as we had to hold our nose then and do some disagreeable things in the interest of a larger good, so do the Germans now—and perhaps they can sort out the underlying problems later, more effectively, at any rate, that we have yet done on this side of the Atlantic. What is ever more unusual and hence appreciated (at least by me) is the fact that Nocera uses economic history, in this case mainly from the interwar period, to bolster his argument.
I won't repeat that argument in detail––anyone can read it for himself––but I will mention that Nocera's basic argument sounded loudly in Berlin yesterday thanks to a speech by the Polish Foreign Minister, Radek Sikorski. (Constance Steltzenmuller offers a good and sympathetic description of it in Transatlantic Trends––well worth reading.) Yet Sikorski could not under the circumstances (and Steltzenmuller did not for reasons of her own) try to explain the source of German reluctance to stand forth and lead Europe out of its crisis, as only a large, stable and wealthy Germany today can do. Nocera, on the other hand, did name the source, but he unfortunately botched its interpretation.
Nocera points out that Germany's reluctance to bail out Europe's “Club Med”, or PIIGS, countries is based on a sense of violated virtue. It's unfair, Germans think, to tease moral hazard by enabling profligate and irresponsible behavior in Portugal, Ireland, Italy, Greece, Spain and other laggard countries. (France and Belgium are rarely mentioned in this group, but that may be only for the time being, one fears.) Nocera adds that the reaction to an earlier column about the need to reduce principal on underwater mortgages here in the United States, necessary to get the economy going again in everyone's interest, was overwhelmingly negative based on the same kind of sentiment: It's not fair, his critics asserted, for people who acted irresponsibly to be bailed out, while those who acted virtuously get stuck with the bill.
All true, but Nocera jumps the track by setting up a false dichotomy between morality and pragmatism. He writes that we need to “stop obsessing about what is fair. . . . The only thing that should matter is what works.” This is a false opposition because it confuses a superficial appreciation of morality with a more sophisticated, fully reasoned version. What “works” can be, and even to a non-utilitarianist usually is, very moral indeed if in the longer run it saves an entire society from needless rack and ruin.
The real dilemma here is how to define what works in which longer run, for the longer run, if you think about it, is not one undifferentiated, amorphous blob of time stretched out before us. German financial and political elites are not completely off-base in arguing that making other members of the euro zone raise themselves up to northern European “best practice” is not just “moral” but is also what will truly “work” best in the longer long run. As many members of these elites see it, that’s the only way to save the euro in perpetuity and pave the way to closer economic and political union—assuming for a moment one thinks that even possible in the absence of a European demos, or any near-term prospect of one….but that is another story. But the EU will never get to the longer run to test the proposition of a demos-less union if the whole thing goes down the tubes now—that’s the proximate point Nocera is making, it seems to me.
The dilemma then becomes clear: What’s best for the mid-long run, so to speak, works at cross-purposes with what’s best for the longer-long run. For the former, one must discount moral hazard in order to survive to fight another day; for the latter, discounting moral hazard puts the brass ring ever further from Europe’s grasp. As I see it, the German elite is letting the highly improbably best become the enemy of the urgently necessary good enough for government work.
The Germans are not wrong to care about morality; the problem politically in Berlin today is that most of them are not very good at understanding moral behavior in its fuller, more sophisticated manifestation. Just as the German penchant for pacifism, understandable though it may be, seems to many Germans very moral but in fact is not, so their unwillingness to reward improvidence is, for most, shortsighted simply because not doing so threatens much worse near-term consequences for everybody in Europe. (Yesterday’s dramatic central banks intervention, led by the U.S. Federal Reserve, buys needed time, but in some ways it complicates both the problem and Germany’s decision……we shall see what we shall see.)
Both attitudes reflect shirtsleeve morality rather than the real thing––points of view that feel right and look good in mixed company, but aren't right at all. Just as pacifism in the face of aggression often leads to enormities of historic proportion––as Germans, more than most people, should realize––so an insistence on anal-retentive economic behavior in this case is likely to lead to economic calamity, and not just in Europe. While there are many exceptions (I think I’ve met most of them), large numbers of Germans reason like Neville Chamberlain about security issues when, by all that is right and fair in history's light, they should be followers of Winston Churchill. Similarly, many Germans today reason about matters of political economy like a Puritan when they should be thinking more along the lines of a potlatch provider.
As for Joe Nocera, he is right in his analysis of the current situation, and what Germany ought to do for its own and the common European good in the near term. But he is wrong to contrast pragmatism with morality as though the two were mutually exclusive opposites.
Finally, although Nocera names the source, he is understandably reluctant to speculate on why the Germans are taking what amounts to a morally based but morally counterproductive perspective. No one can blame him for not delving deeper in a less–then–thousand-word newspaper column. But I have a theory.
If I may simplify a fair bit, let me put it tersely: The German generations that experienced first the Great War and then the Nazi era came to the conclusion that Germans had behaved immorally, and that Germany’s lack of democracy was somehow associated with or the cause of that immorality. After World War II, as Germany became a democracy, the most important thing in Germany’s reborn political culture was to seize the moral high ground in compensation for the perception that Germany had been deeply and destructively immoral, for some going all way back to 1870.
The German elite has proved so effective at seizing the moral high ground, or believing that it has done so, that it has conditioned its entire political syntax so that no other mode of thought or debate is possible except one grounded in what is taken (sometimes correctly, sometimes superficially and hence misleadingly) to be morality. Hence the attitude taken by most ordinary people now in Germany toward the Greeks, the Italians and the whole mess in general: We must do the "right" thing, and the right thing cannot possibly involve rewarding a lack of virtue. The idea that doing the right thing in the longer run involves some tactical compromise of principles right now seems not to occur to most as a possibility. These Germans remind me some of Henry Clay, who once said, as you probably know, that he would rather be right than elected. (Personally, I wish he had been elected: maybe we would have been spared the Civil War.)
Alas, those who insist on morality as the lodestone of all political behavior, but can only reckon what morality means in the shirtsleeves short term, are the bane of history itself. It is often said that the road to hell is paved with good intentions, but it is a statement nevertheless too seldom heeded.
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