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After the Fall: What Went Wrong

November 5, 1999

Reinhardt Stiebler (email: reinhard.stiebler@nur.adtranz.de)
is president and co-founder of the Liberale
Akademie Berlin
. This Fall,
Stiebler presented a paper on Adolphe Thiers at the Austrian Economics Workshop at the Mises
Institute in Auburn, Alabama. He was interviewed following the seminar.

Mises.org: What is your assessment of the aftermath of German unification?

Stiebler: Currently, the government subsidizes rebuilding in the East at a rate of $70
billion per year. This is a huge expense. The idea behind it is that we don't want to have two
separate economies–the rich West and the poor East–because this would create social unrest. In
truth, the wealth disparities are a fact of reality that no amount of subsidies can erase.

Nonetheless, after unification, it was agreed that workers in the East should soon receive the
same amount in wages as those in the West, with the problem that their productivity is much less.
They are 10
percent as productive but receive wages nearly 80 percent of the West. This creates enormous
dislocations. The Eastern part of Germany is now one of the most expensive places to invest in
the whole of Europe.

These subsidies from the central government were intended to redistribute wealth, but not much
of it actually stays there. During privatization, the big Western companies took up most of the
share of Eastern industries, so it is channeled back to big Western enterprises. So, the final result
is that the wealth redistribution actually runs from taxpayers in the West to established
corporations in the West.

Mises.org: Is there any discussion of reducing the subsidy?

Stiebler: Nobody wants to talk about it. The argument about, or rather fear of, social
unrest is
very strong. We have wasted $350 billion in this effort. The sad part for the East is that they now
have a new form of socialism. In the West, more than half our GDP goes to the government. This
tax structure was exported to the East. So actually, instead of full communism in the East and
partial socialism in the West, we split the difference so that everyone lives under one unified
socialist plan.

We had a Chinese trainee in our company, and I asked him how much in taxes he pays. He
replied that he pays 15 percent. From this point of view, then, Communist China is more free
market than supposedly capitalist Germany. I pointed this out to him, and he laughed and agreed.

Mises.org: It is remarkable to think of the opportunity that was missed.

Stiebler: Right. Integration was a political move by Chancellor Kohl, and
implemented based on
political instead of economic considerations. He arbitrarily fixed the exchange rate between the
East and West German mark at one to one. On the black market, the exchange rate was one to
five. With this, he transferred wealth to the East that had been acquired in a more or less
capitalist system after the war, as if the East had not been subject to all- round socialism. They
wanted to cancel out this dark history even though it is part of reality.

What these workers lacked in productivity they made up for in education. If, after the fall of the
Berlin Wall, Chancellor Kohl had really privatized and allowed the free market to flourish, the
East German worker,
with low wages and low productivity but high education, would have had an comparative
advantage to a worker in the West. And after a short time, workers would have received higher
wages in accordance with what they produced. Economic growth would have been very fast. All
of this would have been possible with a massive private capital inflow.

Now the capital inflow is financed by the state and it is both inefficient and redistributionist.
If the East had taken the proper path, instead of people leaving the East to get to the West, the
flow of labor would have run the reverse. People from the West would have been clamoring to
the East. It was a missed opportunity.

As it stands now, sometimes the public preference in the East is actually more liberally minded
than in the West. For example, consider closing time for businesses. In the West, we have strict
laws saying that everything must close at 8:00pm. The weekends are even worse; nothing can
be open on Sunday, for example.

In most parts of the East, however, they have implemented exceptions to the law. Some areas
have been called "tourist resorts," which means that shops can open and close anytime they want.
Suddenly, the trade unions became very religious, claiming that bustling enterprises were stealing
time needed for spiritual reflection.

The debate on closing times in Germany is entirely misguided. The only question discussed is
whether longer hours and more liberality would contribute to the GNP or not. The issue of
consumer sovereignty and property rights is never even mentioned.

Mises.org: Are the unions a large problem?

Stiebler: The trade union for the metal workers is largest trade union in the world,
with 1.7
million members. We have a federation of trade unions that represents close to 30 percent of the
workforce. The big problem is that it has a monopoly in negotiation with business. The unions
are able to dictate policy to the entire country. You must obey even if there are no unions in your

As a result, they are able to hold the whole of industry, as well as the consuming public, hostages.
Indeed, the entire labor market in Germany is heavily regulated, with mandatory vacations, high
unemployment benefits, strict rules concerning hiring and firing, and much worse.

Mises.org: With such regulations, how can you explain German prosperity?

Stiebler: Very easily. We are feeding ourselves from the reforms that were
implemented by
Ludwig Erhard after 1945. He abolished nearly every price regulation and implemented
something very close to a complete market economy. After 1956, more and more rules regulating
economic life were introduced. But we are still living off the impulse given in these early years.
We are slowly strangling the source of prosperity. We desperately need liberalization in the labor
and capital markets if we expect to continue as a prosperous society.

Mises.org: Is Erhard regarded as a hero today?

Stiebler: Sometimes he is cited, but generally people do not talk about him. The
economic miracle is taken for granted. People are more interested in redistributing, rather than
creating, wealth.

Mises.org: More generally, how stands the liberal movement in Germany?

Stiebler: There are very few radical liberals, or what Americans call libertarians or
Austro-libertarians, in Germany. We do have a Liberal Party, also known as the Free Democratic
Party. For the last 40 years, it has captured 5 to 10 percent of the electorate, and has wielded
the decisive vote for giving a majority to the Christian Democrats or the Social Democrats. In
principle, then, the party has been powerful. But, at the same time, it is completely discredited
because it has taken every stance from free-market policies to social-democratic policies.

To be called a "liberal" in Germany means that you are a member of this party, which has
monopolized opinion on the limits of economic freedom. Today it is very difficult to speak of true
liberals in the Austrian sense or any other meaningful economic sense. I know of 20 to 50 people
in Germany who even know who Ludwig von Mises was. It is that bad. In founding the Liberale
Akademie Berlin, we wanted to open up the marketplace of ideas, and publish works that pushed
out the boundaries of opinion.

There are some followers of Max Stirner in Germany, the author of The Ego and Its
, first
published in 1844. He is usually thought of as an individualist anarchist, and he had been quite
influential in the liberal movement in the nineteenth century. Most early Germans liberals and
free traders like John Prince-Smith, who originally came from Scotland, and John Henry Mackay,
originally influenced by Stirner. Actually one of the larger books by Marx and Engels, The
German Ideology, was written against this book by Stirner. They tried, but failed, to refute him in
300 pages. History, unfortunately, has buried Stirner.

But I'm getting off the subject. Today, there are very few people who work, research, and write
from the point of view of radical liberalism. In fact, I think I know most of them. We organize a
forum every year. We are small, and there is a very long way to go, but we are growing. The
question always arises: should we found a party? I am personally against it. You cannot
convincingly argue against government intervention while trying to achieve political power. The
contradictions are evident to everyone.

Mises.org: You also run the risk of having your credibility judged by how many votes
you receive.

Stiebler: That's true. Of course the idea is tempting. The state makes it so, since in
Germany, you
receive government subsidies according to how many votes you get. Of course this favors the big
parties and the political status quo. State-financed elections work hand-in-hand with statism. It
also biases the political positions of parties, which tend not to bite the hand that feeds them.
As a political party, it would be easier to gain access to media, since reporters are always
interested in political parties, much more so than a private think tank. Moreover, life in Germany
is far more politicized than in the United States: everyone assumes that all political questions are
to be settled within political circles. Even the idea of providing private solutions to a problem is
virtually unknown. This is a pity.

Mises.org: What is the Liberale Akademie Berlin, doing to change that?

Stiebler: Our first step is to build the foundations of a library of liberty, through
translating and
publishing important works. Our first book was The Adventures of Jonathan Gullible
by Kenneth
Schoolland, a very nice book for younger people. Our second project is What Has
Done to Our Money
by Murray Rothbard. I translated it, together with Carsten Hülsmann.
we plan to republish the German-language books by Hans- Hermann Hoppe. Finally, we are
translating and publishing a Bastiat reader, Hazlitt's Economics in One Lesson, and
much more,
including a scholarly and popular journal.

I have high hopes for the book on German Liberalism by the great historian of liberty, Ralph
. If the marketing is handled properly, this book could revive interest in liberalism in
Germany. It is partly because of this book that we are organizing a scholarly forum with the title
"Liberty: A German Idea." We are breaking new ground with this theme.

The United States has a libertarian tradition which is more widely understood. Not so in
Germany, where the Enlightenment was not so much an era when the idea of liberty was
advanced but rather a time of Enlightened Absolutism. The idea was that we should have a
brilliant leader and a highly educated bureaucratic class that would govern society with no
egoistic intentions. This thinking, which survives to this day, eventually led to the political
economy of the Third Reich.

What we are trying to reclaim is a different tradition, that associated with a 19th century radical
liberalism of Eugen Richter, the leading opponent of Bismarck. This tradition is proper foil to
national socialism. It heralds decentralized government, individual liberty, enterprise, and the free
development of culture and society. To resurface this tradition, and propagate this among every
strata of German society, is a huge task, but one we are completely committed to advancing at
every level.

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