Nov. 14, 2014 - Freedomain Radio - Stefan Molyneux
01:08:14
2840 The Fall of Germany. There Will Be No Economic Recovery.
The current state of the German economy, including government spending, runaway electricity costs, green energy scams, wildly increasing housing costs, skyrocketing budget deficits, cheap money policies, public sector worker pensions, collapsing GDP growth, retirement savings, educational spending, health care costs, the myth of austerity, taxes, military spending, inflation, standard of living, income distribution, unemployment and mental health.Sources: http://www.fdrurl.com/germanyWhile the mainstream media and government officials may paint the picture of economic growth and an impending financial recovery just around the corner, we'll examine the hard numbers and empirical evidence instead of making blind assertions. With unsustainable yearly deficits, stagnant wages for decades, double digit cost of living increases - hopefully this information will help people brace themselves for the unfortunate reality that...There will be no economic recovery. Prepare yourself accordingly.
Hi everybody, this is Stefan Molyneux from Free Domain Radio.
I hope you're doing well.
So I hope you will lend me your ears as we go through what is going on in the German economy, the powerhouse of Europe, one of the world's largest economies, which is facing some significant problems.
Now, I'm going to build a thesis in this presentation that will have value even if you care little about Germany, however unwise of you that may be, which is that the ingredients for economic growth and the rising tide that lifts all boats is available to us and has been shown to us pretty decisively through German history, and this stuff can all be turned around very, very quickly.
So I don't want this to be a pessimistic presentation.
There is hope within it.
So we're going to start with Germany after the Second World War, 1945.
The German economy, of course, as you can imagine, lay, much like its buildings, infrastructure and people, in shambles.
The war, as well as Hitler's scorched earth policy when he withdrew from the Allies and from the Russians.
He burned, he poisoned, he bombed.
This had destroyed 20% of all of German housing.
In 1947, of course two years after the end of the war, per capita food production was only 51% of the 1938 level.
The official food ration in Germany that had been set by the occupying powers varied between 1,000 and 40%.
And 1,550 calories per day.
So we're talking supermodel rations.
Industrial output in 1947 was only one-third its 1938 level.
And of course, in the 1938 levels, much of it was towards guns rather than butter, towards the production of war machinery.
And of course, most tragically, a large percentage of Germany's working-age men were dead.
Now, at the time, people who rolled into Germany thought that West Germany would have to be about the biggest client of the U.S. welfare state.
Yet 20 years later, a mere 20 years later, its economy was envied by most of the world.
And less than 10 years after the war, people were already talking about the German economic miracle.
The growth of central planning of government control of the economy occurred in two large waves, of course, in the First World War and then in the Second World War and in a smaller wave in the Great Depression.
And by the time the Second World War ended, the conceived wisdom was governments need to run things.
And so the Marshall Plan was set up to send aid into...
Europe, which actually arrived too late, too little, and recovery was already underway.
And in America, the returning vets were supposed to go through some massive bureaucracy to help them get jobs.
But by the time the bureaucracy had been set up, people already had their jobs.
And of course, there was a tidal wave of immigrants, which reached 8.5 million by 1948 in Germany.
Now, after 1945, there was a horrifying economic crisis in Germany, which was, of course, tremendous inflation.
So, Hitler, under the Third Reich, the government had financed a massive industrial buildup to feed weapons into the Nazi war machine as it targeted East and West.
And this was paid for, as it usually is, by rampant monetary expansion.
They just printed and created more money.
And of course, one of the things that brought the Nazis into power was the hyperinflation that was to some degree the result of having to pay staggering levels of war reparations after the Versailles Treaty of 1918-1919.
Under the Weimar Republic, hyperinflation hit, which destroyed the middle class and destabilized the economy and reduced the opportunities for young men, in particular, to get work, to get married and to go through the civilizing influence of all that, which was one of the fuels for Nazism.
The rampant monetary expansion that occurred under the Nazis to pay for the war machine drove up prices.
And so there were price controls put in place.
You know, it's the dominoes.
One control leads to another control leads to another control, leads to either war or collapse.
And so the Nazis cracked down on black marketers, barterers and others who attempted to evade the Nazi price controls.
In fact, a few consistently evaded price controls.
The penalty under the Nazi regime was death.
Now, the Allied commanders of France, Britain and the US imposed a massive system of wage and price controls that tried to fix interactions at pre-inflation levels, i.e.
1936 levels after the war.
And with the entirely predictable result, when you get armies running economies, it's about as efficient as getting economists to run armies.
And so when they put all these wage and price controls in after the Second World War, what happened was the goods vanished from all the legal markets.
They were sold in the black market at prices that were far higher.
The official prices and food, of course, was in very short supply and the Germans would have to sometimes travel for dozens or even hundreds of miles armed with the pitiful remnants of their personal possessions, hoping to exchange them or bar to them for some kind of So barter replaced the efficiency of a common currency,
and barter was so widespread in post-war Germany that business-to-business transactions, not even person-to-person, many firms hired what's called a compensator, a specialist who bartered his firm's output for needed inputs and often had to engage in multiple transactions to do so.
In September 1947, U.S. military experts estimated that one-third to one-half of all business transactions in the bizonal area, the U.S. and British zones, were in the form of, quote, compensation trade, i.e.
barter.
It was bloody medieval.
Now, we're going to talk about Ludwig Erhard in a moment.
He was an exceedingly brave man who wrote papers and circulated papers, even during the war, about what should be done when the Nazis lost, which was, of course, illegal at the time.
And the Allies wanted non-Nazis in the new German government, so Ludwig Erhard, whose anti-Nazi views were clear, he'd actually even refused to join the Nazi Association of University Teachers, He was appointed Bavarian Minister of Finance in 1945.
In 1947, he became the director of the Bizonal Office of Economic Opportunity.
And in that capacity, he advised U.S. General Lucius D. Clay, military governor of the U.S. zone.
Now, of course, the mess of the German economy after the Second World War, with the inflation, with the barter, with the food shortages, and the general shortages of everything, this, of course, was all blamed on the free market, because there's nothing that says free market more than five or six years of war, followed by very strict price controls and wage controls.
The Social Democratic Party was generally left leaning and it favored a government-controlled economy.
The leading intellectual on the left, Dr.
Kreisig, warned that the economy and currency would collapse if prices were set free.
So, under the Nazi regime in Germany, a free market resistance movement developed at the University of Freiburg.
They argued for a socially conscious free market and that this was the best defense against the return to totalitarianism.
Now, they weren't...
Exactly laissez-faire.
They did favor government intervention to promote competition and to protect free markets from monopolies.
They were in favor of minimal redistribution through a graduated income tax and social welfare programs.
But they argued for what was then a radical concept called free trade.
Unilateral free trade, if need be, which would allow Germany to export to the world market.
Of course, Germany's very good at designing and building things and selling them overseas.
This is still a strength of the German economy many years later.
And free trade, unilateral free trade strikes many people like unilateral disarmament.
So unilateral free trade is even if you had trade restrictions against me, I'm going to allow my people to trade with yours freely.
And economists explain it sort of the value of it.
So let's say Japan develops a cure for heart disease and America develops a cure for cancer.
And let's say Japan puts trade restrictions and won't allow itself to sell its cure for heart disease to America.
Does it make any sense then for America to not sell its heart disease to Japan?
It doesn't.
Conversely, if Japan says, well, you can't sell your cancer cure here in Japan, but we'll be willing to sell...
Our heart disease cure over in America.
Well, of course people in America want to buy the Japanese heart disease cure, so you would do that.
So unilateral free trade was promoted by these guys, which was quite radical.
And they wanted an end to the economic control of the Allies.
The leader said, a deflation of allied administration, which ought to be as drastic as that of the German currency.
To combat inflation, the movement proposed a currency deflation of 100 to 1.
A 99% currency deflation.
Of course, you're always told that deflation is the worst thing in the known universe.
And that's for political reasons, not economic reasons.
We like it when prices go down.
I like it when computer prices go down.
I'm sure you do too.
So, Ludwig Erhard was an economic liberal.
He joined the Mont Pelerin Society in 1950 and used this influential body of liberal economic and political thinkers to test his ideas for the reorganization of the West German economy.
So, MPS, the Mont Pelerin Society, international organization composed of economists, including eight winners of the Nobel Memorial Prize in Economic Sciences, philosophers, historians, intellectuals, business leaders, and others committed to their understanding of personal and political freedom.
So, its founders included Friedrich Hayek, Karl Popper, Ludwig von Mises, George Stigler, and Milton Friedman.
Of course, they won freedom of expression, free market economic policies, and the political values of an open society.
Erhardt viewed the market itself as social and supported only a minimum of welfare legislation.
And he had great success early on.
He had some defeats to create a free competitive economy starting in 1957.
And he had to compromise on such key issues as anti-cartel legislation.
And after 1957 and into the 60s, the West German economy evolved into a conventional welfare state from the basis that had already been laid in the 1880s by Bismarck.
Now, in the post-war period, the free market advocates won.
And this was quite remarkable.
One of the reasons that they won is that the Germans, of course, hated the allies who had bombed them and invaded their country, as they saw, and wanted the economic controls out of the country.
And so, these were Germans fighting against the allies, so to speak.
So, in June 1948, the currency was reformed.
Did they get 100 to 1?
No.
Citizens were allowed to exchange 100 old Deutschmark for 6.5 new ones.
So, a pretty radical deflation.
So they had radical deflation combined with unraveling price controls.
Erhard said, It was strictly laid down by the British and American control authorities that permission had to be obtained before any definite price changes could be made.
The Allies never seemed to have thought it possible that someone could have the idea not to alter price controls, but simply to remove them.
And two non-German observers said, Only an eyewitness...
Can give an account of the sudden effect which currency reform had on the size of stocks and the wealth of goods on display.
They mean in shop windows.
Shops filled up with goods from one day to the next.
The factories began to work.
On the eve of currency reform, the Germans were aimlessly wandering about their towns in search of a few additional items of food.
A day later, they thought of nothing but producing them.
One day, apathy was mirrored on their faces while on the next, a whole nation looked hopefully into the future.
Corporate tax rate, which had ranged from 35% to 65%, was made a flat 50%, which, you know, as we've seen with Obamacare and part-time workers, makes growth not a huge problem.
There was a top income tax rate of 95%, but it applied only on incomes above the level of 250,000 Deutschmarks annually.
And in 1946, just previously, the Allies had taxed all income above 6,000 Deutschmarks at 95%, so the 95% went from 6,000 to 250,000 Deutschmarks.
For the median income German in 1950 with an annual income of a little less than 2,400 Deutschmarks, the marginal tax rate was 18%.
That same person, had he earned the Reichmark equivalent in 1948, would have been in an 85% tax bracket.
So they took, for the average German, 85% tax bracket down to 18%.
And the colonel was absolutely outraged and was screaming away at Earhart.
And he said,"'How dare you relax our rationing system when there is a widespread food shortage?' Erhard said, but Herr Urbst, I have not relaxed rationing.
I have abolished it.
Henceforth, the only rationing ticket the people will need will be the Deutschmark, and they will work hard to get these Deutschmarks.
Just wait and see.
So with deflation, removal of price controls, massive cuts in taxes, what happened?
Well...
What always happens in these situations, industrial production and national income skyrocketed.
Industrial output increased 50% within the year, and national income was restored to the 1936 level in just over a year, increased 20%, one-fifth of an increase.
In national income.
Now this, of course, they were retooling from the war.
They had a completely destroyed, largely destroyed infrastructure roads and railways in particular being bombed very heavily.
They had massive amounts of rebuilding and they had to adjust their factory output from Wartime output, the production of guns, not butter.
And of course, during a war, there's not a lot of maintenance of machinery that goes on.
There's not a lot of long-term, let's make sure there's capital stock.
So a lot of it had to be junked.
So in the face of a shattered economy, a six-year war, and massive amounts of destruction of both persons and capital and machinery and infrastructure, this was turned around and the national income went up 20% in a single year.
This increase was not achieved.
This wealth was real.
It was not increased because of stimulus spending or loose credit.
It was savings, investment, and overtime or hard work.
So the free marketers put in tax credits for savers and for business reinvestment.
And those who worked overtime were allowed to keep almost 100% of their extra pay.
There was, of course, unemployment as the economy transitioned from water peace.
It hit a peak of 10% in 1950, then went to 3% in 1956.
It was back down to 1% by 1960.
Now, 1% is effectively full employment because there are people transitioning from jobs, taking time off, going on sabbaticals who are ill, perhaps.
So 1% unemployment with balanced budgets without inflation or without any significant inflation.
Inflation had been about 20% for the previous decade.
So two are obviously averaging out to about 2% a year.
So they had the holy grail of economics, full employment without inflation.
And during the reform period, Erhard consistently balanced government budgets as well.
This is the world that we could be living in, with massive growth in the economy, full employment, stability, opportunity, growth, balanced budgets.
But, sadly, this doesn't tend to last for a variety of reasons we'll get into later.
So post-1948, savings and investment leveled off at 20% to 25%.
Growth soared to 20%, as we saw, and then settled to between 5% and 8% annually.
5% and 8% annually.
I think America, even with all the stimulus spending and so on, was happy to eke out a little over 3% last year.
Now the effect on the West German economy was electric.
This is not just numbers.
This is opportunity.
This is consistency.
This is stability.
This is safety.
This is predictability.
Someone wrote, the spirit of the country changed overnight.
The grey, hungry, dead-looking figures wandering about the streets in their everlasting search for food came to life.
Shops were very quickly filled with goods as people realized that the money they sold them for would be worth much more than the old money.
Reforms, quote, quickly re-established money as the preferred medium of exchange and monetary incentives as the prime mover of economic activity.
Absenteeism also plummeted.
In 1948, workers stayed away from their jobs an average of nine and a half hours a week, partly because the money they worked for was not worth much and partly because they were busy out foraging and bartering for money and food.
By October 1948, average absenteeism was down to 4.2 hours a week.
In June 1948, the bizonal index of industrial production was only at 51% of 1936 levels.
In December, it had risen to 78%.
This is astounding.
From June to December, five to six months, industrial production increased by more than 50%.
Why don't you know any of this?
Because it doesn't fit the current narrative that the government needs to run everything.
Output continued to grow by leaps and bounds after the reforms of 1948.
By 1958, industrial production was more than four times its annual rate for the six months in 1948 preceding currency reform.
400%.
Industrial production per capita was more than three times as high.
East Germany's communist economy, by contrast, of course, stagnated.
And this, East Germany, of course, went to the Soviet bloc and remained under command and control communism and was brutal.
And this is the lab.
And you could see this even in East and West Berlin.
This is the laboratory of freedom from coercion versus micromanaging at gunpoint the economy.
What happens to the two?
Erhard's ideas had worked, so the first Chancellor of the new Federal Republic of Germany, Konrad Adelaue, appointed him Germany's first Minister of Economic Affairs.
He held that post until 1963, when he became Chancellor himself, a post he held until 1966.
So that's the background.
And the reason I say that is that we are only ever months away from an economic turnaround.
You take away controls over the economy.
You take away price controls.
You take away subsidies.
You take away all of the minute regulations that confuse, befuddle and force people out or keep people out of the entrepreneurial space because they don't have the infinite phalanx of lawyers with which defend off the regulations or figure out if what they're doing is legal.
A third of Americans need a permission slip from the government to have a job through licensing and so on.
You relax those controls and you let people generate and innovate and create.
We are only ever months away from turning things around and we only ever a couple of years away from completely full employment and stability, but it requires willpower.
We hope that it does not require for freedom to be achieved even for the decade or two that it was in Germany, the economic miracle of the post-war period.
We hope, perhaps against hope, that it does not require six years of a world war followed by a foreign occupation for people to recognize the value of the free market.
That's why I make these presentations so that people can see it without those terrible situations.
So Germany's economy contracted in the second quarter of 2014 to whiplash us up to the present and has grown by a mere 3.6% since the 2008 global financial crisis.
Tiny bit more than France and the UK, but less than half the rate of Sweden, Switzerland and the United States.
Since 2000, gross domestic product growth in Germany's average is 1.1% annually.
So it's 13th in the 18-member eurozone.
And When the Euro was launched in 1999, Germany was written off as the sick man of Europe, and it responded by cutting costs.
And investment has fallen from 22.3% of GDP in 2000 to 17% in 2013.
Infrastructure, highways, bridges, and even the Kiel Canal are crumbling after years of neglect.
So when Germany started cutting costs, it generally...
It burns the future by bribing the present.
The education system is creaky.
The number of new apprentices is at a post-reunification low.
The country has fewer young graduates, 29%, than Greece, 34%, and its best universities barely scrape into the global top 50.
It is harder to lay off a permanent employee in Germany than anywhere else in the OECD. Germany languishes in 111th place globally for ease of starting a business, according to the World Bank's Doing Business rankings.
So it's got fairly sclerotic with endless amounts of regulations and bureaucracy.
And its largest firms are pretty old and entrenched.
Germany has not produced any equivalent of Google or Facebook or any of the other tech wizard companies.
The government has introduced fewer pro-growth reforms over the past seven years than any other advanced economy, again, according to the OECD. Average annual productivity growth over the past decade at a mere 0.9% has been slower even than Portugal's.
Ooh, that's got to sting a tiny bit.
A productivity growth, worker productivity growth is the basis for, of course, all economic growth, in my opinion.
So, German worker productivity rose by 17.8% over the past 15 years, but now German workers earn less in real terms than in 1999, when a tripartite agreement among the government, companies, and unions effectively capped wages.
So, as you can see, wage and price controls, particularly wage controls, which to some degree, of course, have an effect on prices, the lesson remains eternally to be relearned how disastrous this stuff is for the economy.
So, let's have a look at some of the basic stats further on in more detail about the German economy.
So NATO, North Atlantic Treaty Organization, wants members to budget at least 2% of GDP on defense.
But Germany spends 1.3% only on defense.
And for those who are just listening to the audio, they're afraid this is a bit chart heavy.
So you can check out the YouTube channel, youtube.com slash freedomainradio.
This was 2012.
So, Afghanistan aside, Germany's military contributions to the management of international peace is best described as reactive, uncontroversial, low-risk, low-cost multilateralism conducted under the auspices of the EU, NATO, and the UN. In Berlin, most now believe that Gerhard Schroeder, the then-Chancellor of Germany, made the right call in rejecting German involvement in the 03 invasion of Iraq and that NATO's Afghanistan operation has been a costly failure.
Since the end of the Cold War, Germany's military contributions to international peace and security Have primarily been determined by a deep-seated skepticism in Germany concerning the utility of military force for purposes other than self-defense, which is, I dare say, most enlightened.
Just personally, I mean, my mother is German, and when I would have cousins come and visit me when I grew up in England, we British were all trained from the cradle onwards to be war mad, you know, finest hour and all that.
But my German cousins weren't even allowed to play with guns.
So there is, within the culture, because of course Germany suffered enormously, I mean, through the blockade under Churchill's Royal Navy in the First World War, where starvation rations were imposed, and in the Second World War, of course, even more.
So they really react strongly against the prior militarism of the society.
And this, of course, has a strong effect.
This was going on 40 years ago when I was a kid.
And...
I'm sure it's having a big effect on voting patterns now.
Percentage of imprisoned citizens.
This is some of the good news with Germany.
Germany has very low incarceration rates.
Significantly lower than the US, which is not that hard.
And it makes much greater use of non-custodial penalties, particularly for non-violent crimes.
So not jail time, but other forms of correction.
Conditions and practices within correctional facilities in these countries grounded in the principle of normalization.
Whereby life in prison is to resemble as much as possible life in the community also differ markedly from the U.S. In the U.S. you go into prison and you're like a gulag and you are disoriented when you come back out but of course in Europe and particularly in Germany they try to make it as easy as possible to reintegrate.
So in the U.S. 0.5% 1 out of 200 people is in prison.
In America sorry in Germany it's 0.072% so of course much much lower.
Now, Germany, green bleeds red, passed its Renewable Energies Law in 2000.
This is a subsidy for renewable energy generation, promising fixed payments to wind, solar and biogas producers, regardless of how much it costs to produce.
The law also required the use of renewable energy above all other sources, insisting that the energy grid absorb wind and solar power over that of coal or gas, even if that requires a shutdown of traditional energy plants.
So by 2010, renewable electricity generation had more than tripled in cost compared to 2000.
Alongside that increase came the most expensive electricity in all of Europe, which makes it very hard for a heavy industrial or manufacturing base to remain...
And it is just horrendous.
So it's like 50% of the electricity cost now is just in taxes.
And a lot of it, of course, the cost below in the green, the actual costs prior to taxes are driven by this focus on economically unsustainable energy at the moment.
The taxes on electricity for the industry have increased from 2% in 98 to 48% in 2013.
This led to an increase of industrial electricity prices of 61% between 98 and 2013.
While the included costs for generation transmission and distribution have decreased.
So this of course becomes brutal for economic competitiveness.
So to meet all of its energy demands, Germany has turned to using the most inexpensive alternatives, importing natural gas costs at about three times the American price, such as coal.
As a result, its carbon dioxide emissions did not decrease as intended.
Germany, as of 2011, was the world's leading producer of solar power, accounting for 43% of the world's total installed base, but solar power accounted for only 1.1% of Germany's total electricity supply.
It's kind of clever.
That's the problem, of course.
Solar power and wind power are, you know, sometimes the wind doesn't move and sometimes it's cloudy, but our need for power remains constant.
70% of the price for household electricity is regulated by the state.
Only 30% of the price is determined by the market.
Again, we're back to sort of post-war controls.
On top of sharply increased electricity costs, Germans pay a 59% tax on gas.
For society as a whole, these costs have reached levels comparable only to the eurozone bailouts.
This year, German consumers will be forced to pay 20 billion euros or 26 billion dollars for electricity from solar, wind and biogas plants.
Electricity with a market price of just over 3 billion euros.
So that's really quite astounding.
They're paying more than six times the market price.
And of course, this is having a brutal effect on the economy.
More than 300,000 households a year are seeing their power shut off because of unpaid bills.
Now, as is usually the case when crippling legislations come in, about 2300 businesses have managed to largely exempt themselves from the green energy surcharge by claiming, often with little justification, that they face tough international competition.
Companies with less lobbying power, however, are required to pay the surcharge.
The price for a new apartment has increased by 38% since 2007.
Just by the by, one of the exemptions to wage and price controls in the post-war period under Ludwig was apartments.
Apartments were kept under rent control.
And so there was a strange situation where commercial space and houses were being built at a massive pace, whereas nothing was being done really to reform the The apartment stock, because when you get rent controls in, people stop investing in building those kinds of buildings, so it really hurts the poor.
It helps the poor who currently have those places, but it hurts everyone else, and it even hurts those poor people in the long run.
The price for a new apartment has increased by 38% since 2007.
Michael Kiefer writes, quote, construction of new buildings gets more and more expensive since additional regulations for energy conservation get piles on.
Many experts question if the new 2014 regulation makes sense from an engineering perspective.
The economic viability of the increasing regulations is long gone, and undoubtedly the new regulations do little or nothing to create more affordable housing.
And here, of course, we have MX Index 07 to 14 apartments in Germany.
This is new construction, existing buildings, and for rent.
And again, this is...
Hugely problematic for young people looking to get a toehold in starting their lives.
So...
There's, of course, cheap money.
When governments want to stimulate the economy, they print.
Der Spiegel writes in Germany, European central bank policy is unpopular because it has now pushed the interest rates for investments down so low that they're often no longer enough to compensate for inflation.
In other words, only fools save.
And here we can see USA and Eurozone, the percentage.
And people can see in the statements from the life insurance companies, they're getting smaller payouts year over year because of the interest rates.
The savers are paying the price for rescuing the euro.
You get about 0.8% interest a year on a savings account in Germany at the moment, while the inflation rate is 1.3%.
This, of course, stimulates consumption in the here and now, which generates illusory economic activity at the expense of the present.
It's like cocaine versus personal therapy.
You're happy, but not for long.
Whereas you could, of course, go through the difficulty and be happier longer and better if you do something else.
So this, of course, is a big problem.
Governments love to drive down interest rates because it forces people to spend money.
That's generating economic activity, which generates jobs, which generates taxation.
And of course, when they drive the interest rates down, they can pay less on their debt.
Hans-Olaf Henkel, former head of IBM Europe and political publicist, wrote, The EU, once conceived as a community of competition in which each attempts to surpass the others in productivity and quality of life, is becoming such a transfer union, a community of redistribution in which a new competitive discipline will emerge.
Who can tap the others for the greatest amount?
It's become a continental-wide life raft of economic vampirism.
In the long run, Germany was likely to be less and less distinguishable from the other countries, and instead of standing together with the Netherlands, Austria, Finland, and Luxembourg as bastions of calm, it will throw the stability culture overboard and amplify the downward trend.
What this means for Europe is easy to imagine.
The continent, once the engine and ideas generator of the whole world, will fall hopelessly behind the other major regional blocks.
Having accepted the old French dream of a common economic government, Chancellor Angela Merkel has agreed to accord greater importance to maintaining community spirit and equalization between Eurozone members than maintaining monetary stability and competitiveness on the continent.
So as we talked about, this is from the end of the reforms in the 1960s through to now.
Real economic, sorry, real growth rate in Germany has been slower in each successive decade.
The drop between the 1960s and noughts was a staggering 45 percentage points.
So 1960s.
Growth rate per decade, 53.3%.
You start to get the welfare state coming in and more and more unionization, government-controlled and defended unionization.
And you go from 53.3% in the 60s to 39.4% in the 70s, 22.9% in the 80s, 1990s 22.3%.
And in the 2000s, we're down to 8.4%.
And this has huge effects on demographics and, of course, on deficits, as we'll see.
In 2013, 129,000 new companies were founded whose legal status and number of employees suggest a larger economic importance.
The 2013 number has decreased by 4.1% compared to 2012.
The graph below shows that since 2004, the rate of newly founded companies with larger economic importance has decreased by about 25%.
This is very significant.
Germany is the largest, of course, national economy in Europe, the fourth largest by nominal GDP in the world, and the fifth largest by GDP PPP. This is just putting purchasing power parity.
This is just putting Germany in the rank.
U.S. 16.7, European Union 15.8, China 13.4, India 5, Japan 4.7, of which about 99.9 is dead, Germany 3.2.
Oh, look!
There's Canada at 1.5.
So exports from Germany in US dollar per capita in 2013.
In 2013 Germany exported goods and services with a value of 18,400 per inhabitant.
The country is ranked as the third largest exporter after China and the US. Germany's traditional export strength lies in heavy machinery, automobiles and chemicals.
And as you can see from this graph going from India all the way up to the Netherlands, Germany is huge in its exports.
It's always important to remember just how little America exports compared to all of these other countries.
So, of course, if there are problems with exports of which the massive increase in electricity costs is one factor, that's going to be very problematic for the economy.
Now, German exports are considered by some to be a top threat to global economic peace.
The German government has been pilloried and attacked for years because Germany's exports allegedly disrupt global economic peace.
The complaint was voiced by Christine Lagarde, then France's finance minister, but now head of the International Monetary Fund, as well as a long line of U.S. Treasury secretaries.
U.S. Treasury Secretary Jacob Lew takes the same line.
According to a report from his department, Germany was identified as a top threat, even ahead of China.
Stop being good at what you do.
Stop making things that people want to buy.
It's bad for the economy as a whole.
The charge is always the same.
The Germans have acquired an unreasonable advantage by one-sidedly focusing on exports, and now they are flooding foreign markets with their products.
At the same time, this view holds that the Germans live and consume below their means, which is detrimental to foreign companies.
Because there is less demand for their products in Germany.
So if I focus on tennis only rather than tennis and golf, that gives me an unfair advantage over somebody who focuses on tennis and golf.
Well, what can you even say to this madness?
Could we argue the French and US government administrators are simply trying to lower the benchmark of the relatively successful German economic policy.
Let's look at taxes.
In 2012, the total German tax revenue amounted to 37.6% of GDP, compared to a couple of decades earlier when you could get away with middle-class income at 18% income tax.
2013, inhabitants paid an average income.
1,230 euros in taxes per month, or 1 euro and 69 per hour.
Between 2001, 36.1% in 2012, 37.6% tax revenue in percent of GDP increased by only 1.5 percentage points, though the graph of course does not show hidden taxes like inflation, which is a huge problem of course.
Total public expenditure increased by 35% between 1960 and 2013.
The expenditure for Social Security increased simultaneously by 74% between 1960 and 2013.
So it's often argued that a percentage increase of total public expenditure reflects a change in the nature of the state, from a state providing core functions such as security services, defense policy and justice, to a state that provides a much wider range of social services.
So here you can see in the chart, these are total public expenditures in blue and Social Security in what is yellow, orange, burnt tangerine, something like that.
And of course, this was the fundamental change that occurred and is continually occurring.
Early democracies or early republics tend to focus on governments to provide core security.
They're referees, they don't interfere with the game.
And then there's an inevitable demand for increased government services to help people escape either accidents or messes of their own creation.
In the years leading up to the financial crisis, household debt soared in most rich countries, but Germany did not experience a housing boom that caused household debt to accumulate.
So here we can see, I won't describe the graph, but here you can see household debt versus non-financial corporations, financial corporations, institutions, sorry, and government.
So in Germany, household debt was not as brutally expanded as it was in other countries.
The public debt increased more than 200-fold between 1950, when it was $10 billion, and 2012, when it was $2,068 billion.
While the initial rise in public debt might have resulted from the first serious recession of the post-war era in the 70s, the second major increase was caused by the costs of the German unification.
Finally, the Great Recession has led to crossing the €2 trillion threshold.
Well, to be fair, Great Recession combined with Not cutting back costs.
In the two decades following the formation of the Federal Republic of Germany, the general debt-to-GDP ratio fluctuated around 22%.
However, this situation owes more to the extraordinary economic miracle than to fiscal prudence.
1967, the 60s, so much pivoted in the 60s.
1967 can be seen as a major turning point as a new law authorized the government to, quote, stabilize economic cycles using countercyclical fiscal and economic policy.
Within a few years, Germany's postwar economic miracle was buried and public debt to GDP nearly quadrupled from 1966, 20 percent to 2013, 78 percent.
So look, they've stabilized the economy.
There's a graph, of course, showing public debt in percentage of GDP. And as you can see, 1950 to 1974, relatively stable.
In fact, from 1950, 19.3% went down to 17.8% in 1973.
Pretty good stuff.
And then, as you can see, this is most of the West, of course, of the institution of the welfare state in the 60s and the 80s.
Induction of the Keynesian stability program to cool down inflation and to raise employment and all this nonsense where you're just moving these giant levers that throw people off boats.
This, of course, this is the typical graph for Western economies.
2014, the official public debt per person in Germany of €25,700 is higher than the European average of €22,800, but below the US debt of €43,100.
So if each of the about 80 million inhabitants in Germany, including babies, would repay €100 each month, it would take 21 years and 5 months to pay the debt back, assuming the government did not create any new debt.
In the meantime, and here again, these all in constant dollars, $190 per capita to $24,593 in 2010.
It's a mere 60-year period where you just have staggering increases in public debt.
And public debt is simply, it's deferred taxation or deferred economic catastrophe.
It is a very real phenomenon.
The US's public debt of 72% of GDP is slightly better than Germany's ratio of 78%.
The EU average of 87% and Canada's 86% have slightly worse ratios than Germany.
So Germany sort of sits in the middle of the pack.
Again, Japan building the stratospheric debt mountain.
Russia, remember?
Boy, how communist that was and what a terrible, you know, it's a good thing we fought all that socialism and fought all that communism so that Russia can end up with a public debt of 8% of GDP. And China, boy, remember how bad they were?
Boy, the communists.
It's a good thing that Greece at 175% sent soldiers to fight communism, otherwise the economy might be in real shambles.
The long-term trend of the yearly national budget is an increase in deficits.
From humble beginnings in 1950, with a €0.9 billion deficit, it increased tenfold to €9.4 billion deficit in 2013.
In 1989, the government had almost consolidated its finances when it decided to spend big after the German reunification in 1990.
So when you inherit an economy in shambles, what you want to do is you want to free it from economic constraints, restraints, and control.
That was, of course, the lesson of the post-war period, the lesson that continually seems to need to be relearned around the planet.
And so the idea that they were getting East Germany back and therefore needed to spend a lot of money is the exact opposite of what worked in Germany in the post-war period.
In 2000, Germany had an exceptional €18.6 billion budget surplus because the government auctioned off new cell phone frequency ranges for €51 billion.
During the Great Recession in 2009 and 2010, the tax revenue decreased and stimulus packages were initiated, leading to record deficits.
So here, from 1950 to 2013, The purchasing power of the German currency decreased constantly due to inflation.
According to official statistics, the prices of goods and services roughly increased fivefold.
Between 1955 and 2013, so here you can see a baseline of 1955.
At 100, the scale is going down to 20 over the time.
This is, of course, massive theft, often on an intergenerational scale.
The euro was introduced in Germany without a referendum and, quote, was one of the concessions to France that helped pave the way to German reunification, according to former Foreign Minister of Finance, Pierre Steinbock.
When the euro entered into circulation in 2002, it was met with a lot of skepticism in Germany regarding its price stability compared to the Deutschmark, which, of course, Germans have a significant intergenerational fear of inflation.
And the Deutschmark was, in the public perception, an important pillar of Germany's strong economy.
Twelve years after the Germans largely accepted the euro, only 27% of Germans want the Deutschmark back, 36% of French want to return to the franc.
Step by step, the German governments have increased the value-added tax from 0.5% in 1918 to 19% in 2007.
This is included in the store prices of affected goods and services, and thus is largely hidden from consumers.
And here you can see regular tax rate.
And then there's a reduced tax rate for food, books, hotel, and art.
I guess in Germany, art is considered a necessity.
Net wages in Germany have hardly risen since the beginning of the 90s.
This mirrors trends throughout the Western economies.
This is a unique development in Germany never before has a period of rather strong economic growth been accompanied by a decline in net real wages over a period of several years.
The key reason for this decline is not higher taxes and social insurance contributions as many would hold, but rather extremely slow wage growth, both in absolute terms and from an international perspective.
The finding is all the more striking in light of the fact that average employee education levels have risen, which would on its face lead to one to expect higher wage levels.
And again, this is mirrored all over the place that real wages have not increased despite increases in productivity.
The reasons for that are complex.
We won't get into all the details here, but mostly has to do with government control, regulation.
You know, wherever you don't see an increased bid for services, it's because there's an interference in the bidding process.
The contributions to mandatory pension health and unemployment insurance have increased by 42% since 1970 and 2010.
health insurance alone has increased by 82 percent it could be argued that contained percentage increases in the 2000s could be attributed to the agenda 2010 that the social democratic and green coalition passed as a series of reform bills in 2003
the steps taken included drastic cuts in unemployment benefits liberalization of temporary employment introduction of mini jobs reduction of non-wage labor costs and introduction of a private pension scheme so some relaxation of controls over the economy.
So there has been some containment in welfare spending.
1960, 18.3% to 2010, 30.6%.
And this, of course, Charles Murray wrote books criticizing the welfare state, which had some effect on welfare reforms in the 90s under Clinton.
And this did spill over into other areas of thinking as well.
Official German unemployment rate only West Germany before 1991 and as you can see here from 1950 It went down to zero effectively zero unemployment and then after the welfare state we start to see an increase and so on in unemployment unemployment is much worse than all of these statistics indicate because The government artificially hires people by borrowing money to pay them, which, of course, is deferred losses in the future.
And so government creates a lot of make-work projects.
Government hires a lot of people.
And, of course, people then are not counted in the workforce often who are no longer looking for work if they've given up.
And, of course, if people have gone from full-time to part-time, they're still counted as employed.
The numbers are far worse.
And you can look up shadow stats on the Internet for more, I think, in particular on America on this.
But even with the government jigging all the numbers, you can see that the free market experiment from 1950 to the 1970s was enormously successful, as I've argued repeatedly in this show, and it just gets worse after that.
So East Germany is a satellite state.
The Soviet Union reported full employment each year.
Of course, you type whatever you want into your number spreadsheet.
West Germany reported full employment during the economic miracle years.
See, they say miracle like it's somehow miraculous.
Of course it's not.
It's just freedom.
Since the German reunification in 1990, the unemployment rate of East Germany skyrocketed to 20.5% in 2005, declined 11.6% in 2013.
The increase in unemployment in the year 2005 is attributed to a change in the accounting of the rate.
Which is a way of saying it should have been higher earlier.
Unemployment rose steadily in Germany until 2005 with each new downturn leaving behind higher numbers of people without prospects.
Then the trend was reversed and even the numbers of the long-term unemployed shrank.
But the success had its price.
The normal employer-employee relationship with a secure and open-ended contract We're supplemented with the principle behind the HUD's four welfare reforms undertaken in the 2000s.
The number of low-paying jobs has grown since then.
They include part-time work, temp work, and what are called mini-jobs.
This has reduced unemployment, but the new flexible jobs form fewer bridges to traditional forms of employment than anticipated.
Even in 2013, the unemployment rate among poorly qualified workers was still close to 20%.
So, employment in the public and private sector in percent of total population.
The German public sector is relatively small compared to other OECD countries, and the share of the state and GDP has been reduced.
Because of the strong economic and employment performance in the last few years, there have been no special adjustment programs for the German public sector in the Great Recession.
Substantial adjustments such as reductions in employee numbers, pay freezes or cuts, and reductions in pension entitlements have instead been taking place gradually over the past 20 years.
So, as you can see here, 1996, 6.4% in the public sector, 2011, 5.7%.
And there's been an uptick of 4 percentage points in the private sector from 29.6 to 33.6, 96 to 2011.
So there's some stability in these areas.
So Germany has a northern European welfare state.
This means that social benefits are extensive compared not only to the American standards, but even compared to other European countries such as Italy or Spain.
Of course, they have the subsidy called Sunshine.
The German state spent 1.1 trillion euros in 2011.
The majority of the public spending was directed towards the welfare system at 56.3%.
The educational system was a distant second, 8.5%.
So for each inhabitant, the state spent 1,147 euros each month in 2011.
So here again, we have our burnt tangerine welfare system Pac-Man eating up pretty much the rest of the economy.
So...
So vote-buying and bribery for people to continue to defend the existing system consumes the majority of Germany's income.
The healthcare spending in Germany's percent of GDP has increased by only 0.9 percentage points between 2000 and 2012.
Considering the aging population, this is unexpectedly positive.
In 2000, $2,680 spent per German inhabitant in 2012.
This had increased by 75% to $4,680.
This is a huge increase, but of course in America, they spent $8,510 per person on healthcare in 2011.
Canada was 11.2%.
It's caught up with the level of German expenditures as a percentage of GDP. Of course, US spending is a league of its own at 17.7%.
So here you can see the crazy stuff that's going on in the American healthcare system, where you have socialized payments and privatized profits and all of the capitalist monopoly cartels that you would expect in a fascistic economic pseudo-system.
And what about education?
Spending on education in Germany is a percent of GDP is increased by only 0.2 percentage points between 1995 and 2010.
Canada has managed to decrease its education costs by 0.1 percentage points.
U.S., U.K., and Australia have increased their education costs by more than a percentage point each.
In 2010, 5,700 euros per student were spent in primary education.
That's below the OECD average of 6,500 euros.
And education costs in Germany, secondary and tertiary education, slightly above OECD average.
So, how has that worked out for Germany?
Well, not too badly.
Peace of Science Literacy score on a 1,000-point scale, 2000, Germany was ranked 21st country, and Science Literacy Germany scores have consistently improved, and in 2012, Germany was ranked the 12th country.
Peace of Science test covers diverse topics like biodiversity, the Earth and its place in the universe, evolution, genetics, evaluating scientific evidence, and applying scientific knowledge.
Not bad for an engineering-based export machine.
The average German household had in 2008 less debt and less assets compared to 2003.
Between 2003 and 2008, the net debt as a percentage of net assets remained constant at 22%.
And 92% of the €26,500 debt is outstanding mortgage debt, 6.4% of consumer credits, 1.1% of student loans.
Public university tuitions are about €0,000 per year, so you don't get a huge amount of debt while studying.
So as you can see here, net assets somewhat declined in both.
Roughly half of the 47 million German households do not pay any income tax.
These would be the bribees in the general sloshy wave of money going back and forth between the productive and the consumptive.
Unmarried persons only pay income tax if their income exceeds the untaxed allowance of €8,004.
Couples have an allowance of €16,008.
This chart shows the distribution of total net wealth among the German population.
The richest 10% own 61.1% of the wealth, while the poorest 10% are in debt and own minus 1.6% of the total wealth.
Well, the richest 1% of people in Germany have a personal wealth of at least 800,000 euros or 1.09 million dollars.
Over a quarter of adults have either no wealth or negative wealth because of debt.
A study by Germany's DIW think tank showed nowhere in the eurozone is wealth so unequally distributed as it is in Germany.
Now, of course, the goal of the welfare state throughout the West has been to try and even out disparities in economic inequalities.
And like, you know, government programs in general, it achieves the opposite of its stated effect, and income inequality tends to have grown since the introduction of the welfare state, for reasons I've gone into in other presentations.
During the years of the economic miracle, 48 to 68, till the 1970s, the majority found the distribution of wages and wealth to be fair, because in a free market, things are kind of fair.
I mean, it doesn't mean equal.
It just means that nobody's forcing anyone to do anything.
Governments have much less power to benefit corporations that help them out and so on.
In 1995, the fairness sentiment had already changed.
Only 39% experienced the distribution as fair.
By 2013, only 18% found the allocation of wages and wealth still equitable.
The study of the Bertelsmann Foundation concludes that as the idea of fairness vanishes, so does the belief that each man is the architect of his own fortune.
So when class hardens, in a free market, class is very permeable.
It used to be called shirt sleeves to shirt sleeves in three generations, right?
So you start off as a manual labor, you make a lot of money, your kids blow it, and then their kids are back to work in manual labor.
The permeability of class was very high in a free market system as the free market begins to ossify and becomes more controlled by corporations and government and there's more interference in free trade than inequality tends to exacerbate because the poor end up on welfare and the rich end up gaming the system to protect themselves from the competition that the poor So
So what are the worries that people have in Germany?
And you can only mention two in these surveys.
The graph shows the percentage of the population that worries about the four most mentioned problems of the last 14 years.
Threat of unemployment was on the mind of 82% in 05, but decreased steadily to only 21%.
So, unemployment, pensions, economic situation, and euro financial crisis.
So, worries do appear to be declining, which usually means that the government is borrowing more.
So, one of the founding myths of the old Federal Republic of Germany...
Was the conviction that you can make it if you want, if you work hard, if you try hard, if you do the right stuff, you get a good education or educate yourself and go out and work hard.
That was one of the founding beliefs.
I shouldn't say myths, but it's pretty true in a free market.
In 57, in the years of the economic miracle, Ludwig Erhard devised a recipe for success, prosperity for all.
In my opinion, Erhard writes, the historic task of the Federal Republic in the second half of the 20th century that we have just entered upon is to underpin, to strengthen, and to defend the free economic order of Europe with the full weight of German trade.
The successful rehabilitation of my country must serve as a clear documentary evidence to put before the still vacillating and doubting peoples of the fact that only by firmly rejecting socialist dogmas of whatever complexion and by affirming a free economic order can mounting prosperity and genuine security be achieved.
Again, just to remind everyone, Ludwig Erhard was not even close to a true free market advocate.
He adopted the term of the social market economy, which is the idea of combining certain free market elements with the corrective of social welfare distribution.
So firmly rejecting socialist dogma was, I think he meant basically communism, but he certainly didn't mean the socialism of the welfare state.
About two-thirds of Germans believe that social conditions have become more inequitable over the past legislative period.
At the same time, the share of Germans who view the tax system as unfair has increased sharply.
Only 21% of those polled consider income distribution to be the most important problem.
A majority of 57% believes that justice mainly signifies a balance of opportunities.
The gap between rich and poor has been widening since the 1980s, but since about 2005, income differentials have narrowed slightly, largely because of the booming labor market.
Okay.
Number of marriages per year.
Marriage, the foundational base of social stability, where marriage declines, where single motherhood increases, social chaos tends to follow, and certainly government expands because the government has to step in with the resources formerly provided by the husband.
The number of newly wedded couples is steadily decreasing and has been since 1950.
It could be argued that the 1950 record is an effect of ex-soldiers being released from war captivity.
Fine, but still 1950, 750,000.
2012, 387,000.
This is despite an increase in population, of course.
Births per year.
In 1964, 1.36 million babies were born in Germany.
I believe about only half of those to the Octomom.
This number declined steadily, and in 2012 this number dropped to 670,000, less than 50% of the 1964 record high.
And this is, of course, despite increases in population.
Germany currently has one of the lowest birth rates in the world of 1.4 children per woman, which is nowhere near the replacement rate of 2.2 or 2.3, I think it is.
So, of course, this has massive implications in a social welfare pension state with health care costs socialized and pension costs socialized, of course.
In 1966, only 5.7% of children were born out of wedlock.
This percentage steadily increased by a factor of six.
Until 2012 to 34.5%.
And 1946, of course, right after the war, but 1966, during the height of economic stability.
Economic stability breeds marriage, breeds the stable two-family unit that children need to thrive.
And when the social welfare state comes in, a variety of things happen that drive up out of wedlock births.
Between 2002 and 2012, the percentage of children living with married parents decreased by 10% to 53% in 2012.
As a result, the number of children living with cohabitating or single parents increased by about 5% each.
That, of course, is a big challenge.
This is just in 10 years, a 10% reduction.
And of course, given the poverty levels associated with single-parent households, it's a big problem.
Households at risk of poverty in percentages.
The definition of risk of poverty is an income below €952 a month, including welfare transfer payments.
Two adults raising two children are only at a poverty risk of 8.7%.
In contrast, 37% of single parents are at risk.
The most prevalent family situation in Germany in 2012 with families with kids below 18 is the father working full-time and the mother part-time.
The second most common is the mother staying at home while the father works full-time.
And no one works is 10.3%.
Both parents full-time 13.8%.
So it looks like the goal of getting women into the workforce so you can tax them and get earlier control of the kids is going just nicely.
Since 2000, children in Germany have had the legal right to peaceful parenting, which is another big topic in this show.
You can look it up at freedomainradio.com.
However, which means that no hitting children.
Sadly, a total of 22.5% of children answered in a 2013 survey that they were beaten often or sometimes.
The depicted representative 2013 study found that 17.1% of children with a precarious socioeconomic background were beaten so hard that they had bruises afterwards.
So this is beaten, not spanking.
So almost a quarter of children are beaten, according to self-reporting, and 17.1% of kids with a...
Bad SES. We're beaten so hard that they had bruises afterwards.
That's only 1.4% in privileged households.
A 2011 survey, including more than 1,000 parents, asked if they gave their child at least one smack on the bottom in the last 12 months.
45% of children below two years and 54% of children between two to four years received one or more smacks.
And this has slightly declined.
Below two years, 47 to 45.
Two to four years, 64 to 54.
Between 2007 and 2011.
Let's keep this number going down, people.
Workday's missed due to mental illness baseline 1997 is zero.
The cases of incapacity to work due to mental illness have increased by 165% between 1997 and 2012.
Experts attribute the rising problem to increase time pressure more over time and a higher workload.
So all health problems combined have gone up to some degree, but as you can see here, workday's missed due to mental illnesses have skyrocketed.
The number of missed days stagnated between 2002 and 2006, but continuously climbed during the last six years.
So let's finally end up with the demographics.
Thank you for your patience.
The ongoing low birth rates and steadily increasing life expectancy leads to a drastic change in the ratio of young and old generations.
The percentage of people 60 years and older will double between 1960, 17.4%, and 2030, 36.2%.
This is a cocoon, geriatric-style, old-age home of a civilization.
And the closer I get to them, the more wonderful they seem.
But this is not the foundation of a sustainable economic system.
The amount of retirees and percent of the working age will double between 2000 and 2040, from 26 to 53 percent.
The mandatory state pension system will probably encounter some financial problems, to put it nicely, since funds paid in by contributors, employers and employers, are not saved or invested but are used to pay current pension obligations.
It's a Ponzi scheme, right?
So the idea was you pay money to the government, the government saves and invests it and gives it back to you.
When you retire, this is not the case.
The government blows all the money and then uses transfer payments from the poor, i.e.
the young, to the rich, i.e.
the old.
And this kind of reverse welfare state is just brutal.
So here's the retirees over 64 graph percentage of working age population.
You can pause this if you like.
The percentage of people aged 80 and older will triple between 2010 and 2050, from 7.8% to 26%.
In 1995, the state introduced a mandatory nursing care insurance that covers everybody, including nursing care for the elderly.
This insurance will likely encounter problems in the future since funds are paid by a pay-as-you-go approach.
Contributors are not saved, sorry, contributions are not saved up for each individual contributor, but pooled by the insurance.
In contrast to private nursing care insurances abroad, the mandatory nursing care insurance does not offer incentives to stay healthy apart from the bureaucratic and long-winded application process.
.
So, that was a very quick tour through where the German economy is and where it is heading.
I just wanted to give a very, very brief summary of, I think, the salient and important message.
We as a species, and I think this is true of just about everyone that I've ever met, sometimes even including myself, we tend to wait for a crisis to gain moral courage and resolution, and this is a very bad idea.
This is a very bad idea because sometimes it's too late.
You don't want to wait for your first heart attack to start exercising and eating right.
But we have this, you know, we'll take on economic controls and we'll free up the market.
Maybe after 40 million people slaughtered a holocaust, Western Europe committing democide and suicide on a continent-wide basis, and when the Allies are occupying our country, okay, then we'll try the free market.
Why do we need to wait for these absolute disasters?
Why can we not be proactive and say, well, we know where this is all going to lead, which is to economic catastrophe, and that has very bad effects on society, tends to bring in even more state controls, leading to totalitarianism.
Or, as economic collapse looms, governments tend to provoke conflicts in order to distract the public from necessary reforms and make everyone feel like they have to pull together and make everyone who complains about things a whiner.
And so why do we continue to need to learn this lesson?
The economic miracle, which is basically just freedom, that occurred for 20 years in the post-war period in Germany, is one of the most salient economic lessons of the 20th century, and one of the few positive ones outside the liberalization of the Indian and Chinese economies.
Most of the 20th century was a grim slide into economic semi-totalitarianism and semi-fascism, which is what we're currently laboring under now, but we do have a few glowing examples of the value and beauty of freedom and how much that changes not just people's incomes, but I was very struck by the descriptions of the emotional hope and happiness that accrued to the German population when they were set free of the economic slave pens of their occupiers.
So it is my hope and goal that you, even if you don't care a whit about Germany, that you've gone through this presentation and can understand that we're only ever months away from a genuine turnaround in the economy.
But if we wait for disaster to occur, it is a price too high to pay and absolutely unnecessary.
This is Stefan Wallenew for Freedom Main Radio.
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