Kohl's Miscues on the Road to Reunification

SEVERAL attacks on foreigners throughout Germany every day; demonstrations and riots against immigrants; arson and murder directed by neo-Nazi Germans against foreigners, the disabled, and gays; the rapid rise of right-wing political parties and increasing disgust with the politics of democratic compromise and tolerance.

In Germany, the word "Politikverdrossenheit" (disgust with politics) has become the editorial catchword to capture the dark and bitter mood that prevails throughout the country. Its most recent manifestation came in elections Sunday in the German state of Essen, where the extreme right Republican Party won 8.3 percent of the vote, up from less than 1 percent four years ago.

Events in Germany are at least partially the result of two fundamental mistakes made by Chancellor Helmut Kohl three years ago, one economic, the other political. Both are closely connected.

Chancellor Kohl's economic mistake was that he failed to see the tremendous challenge posed by the collapse of the East German economy. During the 1990 election campaign in Germany, Kohl quite incredibly insisted: (1) that a new "economic miracle" was imminent in East Germany (GDR); (2) that no one would be worse off because of unification, but many people would be better off; and (3) that because of unification's economic dynamism, the entire process could be financed without raising taxes.

Kohl was wrong on all three counts. A few simple figures may suffice to suggest how wrong. As of 1992, industrial production in the former GDR had sunk to 30 percent of its previous level, and would have sunk to 15 percent had it not been for emergency measures taken by the federal government. The official unemployment figures for the former GDR are now hovering around 15 percent, but that figure is artificially low, kept down by forced retirements, job-creation measures, and shortened work weeks. The re al figure is probably at least twice as high, and will continue to rise for at least another year.

During the second half of 1991 alone, the East German gross domestic product fell by 11.4 percent; the labor force decreased by 18.7 percent. Meanwhile, prices went up 21.4 percent. The average East German makes about half as much as the average West German.

In order to finance reunification, the federal government has engaged in a positively American bout of deficit spending, driving interest rates to record highs. And on top of it all, the West German economy, pumped up in 1990 by pent-up consumer demand from the East, is now in deep recession, just as the United States seems to be coming out of one.

These outcomes all were predicted and expected. The collapse of the wall was an economic as well as a political event, since the wall was the only thing that kept the East German economy from imploding during the last three decades. Suddenly, with economic unification, East German companies had to compete with immensely more sophisticated West German competitors. Is it any wonder that so many of them went bankrupt? In 1990 Kohl refused to listen to the voices of economic common sense - including the hea d of the Bundesbank itself, who resigned in protest - who urged a more cautious approach, tax increases, and more protection for the East German economy. He has only himself to blame if he refused to listen.

1 | 2

Next