Helmut Shmidt has an interesting article in Die Zeit where he blasts the talking heads and the press for spreading misinformation about the Hartz reforms, but he also has some concrete proposals. Schmidt is quick to point out that disasterous policy at the time of reunification is the root cause of the lack of investment in eastern Germany. The biggest mistake was the currency valuation that made one Ostmark the equivalent of one DM:
Ebenso wichtig ist die Ehrlichkeit, Fehler und Versäumnisse einzugestehen. Nicht »der Kapitalismus« hat die ostdeutsche Industrie brotlos gemacht, sondern der Kardinalfehler, 1990 die bislang staatlich festgesetzten Preise und Löhne von einer Mark Ost auf eine DM West umzustellen.
Schmidt encourages his compatriots in eastern Germany to compare themselves with citizens of other post-communist countries instead of with west Germans. See, you don’t have it so bad! Anyway, here are Schmidt’s proposals:
1) East German states need to eliminate the regulatory and bureaucratic barriers to investment and commerce.
2) A preferential cut of 50% to the value-added tax in the eastern Germany should be implemented.
3) Government subsidies need to be targeted to specific “Growth Centers” or development zones where a critical mass of new jobs can be created.
While these proposals are certainly sensible, they are bandaid solutions that fail to address the growing despair and disillusionment in eastern Germany.
Also addressing the Hartz reforms, Frank Norris asks in today’s New York Times: “If Workers Get Less, Will More Get Work?” Norris is somewhat skeptical:
“In the best of all worlds, longer hours – lowering pay per hour but not overall income – should lead to higher investment and employment, stimulating spending by both businesses and consumers. But that impact, if it is to come at all, is not near. For now, German growth is stronger than it has been in three years, but the 2 percent annual growth rate reported in the second quarter is not exactly soaring, and all of it came from exports. Consumers did not spend, and companies reduced capital investment”.
Even if increased investment does eventually kick in, how much will flow to the east?
