Slate Money: The Germany Edition (June 30, 2018)

Overview

In this special edition of Slate Money, host Felix Salmon and co-hosts Emily Peck (Huffington Post) and Anna Szymanski are joined by renowned historian Adam Tooze (Columbia University) for an in-depth discussion on Germany’s economy, society, and its unique position in Europe. The episode unpacks Germany’s reunification, its socio-economic structure, misconceptions held by Americans, and contemporary challenges like inequality and immigration—illuminating myths and realities of modern Deutschland.

Key Discussion Points & Insights

1. German Reunification: An Unprecedented Challenge

[01:18 - 04:25]

• Germany’s reunification in 1990 was unparalleled—a rich, advanced economy absorbing a poorer state.
• The process entailed massive financial transfers from West to East (~€1.2-1.3 trillion).
• These funds mainly went to public infrastructure, transforming East Germany.
• Remark: Adam Tooze:
  “It’s one of the really remarkable things... East Germany looks like an East Asian emerging market. Infrastructure, beautiful railway stations, really transformative public spending.” (03:24)
• Despite progress, East-West disparities persist—albeit less pronounced than, say, between US states like Connecticut and Mississippi.

2. Modern Inequality: From East-West to North-South Divides

[04:25 - 06:42]

• Wealth is still concentrated in Germany’s West and Southwest (Munich, Frankfurt, Hamburg), with Berlin remaining notably poor.
• A growing North-South divide is now evident, alongside the East-West legacy.

3. American Misconceptions About Germany

[05:21 - 06:39]

• Americans often harbor fuzzy views: Germany as a “socialist paradise” or just a statistical economic powerhouse.
• In reality, Germany shares many problems with other advanced capitalist societies—especially inequality.

4. Germany’s Role in the EU: Hegemon or Reluctant Paymaster?

[07:04 - 08:52]

• While often branded as Europe’s leader, Germany’s influence is more “blocking shareholder” than overwhelming hegemon.
• Germany’s strong credit facilitates benefits like low interest rates for the EU but also advantages German exports through a “weak euro.”

5. The 2000s Economic “Lost Decade” and Labor Relations

[08:52 - 12:17]

• Germany faced stagnation after reunification, with GDP and wage income lagging despite corporate resilience.
• Labor’s reputation for strength in Germany is overstated; unionization has fallen from mid-20% to just 17%.
• Adam Tooze:
  “It’s not Scandinavia... It’s 17% unionization rate in Germany, down from mid-20s 15 years ago.” (10:57)
• Income gains have been segmented: high-skilled workers prospered, but a large underclass saw wages stagnate, mitigated only by welfare.

6. Rising Inequality & the Role of the Welfare State

[11:54 - 13:24]

• Germany’s pre-tax Gini inequality has risen sharply since the 1990s, faster than many peers.
• The welfare state works “overtime” offsetting private inequality, but significant social exclusion persists, especially among migrants.
• Demographics: Up to 40% of children <5 have a migration background.
• New poverty “pockets” are emerging.

7. Wage Restraint, Competitiveness, and the Eurozone

[13:24 - 15:26]

• Wage stagnation in Germany, particularly in the service sector, arguably helped competitiveness but exacerbated inequality.
• Export success hinges more on quality than on price competition.

8. Education & Social Mobility: A Double-Edged Sword

[15:26 - 18:43]

• Germany’s three-track education system splits students at age 10: only a minority progress to university, others to vocational tracks.
• While apprenticeship culture bolsters vocational excellence, it limits social mobility.
• The system tends to perpetuate socio-economic (and migration-based) class boundaries.

Adam Tooze:
“All the evidence suggests that Germany in this respect is by no means a mobile society.” (18:43)

9. The Migrant Question & Political Tension

[19:30 - 22:57]

• The convergence of rising inequality and difficulty integrating migrants, coupled with the rise of populism, is a serious concern.
• The 2015 refugee wave and Merkel’s policies have fueled right-wing backlash.
• Despite demographic needs for more workers, intra-EU migration (from youth-unemployment countries) is surprisingly limited.

Adam Tooze:
“The real puzzle in many ways is why that question isn’t being answered by huge flows of young people from Spain or... Italy... The really big question... is, of course, Africa, Africa, Africa...” (21:31-22:57)

10. Gender Inequality & Demographic Dilemmas

[23:06 - 25:33]

• Germany’s low birth rate and underrepresentation of women in the workforce compound demographic challenges.
• The wage gap between men and women is wider than in almost any other European country, rooted in:
  • Outdated school/childcare assumptions.
  • Prevalence of part-time/low-paid work for women.
• There has been progress, especially in providing childcare, but gaps remain.

Adam Tooze:
“I went to school in Germany. We started at 7:45 in the morning and finished at 1:10. And there was a cast-iron assumption that there was a mother at home to take care of the kids.” (24:54)

11. Cultural Lexicon: “Rabenmutter”

[26:23-27:59]

• Noteworthy German terms include “Rabenmutter” (raven mother)—a pejorative for working moms—and “patchwork family” (a modern family with children from previous relationships), reflecting changing cultural norms.

12. Homeownership & Wealth Inequality

[27:59 - 33:31]

• Germany is a homeownership outlier; renting is common, with high-quality long-term rentals preferred over ownership.
• This impacts wealth distribution—without housing equity, wealth is concentrated among those with productive assets, often held by a small fraction of the population.
• East-West regional disparity in wealth is pronounced, with East Germany marked by a near-total absence of significant private wealth.

Adam Tooze: “The really dramatic element of wealth inequality in Germany is regional and it’s East, West... In East Germany, there simply isn’t any wealth ownership of that type.” (32:13-33:31)

13. Difficulty Taxing Wealth & Quiet Influence of the Rich

[33:31 - 34:58]

• Taxing wealth is politically difficult—rich Germans exert disproportionate influence over legislative outcomes, even more so than in the US.

Adam Tooze:
“Rich people’s preferences have a larger influence on legislative outcomes in Germany than they do in the U.S.” (34:49)

14. Low Investment and Infrastructure Concerns

[36:08 - 37:15]

• Germany’s infrastructure investment is the lowest in the EU; negative net public investment rates have resulted in aging, underperforming physical and digital infrastructure.

Felix Salmon:
“Germany has the crappiest Internet in Europe.” (36:42)

Notable Quotes & Memorable Moments

• On reunification:
  “It’s a comprehensive refurb of East Germany... Infrastructure, beautiful railway stations... Rather less... in terms of private investment, manufacturing, new jobs.” — Adam Tooze (03:24)

• On education and social mobility:
  “All of the evidence suggests that Germany in this respect is by no means a mobile society.” — Adam Tooze (18:43)

• On homeownership culture:
  “Why accept the burdens and responsibilities of ownership when you could rent instead...” — Adam Tooze (28:35)

• On gender norms:
  “Rabenmutter... It’s what they call working mothers because they leave their children behind in the nest.” — Emily Peck, with Adam Tooze’s clarification (26:39)

• On policy influence:
  “Rich people’s preferences have a larger influence on legislative outcomes in Germany than they do in the U.S.” — Adam Tooze (34:49)

Timelines & Key Segments

• Reunification’s economic impact: [01:18–04:25]
• Persistent and shifting inequality: [04:25–06:39]
• Germany’s EU role explained: [07:04–08:52]
• Labor market segmentation and stagnation: [08:52–12:17]
• Education and social mobility blockages: [15:26–18:43]
• Challenges of migration and integration: [19:30–22:57]
• Gender gap and family policy: [23:06–25:33]
• Homeownership and wealth inequality: [27:59–33:31]
• Low investment rates and infrastructure woes: [36:08–37:15]

Conclusion

The episode closes with reflections on how Germany’s unique path—marked by reunification, stable but segmented labor markets, low homeownership, and an aging, diversifying population—creates both stability and new challenges. The German “economic miracle” is revealed as complex, not mythic, with mounting pressures from inequality, demographic shifts, and political polarization.

Before signing off, Felix plugs Adam Tooze’s then-upcoming book “How a Decade of Financial Crises Changed the World” (out August 7, 2018), and listeners are invited to catch more on Slate Plus.

Further Listening

For a bonus conversation on why Germany is so successful at international soccer, check out the Slate Plus segment at the episode’s end.

[Episode Timestamps Highlighted]

• [03:24] Reunification spending
• [10:57] Decline in unionization
• [18:43] Education and mobility
• [24:54] Gender, schools, and care
• [28:35] Renting culture
• [32:13–33:31] Wealth inequality East vs. West
• [34:49] Policy influence of the wealthy
• [36:42] Investment/infrastructure critiques

Host: Felix Salmon
Guests: Adam Tooze, Emily Peck, Anna Szymanski
Podcast: Slate Money – The Germany Edition
Date: June 30, 2018