Farewell to Oskar

Hep Ingham HIngham at igc.apc.org
Wed Mar 17 09:55:02 PST 1999

>From the ZNet commentary.

"A farewell to Oskar"

By Noam Chomsky

On March 11, Oskar Lafontaine resigned his position as German Finance

Minister and chair of the Social Democratic Party (SPD). His resignation

elicited "euphoria" in "jubilant" financial markets, editorial offices,

and news rooms.[1]

Bidding him its editorial farewell, the London Financial Times heralded

the "angry revolt" that had "unquestionably changed...the relationship between

government and business" in Europe's major economy.[2] The background is

the electoral victory of the SPD-Green coalition in the last elections.

Lafontaine led the SPD and was the link to the Greens. Chancellor Gerhard

Schroeder replaces Lafontaine as chair of the SPD, though he "has never

been as warmly embraced by the party rank-and-file as Mr Lafontaine," not to

speak of the Greens. The "angry revolt" was not by the public, but by "the

European Central Bank and German businesses threatening to relocate


The Central Bank has been granted extraordinary independence and authority

in the European Union, a "sinister" threat to democracy, the lead article

in the journal of the Council of Foreign Relations warns, noting accurately

that the goal is to "reassure financial and business elites

that...Europe's economic policy will be appropriately insulated from the demands of labor

and other domestic interest groups."[4] And as is well understood, the

threat to relocate is also a powerful weapon against democracy and human

rights -- specifically, against the socioeconomic rights guaranteed by the

Universal Declaration of Human Rights, but derided as a "letter to Santa

Claus" and "preposterous" by the leaders of the relativist challenge to

the UD, in Washington.[5]

The world's leading business daily is right about the significance of this

dramatic change in "the relationship between government and business" --

that is, the relationship between the institutional framework that suffers

from the fatal flaw of susceptibility to public influence, at least in

principle and sometimes in fact, and unaccountable private power, much

safer hands. Lafontaine was an "unreconstructed Keynesian," the FT observes, an

"old-style taxer and spender" -- not a "new-style" borrower and spender of

the preferred Reaganite variety. And his priorities for taxing and

spending were completely intolerable to "financial and business elites." His crime,

the editors explain, was the goal of "redistributing large sums from the

corporate to the personal sector." His tax legislation "closes many

loopholes enjoyed by industry without compensating cuts in the main rates"

for corporations, which "protested fiercely" against this outrage. The

more "business friendly" Chancellor Schroeder was planning a sharp cut in

corporate taxes, but "it was unclear whether Mr Lafontaine would agree

[to] such a move -- at least without raising funds from elsewhere."

Lafontaine's policies were "business-hostile" in other ways as well, benefiting small

and medium-sized family businesses. He also "incensed industry with his

`socially just' changes pitched largely at workers and families," leading

to the threat by "several of Germany's largest companies...to transfer

activities overseas" where they are protected from "`socially just'

changes." Lafontaine's initiatives "had caused Germany to lose its good

reputation abroad," according to the president of the German industry

association, who wasted no time identifying the circles that define "good

reputation." But with his resignation under the transfer threat, "Mr

Lafontaine's orthodox macroenomic ideas have died once and for all," the

industry association president declared.[6]

"US economic policymakers are unlikely to mourn the loss of Oskar

Lafontaine from the international monetary landscape," the FT reports further, even

though they agreed with many of his initiatives, including his efforts to

induce "the European Central Bank to cut interest rates to get the

European economy moving." But "Lafontaine's approach looked to Americans like a

throwback to the inflexible, statist, welfare-dominated European past,"

which deviates from the modern, up-to-date US approach of enriching a tiny

sector of the population while the typical family puts in 15 more weeks of

work a year than 20 years ago while their incomes have stagnated or

declined, average wage for non-supervisory workers is 14% below 1973, and

even the second decile lost net worth (assets minus debt) during the

anemic current recovery, which breaks new records in that the majority has just

now barely recovered the level of the last business cycle peak of 1989.[7]

US policymakers had hoped that the SPD might be a "useful and constructive

partner in the moderate centre-left politics of which US President Bill

Clinton has been such an enthusiastic champion," but they were

disappointed when he showed his true colors as an "unreconstructed Keynesian"

advocating "orthodox macroeconomic ideas." Clinton's "moderate center-left policies"

have not lacked praise. Clinton was "likened to Martin Luther King Jr. and

generally celebrated at a Wall Street conference" in mid-January 1999,

where the president of the New York Stock Exchange "told Mr. Clinton that Dr.

King was surely smiling down on the gathering" at the annual King memorial,

recognizing how Clinton had benefited "my little corner of southern


Other little corners may have fared somewhat differently, but "business

and financial elites" and their advocates have only contempt for such

"old-style" sentimentality.

The "euphoria" and "jubilation" elicited by the victory of private power

was not confined to markets, or editorials. As is often the case on matters of

real importance, the news pages of the elite press joined the "thunderous

approval" of the business and financial elites, abandoning even a pretense

of objectivity, and staking out a position well to the right of the

Clinton Administration. In the New York Times, correspondent Edmund Andrews

depicted the orthodox Keynesian as "one of Europe's most combative and ideological

leaders," who sought to move Germany "toward a sharply left-wing direction

that frequently clashed with Mr. Schroeder's more pragmatic and

pro-business instincts." He is "an outspoken and ideological passionate left-wing

traditionalist who had enraged central bankers with blustery demands for

lower interest rates" (as advocated by Washington, the news report failed

to mention in its "pragmatic pro-business moderate" exuberance).

The ideological fanatic Lafontaine was adding "extra taxes on corporations

while giving a slew of new breaks to lower- and middle-income families."

With his resignation, "the leftists were clearly on the run and the

pragmatists were on the rise," a wonderful victory for "pro-business

modernizers" over "left-wing traditionalists." "A major barrier to

corporate profits has left today," an economist at Warburg Dillon Read exulted,

along with the news columns, which were as "happy" as the "co-publisher of the

liberal weekly Die Zeit" who understood that Lafontaine was "far too

ideological, far too left-wing, and too removed from the economic

realities of the country."[9]

Andrews recognized that the "more pragmatic and pro-business" Schroeder

now faced a problem: "in Germany, politics is based on political parties."

"The nature of power in Germany requires control of the major political

parties, and it was the much more left-wing Mr. Lafontaine who could muster

discipline on that level" -- Times-speak for the observation of the

Financial Times that Lafontaine is "warmly embraced by the [SPD]

rank-and-file," unlike Schroeder, and is of course far more popular among

the coalition partner of the SPD, the Greens. The Greens have "capitulated

on all of their top priorities," Andrews reports, but it is unclear today

whether they "would be willing to concede even more to industrial

interests." The problem is the usual one: too much democracy -- though

Andrews comforts the reader with the thought that Lafontaine "could never

match Mr. Schroeder's popularity with voters."[10]

Further good news for the "pro-business moderates" and "pragmatists" is

that the "blustery, bumptious political boss" Lafontaine is being replaced by

Hans Eichel, who is particularly attractive because of his "experience in

working with conservative bankers." Joining in the euphoria, the

Washington Post news columns hail Eichel as "the business-friendly governor of Hesse,

Germany's richest state." Germany can now face the "tough choices" that

Margaret Thatcher made for Britain, with the "painful free-market

restructuring" that made possible "the market-oriented pragmatism" of Tony

Blair. Germany too will be able to "prune an elaborate social welfare

state" and enact "pro-business proposals," ridding itself of the "traditional

socialist base" of the SPD, which was concerned with workers, families,

and small business, and handing power over to "more pragmatic moderates." Then

Germany may be become the kind of paradise enjoyed by the majority of the

population of England and the United States under "free-market

restructuring" -- which does resemble "free-markets" in Britain somewhat

more than here, consistent with the usual relation between markets and


Andrews recognizes another potential problem: Eichel has a dubious past.

"He campaigned against nuclear proliferation and for environmental causes."

But "his politics have moderated since then." He is now "generally considered

a business ally," so perhaps the immoderation of his youth will not

interfere too much with the stunning defeat of democracy and human rights.[12]

The events are significant, the interpretation of them as well. The

lessons for the general population of the richer countries are clear enough, for

those less fortunate still more so.


[1] Edmund Andrews, "German Finance Aide Quits: European Markets


_NYT_, March 12; Andrews, "German Stock Market Soars As Leftist Fiscal

Chief Quits," _NYT_ March 13, 1999.

[2] Editorial, "A farewell to Oskar," _FT_, March 13.

[3] Ralph Atkins, "Clash of Thunder Gods leads to opportunity to start

afresh," _FT_, March 13/14.

[4] Sheri Berman and Kathleen McNamara, "On Central Banks and Democracy,"

_Foreign Affairs_, March/April 1999.

[5] UN Ambassador Jeanne Kirkpatrick; Ambassador Morris Abram, explaining

the US veto of the Right to Development, which closely paraphrased the UD.

See my article "The United States and the challenge of relativity" (in

Tony Evans, ed., _Human Rights Fifty Years On, U. of Manchester, 1998),

reprinted as _The Umbrella of U.S. Power," _Open Media Pamphlet Series_ (Seven

Stories, 1999).

[6] Editorial, _FT_, _op.cit_; Ralph Atkins, _FT_, March 15; Atkins and

Frederick Stuedemann, _FT_ March 13/14; Uta Harnischfeger, _FT_, March


[7] Gerald Baker, "US policymakers relieved at departure," _FT_, March 15.

Lawrence Mishel, Jared Bernstein, John Schmitt, _The State of Working

America 1998-99_ (Cornell, 1999); Robert Pollin and Stephanie Luce, _The

Living Wage_ (New Press, 1998); Edward Wolff's research, cited by Aaron

Bernstein, _Business Week_, Sept. 14, 1998.

[8] Baker, _op. cit._. James Bennet, "At a Conference on Wall Street

Diversity, the President Finds His Own Stock Soaring," _NYT_, Jan. 16,


[9] Andrews, _NYT_, March 12, 13, 15.

[10] _Ibid._

[11] Andrews, "From Wealthy Hesse, an Ally of Business," _NYT_, March 13;

William Drozdiak, _WP_, March 13.

[12] Andrews, "From Wealthy Hesse." _

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