Do you really think that the _Economist_ is delighted that Oskar Lafontaine resigned? Or that the _Economist_ thinks that the powers that be *should* be delighted? Or--since the _Economist_ is one of the major powers-that-be--that the first sentence is an accurate assessment?
I don't know many people who take a statement that "Everyone else says X, but I say Y" as evidence that everyone else really does say X.
Those who do seem to me to be in the let's-make-some-quotations-out-of-context business.
I'd started my quote a paragraph and a half down to save some space (though do note that I started it with the _Economist's_ recitation of the reasons that Lafontaine was a bad choice for this SPD-Green coalition precisely because I didn't want to make it appear that the _Economist_ was more pro-Oskar than it is--I didn't want to quote out of context). But I'm happy to post the whole thing, as evidence that the _Economist's_ newsroom and editorial office were not afflicted with "jubilant euphoria" in response to Lafontaine's resignation.
Brad DeLong
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Oskar bravo
Germany's recently departed finance minister may have come up with the wrong answers-but at least he was willing to raise the right questions
Search archive ALL across Europe, it appears, the powers that be were quietly delighted when Oskar Lafontaine resigned as Germany's finance minister (and, for good measure, quit as chairman of the ruling SPD and announced that he would give up his seat in parliament). Red Oskar, unreconstructed Keynesian, friend of the trade unions, enemy of big business and scourge of the new European Central Bank, would no longer be there to embarrass third-way, new-middle types such as Gerhard Schröder and Tony Blair-or to offend the foreign-exchange markets and hobble the euro in its crucial first weeks of existence. Politicians hailed a new start both for Germany's centre-left government and for the euro, which duly enjoyed a short-lived burst of strength against the dollar.
Readers will understand that Mr Lafontaine's thinking on economics differs here and there from The Economist's, but this column, for one, does not rejoice at his departure. Of course, to appoint Mr Lafontaine as finance minister in a Schröder government was about as sensible as it would have been for Tony Blair to name Ken Livingstone as his chancellor of the exchequer, or Bill Clinton to appoint Ralph Nader as his Treasury secretary. By and large, it is better that governments should not be riven at the very top by fundamental ideological differences. And certainly, if one view is to prevail, better Neue Mitte than old left. And yet, and yet. There was much to be said for Red Oskar.
On the issue where Mr Lafontaine's interventions caused the greatest dismay-his unsubtle efforts to talk the ECB into cutting interest rates-this old-left unreconstructed Keynesian was actually correct. Interest rates in Europe were too high, as the ECB may recognise by trimming them at the earliest opportunity after Oskar's departure. And Wim Duisenberg, the ECB's boss, was wrong to retort that rates are "historically low": that may be true of nominal rates, but not of real ones-the kind of mistake (or attempt to mislead) you might expect of a politician, not a central banker. True, the ECB's calculation is complicated, because some parts of the euro zone are doing a lot better than Germany, which is in a downturn. Overall, though, recent data for the euro-11 as a whole had tipped the balance in favour of an interest-rate cut. Yes, Mr Lafontaine was rash to risk compromising the ECB's independence in its early weeks. And in all likelihood, he made it harder for the bank (determined to establish a reputation for firmness) to cut rates. But none of this alters the fact that his assessment of European monetary policy was broadly right.
The same goes for German fiscal policy, when judged in the aggregate (though certainly not at the micro-level: Mr Lafontaine appeared to think that punitive taxes on business were a fiscal free lunch). The minister evidently thought the constraint of the European Union's "stability and growth pact" was too severe. Again, he was correct. Europe's big economies have moved out of synch in recent months. With growth in Germany falling well below growth in France, in particular, an easing of fiscal policy would have been appropriate. But the stability pact, if followed at all zealously, rules this out.
Admittedly, old-left types such as Mr Lafontaine always favour lower interest rates and more public spending, regardless of the state of the economy. But at certain points in the cycle-and for Germany this is one-endangered old-school demand-managers turn out, for a while at least, to be right. So this seems a perverse time for governments to be celebrating Mr Lafontaine's political demise. One suspects that the ex-minister's real crime, in the eyes of his erstwhile political friends, was not so much that he was wrong as that he said what should not be said-or, more precisely, that he raised questions that must not be raised. Governments should have no view on interest rates; if the stability pact is to be flouted, let it be done quietly, not in the full glare of democratic accountability.
Hush-a-bye euro Another favourite theme was exchange-rate policy. Mr Lafontaine's idea for some international agreement on exchange-rate target-zones was one that America was unwilling even to talk about. It was embarrassing for Germany that Mr Lafontaine raised it and was so brusquely rebuffed (as he surely knew he would be). Also, to talk of a European exchange-rate policy was, in effect, another challenge to the ECB's independence-because exchange-rate policy is, to all intents and purposes, the same as interest-rate policy.
But sooner or later this issue will need a proper airing. The value of the euro, especially if it should one day come to seem to be too high, is a matter on which Europe's governments can be expected to have a view. Internationally co-ordinated efforts to move exchange rates are not uncommon. How is Europe to deal with this question? The Maastricht treaty lays down that exchange-rate policy is for governments, not the ECB, to decide; but since it is, in essence, the same as monetary policy, it is difficult to see how this division of labour can work. Mr Lafontaine opened this can of worms before anybody else was ready to look inside.
He was also keen to harmonise European taxes and regulations. Here too the trend is firmly established-but, once again, it dare not speak its name. Mr Lafontaine does not want to see governments competing with each other for inward investment and skilled manpower; he sees tax competition as a curb on government spending. So it is, in a small way. That is why, to a liberal, tax competition is good. But Europe's assorted new-middle governments are not liberal. They affirm an ambitious economic role for the state. They should be in favour of tax harmonisation, the better to plunder their citizens and do good works. They are coy about it. That is one thing about Oskar: he may have been red, but he was never coy.