The World Financial Crisis Continues to Discredit Socialism

I’ve already done three posts on this. One on the EU elections, one on the Indian elections, and one on the Argentine elections. But each time you socialists and pessimistic libertarians keep telling me I am wrong. So I’ll just have to keep doing them until people get so sick of it they stop commenting. As this article shows, today the conservatives won a big victory in Germany. When I discussed the sweeping victory of the right in the last EU elections, some commenters pointed out that it might represent an anti-immigrant vote, not a pro-free market vote. OK, I’m ready this time. Let’s take a closer look.

I have followed German politics for decades, and it is generally pretty predictable. Both the (moderately left wing) Social Democrats and the (moderately right wing) Christian Democrats used to each get about 40% of the vote. This time the Christian Democrats got only 33.8%. So why is it called a major victory for Merkel? The key is the performance of a third party, the Free Democrats. This small third party has traditionally been liberal on social and foreign policy issues, and conservative on economic issues. In other words they are the closest thing Germany has to a libertarian party; although of course they aren’t at all libertarian by American standards, just a bit more so than the two big parties.

Usually the Free Democrats struggle to cross the 5% threshold that is required for any seats in the German Parliament. They often barely make it with 7% or 8%. This time they got 15%, which is the most I ever recall them getting. So not only was it a swing to the right, it was a swing toward the more socially liberal and free market part of the right. Now Merkel can govern without help from the Social Democrats. And given the strength of the Free Democrats, I don’t see how anyone can say this is just an anti-immigrant vote. Rather, it is a vote against socialism.

The article doesn’t even mention immigration, but does mention that both winning parties campaigned on tax cuts:

“Both argued that tax cuts would boost the economy, ultimately leading to higher tax revenue.”

Hmmm, where have we heard that idea before? Don’t the German voters know that supply-side economics is an Anglo-Saxon idea that has been thoroughly discredited? The leader of the losing party put it best:

“There is no talking around it: this is a bitter defeat,” a subdued Steinmeier said, vowing to lead a strong opposition.

I’d say so. I hope all you pessimistic libertarians will accept some good news for once. Krugman was wrong; this crisis doesn’t show that free markets don’t work. Don’t make me do any more of these posts.

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About Scott Sumner 492 Articles

Affiliation: Bentley University

Scott Sumner has taught economics at Bentley University for the past 27 years.

He earned a BA in economics at Wisconsin and a PhD at University of Chicago.

Professor Sumner's current research topics include monetary policy targets and the Great Depression. His areas of interest are macroeconomics, monetary theory and policy, and history of economic thought.

Professor Sumner has published articles in the Journal of Political Economy, the Journal of Money, Credit and Banking, and the Bulletin of Economic Research.

Visit: TheMoneyIllusion

2 Comments on The World Financial Crisis Continues to Discredit Socialism

  1. Since the Angles and Saxons both came from Germany, and Queen Victoria’s brother-in-law was a German Duke, the Germans are too intertwined to see past the truth in economics and embrace popular delusions.

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