Review of Austrian Economics - The Ludwig von Mises Institute

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Hoppe: De-Socialization in a United Germany 95 West Germany the continuing migration is bound to further aggravate West Germany's already recalcitrant unemployment problem. On the other hand, even at the present East mark-wage-rates the East German economy is largely uncompetitive in world markets. By actually fixing wage rates several times higher—by requiring nominally identical deutsche mark-wage-payments—the East German labor force will be priced out of the market to an even greater extent. The 'normal' flow of capital from high to low wage areas will be drastically reduced and massive—and with unemployment insurance—lasting unemployment will result. In order to finance East Germany's large-scale unemployment, steady massive transfer payments will be required from West to East, but also from East Germany's productive sector to its unproductive one. Once again, taxes and/or paper money creation will have to be substantially increased. Whatever new productive energies were set free by East Germany's partial privatization will immediately be stifled, and within an environment of rising unemployment figures and economic stagnation nationalistic sentiments, already on the rise, will receive another boost. 30 While the course has largely been set and German reunification has proceeded through the incorporation of East Germany into the West German welfare state, an alternative existed which would have spared the Germans the economic frustrations inevitably associated with the current planned course of reunification. Unfortunately, this radical alternative—the uncompromising privatization of East Germany, the adoption of a private-property constitution, and reunification through a policy of complete, unilateral free trade—has so far found practically no audience. Almost all alternatives proposed are variations of the same welfare-statist theme: either somewhat more drastic (i.e., more redistributionist), advocated mostly by Eastern economic 'experts', or somewhat more moderate, as advanced mostly by the economics establishment of West Germany. Nor does there appear to be any suspicion among the German public regarding this happy uniformity of expert opinion. Is it not curious that even in 'liberal' West Germany the instruments of opinion molding are largely in governmental hands? There are practically no private schools or universities; radio and television are By the end of 1990, the unemployment rate in East Germany had risen to about 25 percent (2.5 million); and increasing animosity among East Germans toward their own foreign 'guest workers' had become a widespread phenomenon.
96 The Review of Austrian Economics, Vol. 5, No. 2 mostly state-owned or, in the case of a few exceptions allowed since the mid-1980s, subject to strict governmental licensing requirements; and there are almost no independent, private free-market think-tanks or foundations. Moreover, why should the West German power elite and the economic establishment on its payroll actually have the same interests as the German public? Indeed, is it not much more realistic to assume, as the Austrian school of economics long ago explained 31 and the public choice school has reiterated more recently, 32 that government officials and their intellectual bodyguards, like everyone else, pursue their own narrow self-interest rather than promoting the so-called public good? And is it not rather obvious that the interest of the West German government and its Eastern affiliate is the expansion of its own power: of tax revenue and governmentally controlled assets. The presently unfolding reunification process promotes precisely this goal and is indeed bound to lead to Germany's becoming Europe's foremost political power: and that what might appear as an ill-conceived strategy from the point of view of the German public, then, is actually the successful accomplishment of the German government's own different, even antagonistic interests? 33 The German public today is too authoritarian minded to ask any such questions seriously. Much learning the hard way will be required, and much damage done, before the radical privatization alternative is to receive its chance, if ever it does. Only then may the German public begin to realize that the complete neglect of this option among the presently discussed reunification strategies may not be an accident, but have a systematic explanation. The solution of the present crisis must begin with the recognition that while it may not be the East Germans' fault that they are as bad off as they are, it is also not the fault of the West Germans. As a matter of fact, the millions of people who left East Germany for the West, in many cases risking their lives, actively contributed to the undermining of the East German regime and in any case demonstrated correct 31 See Ludwig von Mises, Bureaucracy (New Haven: Yale University Press, 1944). 32 See James M. Buchanan, What Should Economists Do? (Indianapolis, Ind.: Liberty Fund, 1979); Gordon Tullock, The Politics of Bureaucracy (Washington, D.C.: Public Affairs Press, 1965). 33 On the theory of the state see Franz Oppenheimer (one of Ludwig Erhard's teachers), System der Soziologie, Vol. 2: Der Staat (Stuttgart, 1964); Albert J. Nock, Our Enemy the State (Delevan: Hallberg Publishing, 1983); Murray N. Rothbard, For A New Liberty, (New York: Macmillan, 1978); idem, The Ethics of Liberty (Atlantic Highlands: Humanities Press, 1982); Hans-Hermann Hoppe, Eigentum, Anarchie und Staat; idem, A Theory of Socialism and Capitalism; Anthony de Jasay, The State (Oxford: Blackwell, 1985).
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