Monday, 20 October 2014

When is a social democrat not a social democrat?

When he's Sigmar Gabriel, head of Germany's SPD and Minister for the Economy.  Here's Mr Gabriel in an interview with the Bild newspaper, defending the so-called "black null," the plan for a balanced budget:
Bild: There's a discussion in the SPD about whether or not new [government] debts ought to be incurred.  Is budget discipline social-democratic?   
Gabriel: Yes. Workers [Arbeitnehmer] want their taxes to be spent on social security, schools, or policy and not on interest payments to big banks for government debt. Only big banks earn money from high government debts. Government borrowing is antisocial.
There's a major problem with this argument: as Ambrose Evans-Pritchard noted, last week German government bond interest rates were "touching levels never seen before in any major European country in recorded history." In fact, correcting for inflation, Germany can literally borrow money interest-free:  August's inflation rate was 0.8% per year, and its ten-year bonds as of today yield 0.85%.  

Anyone who cannot find a way for the state productively to invest interest-free loans cannot be characterised as a social democrat (there's certainly plenty of low-hanging fruit).  For that matter, anyone who deliberately misleads workers about the costs of borrowing doesn't deserve the title either.  

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