Tuesday, July 27, 2010

New Lessons from Old Europe

Just a few years ago we spoke derisively about Eurosclerosis-high unemployment, inflexible labor market, and so on.  How times have change.

Unemployment in German is now lower than in the U.S. (a 7.7% jobless rate compared to 9.5% in the States).  This is remarkable.  Inflation and both public and private debt are much lower than in the U.S.  Sure, both corporate profits and productivity in Germany lag behind the U.S. (although productivity per hour worked is higher, Germans work many fewer hours).  The New York Times (2.4.2010) reports that German profit margins have fallen to 0.6% from over 6% in 2008; in the U.S. profits are down to 3.6% from 7.8%.

But the German system is more stable; it is a trade-off: lower profits for greater stability.  And while there is much to be celebrated about the dynamism of the U.S. economy, our current situation also makes clear the virtues of a degree of stability.

In the current financial crisis, Germany responded with a modest stimulus package.  Indeed, it was far too modest for Obama's tastes, but it has worked in terms of keeping unemployment low and thus maintaining (already low) domestic consumer demand.

The Kurtzarbeit ("short work") program provides government subsidies to companies to keep on their employees but reducing their working hours.  German companies have largely embraced the program, and go beyond its mandates, to keep workers, reducing their productivity but allowing them to keep the talent they have built up, to save it for better times.

The engine of the German economy are the Mittelstand businesses, small to medium sized enterprises that are often family or otherwise privately owned.  The Mittlestand have a reputation for honoring a commitment to their employees, embracing the German system of stakeholding and co-determination.  And this commitment shows through in keeping workers employed in hard times.  A key work in German discourse is "solidarity," and this embrace of the concept of solidarity produces different incentive structures for Mittlestand management.

Mittlestand companies rely on the patient capital of Germany's cross-holding banking system.  But the Landesbanks are under threat because of their ill-time foray into the U.S. exotic derivative market and from E.U. regulations to promote competition, and thus penalize state subsidies of banks.  Indeed, the current reforms in the German banking system may have a much wider impact than is thought, in terms of capital markets and their social implications.

Biking in the Rain, Bildung, and German (Un-)Happiness

Yesterday in Hannover it was cold and rainy.  So, in good German fashion, I went for a long bike ride.  I used to be puzzled by German forms of recreation, which sometimes border on the masochistic.  And I always got puzzled looks when I asked, "was it fun?"

It isn't supposed to be "fun."  At least not in that word's adolescent, giggly, common American usage.  It is more about the satisfaction of doing something that should be done.  It is about Bildung, a key word in German discourse that means, roughly, improving one's self or building character.  Bildung is the hallmark of the German bourgeoisie.  Rather than seeking mere fun, it is thought, one should strive to lead a fulfilled life (the Aristotelian good life, eudaimonia).

Germans also tend to be uneffusive.  A common reply to "how's it going?" (wie gehts?) is "Muss, ja?" ("it has to, doesn't it?").  A great compliment is along the lines of "Kann man nicht meckern" ("Cant complain").  Germans also tend to think Americans are more shallow because of their happy-go-luckiness, that a focus on "fun" and "happiness" is a weak basis to build character upon. 
Perhaps this is why Germans rank relatively low in the World Values Survey's (available at www.worldvaluessurvey.org) measure of subjective well-being (happiness and life satisfaction, equally weighted):
        Denmark              4.2
        US                       3.6
        Guatemala            3.5
        West Germany     2.6
        East Germany       1.8

Germany's low ranking on subjective "wellbeing" is surprising because in so many indicators (income, leisure time, health, etc.) German does exceptionally well.  Indeed, my argument about Bildung is that the German middle class does largely strive for multidimensional wellbeing through the cultivation of a "good life."  I attribute these results to the above survey's emphasis on "happiness" and the German cultural disposition toward understatement in this context.

(Interestingly, East German incomes increased dramatically after the 1991 reunification, and yet happiness levels have not gone up.  In 2006, unemployment was still above 18%, and in some areas it topped 25%.  Germany's generous social benefits and massive investment in the former East have raised incomes, but happiness depends on more than just income.  It also depends on doing something meaningful with one's life-having hope, which implies direction, which implies moral values with we just vest our very notions of self.)

Monday, July 26, 2010

Benefits of a Bike-Friendly CIty

In some places around town, bicycles far outnumber cars.  Indeed, Hannover, like most German cities, is remarkably bike-friendly.  Most streets have bike lanes, usually with their own stop lights.  There are well-marked and maintained bike paths through the wooded areas, around the lakes and marsh, covering the urban planners' green space.  There are tunnels under train tracks and bridges over highways for bikes.  High petrol taxes discourage driving and traffic congestion and parking problems make biking more appealing.  But the attraction goes beyond that-people tend to feel a strong connection to their bicycles. 

It's not just the bikers that benefit from this extensive and expensive infrastructure, for biking produces lots of positive social and economic externalities.  It reduces pollution and eases traffic congestion.  Biking promotes better fitness and health, lowering overall health costs.  Bike-friendly cities are more attractive to young, educated, creative-class workers.  And, beyond that, biking puts one in closer contact with the world, forcing closer contact with fellow citizens and the natural and manmade environment, subtly reinforcing a sense of community, belonging, and ownership.

Thus, investments in bike infrastructure produce larger social and economic returns than one might first think.  For U.S. cities, it is not just about catering to a small group of avid bikers, but reducing the barriers to biking, making it more feasible and convenient, and thus reaping the health, pollution, and social gains to be had.

More folks say they would like to commute by bike than do, for example.  Economists might say that they reveal their true preference when they get in their cars and drive.  But we should also take folks' stated preferences seriously.  And, in fact, making it easier to bike does increase the number of bikers on the street dramatically.  I have seen it happen in Nashville.  When I first started biking to work there five years ago, there was hardly anyone else on a bike.  Since then, bike lanes have been added to street in my part of town, and the number of bikers has shot through the roof.  Just reducing barriers slightly, providing a little nudge, is enough to change behavior-and allow people to do what they want to do.

We can learn a lot from places like Hannover in terms of making our cities more bike-friendly.  The bike lanes on streets are clearly marked.  At intersections, there is a painted box on the street where bikes can move in front of cars when turning.  Bikes often have their own light at intersections, and the choreography of stop lights and crossing signals is elaborate: the pedestrians' light turns green a few seconds before the others, and bikes too are given a few second head start (which is both safer and clears the intersection faster).  On many one-way streets, two-way bike traffic is still allowed (more convenient for bikes, and slowing cars down as well).  Bike paths in the woods and surrounding countryside are well marked with directions and distances.  And there are frequently park benches and trash cans and even little kiosks dotting the bike paths, even seemingly out in the middle of nowhere.

Sunday, July 25, 2010


Reading the major German newspapers (Die Zeit, Frankfurter Allgemeine Zeitung-although perhaps not the more mass-market Bild tabloid), one is struck by how often the word "Kapitalismus" appears-much more often than in the New York Times or the Nashville Tennessean. The U.S. press talks a lot about "the economy," but that is different-it takes a particular free-market variety of capitalism for granted, simply the way things are. Explicitly naming the system ("capitalism") highlights the more overtly negotiated nature of the German variety of capitalism-not so taken for granted that it can be left unnamed, not yet a part of a hegemonic common sense. (On the other hand, it should be noted, Kaptalismus is sometimes used by German journalists as pejorative shorthand for market excesses.)

On editorial pages, subway graffiti, and in daily conversation, one finds in Germany a widespread critical perspective toward capitalism. Even the Hannoverian neighborhood Südstadt Magazin (which is filled mostly with ads from local businesses and announcements of neighborhood events) takes this tone: a recent letter from the editor warned readers that "capitalism demands its tribute, and it demands it first and foremost from the place that appears weakest." A 2008 survey by the Bertelsman Foundation found that 75% of Germans felt that economic conditions in their country are "unfair." Overwhelming majorities agreed or strongly agreed that workers deserve a bigger percentage of company profits (96%) and that managers should worry less about profits and more about the social impact of their decisions (93%). More Germans than ever had lost confidence in the German "social market" economy (spiegel.de).

What Germans see as so unfair would seem downright socialist to many Americans. It is important to remember that while we often speak of "capitalism" (or "globalization") in the singular, there are in fact a multitude of capitalisms, or varieties of capitalism. Germany's version of compassionate capitalism-the soziale Marktwirtschaft (social market economy), the Rhenish model, the German model, ordoliberalism, or the stakeholding model-differs in important ways from Anglo-American capitalism. The German model tends to be more "coordinated" than the "liberal" Anglo-Saxon market economies.

And this speaks to questions of what is and what ought to be: if we question the basis of the economy, if free-market capitalism is not seen as somehow "natural" or inherently given, then we open ourselves up to new possibilities. What is the right balance between labor and capital interests? What should be the trade-off between leisure time and income? Rather than defer to mathematically-modeled market forces, how can ensure that our economy is producing the greatest utility (as broadly conceived) for the greatest number?

Indeed, perhaps if we saw our "pursuit of happiness" more as a pursuit of "fulfillment," and if we were willing to define fulfillment holistically-rather than over-privilege a single factor, such as income-we would induce very different incentives into our economic system, and strike a different balance between individual material advancement and regulatory frameworks that promote common goods. We might look to Bhutan's index of Gross National Happiness as an example. And wouldn't this get at fulfillment in a way that escapes measures of the GNP, much of which is composed of unhappy transactions (paying the divorce lawyer, or one too many bottles of vodka, or whatever).

Saturday, July 24, 2010

German Paper Clips, Books, and Three-star Restaurants

Today I went out to buy some paper clips. They were €1,49 (more than $1.75) for a small box of 100. Now you might think paper clips are paper clips, but most German ones are different. These Hansa brand clips have a heft to them that the ones I normally get from Office Depot in Nashville don't have, and they hold together my writings almost as well as a staple. It's a small thing, the heft and resistance of a paperclip, but here and in many other obscure corners of German daily life, we find preferences that value quality as highly as price.

My €1,49 purchase helps pay for the generous worker benefits at the Hansawerke factory outside of Hamburg and for the value of patronizing my friendly local office supply store. I could take a bus out to Staples and get cheaper clips, I'm sure. But I like the subtle heft; it feels like Germany to me.

Customers don't always have a choice to save money or not. Germany has legal, structural constraints that favor small shops and higher quality products. I wrote previously about store opening hours. There are also stringent laws governing the timing and depth of discounts for store sales. And in the book trade, retailers generally have to sell at the suggested retail price, Amazon.de the same as the little corner store down the street.

At the same time, there is a pronounced German cultural propensity to be thrifty (Günstig) and to downplay socio-economic inequalities. Take fine restaurants, for example. Carter Dougherty reports (in a 2008 New York Times article) that Germany now has more three-star restaurants (9) than any European country except France. But such high-end dining is a bargain in Germany: these restaurants charged about half (circa €$150) of what a similar full menu in France would be. Dougherty reports that upper-end diners' sense of justice and fairness would be offended at higher prices. (My wife and I like Michelin-starred Vau in Berlin, which offers its succulent neo-German cuisine in €12 portions at lunch.)

Thus, we find both structural constraints that favor small producers and vendors as well as deep-seated cultural notions of equality and solidarity that produce the particularly German paradox of thrift and a willingness to pay a premium for quality and positive social externalities.

Thursday, July 22, 2010

Enforcing Leisure: German Store Opening Hours and the Common Good

There is a price to pay for the many intangible benefits we gain from living in a community. Personally, I like it that the butcher, the guy at the office supply store, the woman at the café, all know who I am and make small talk when I come in. We aren't great friends, what we know about each other is pretty shallow, and yet there is a sense of human connection that gives greater satisfaction to my little economic transactions.

Yet, we are too often unwilling to pay the price to sustain our communities. The reasons are varied, from the eternal tension between individual freedom and social obligation to a distrust of bureaucratic inefficiencies and corruption to what some would argue is an innate propensity for economic maximization.

Germans are generally more willing to pay a premium for positive social externalities. This is partly cultural and partly structural. There is a tendency to value quality over quantity in personal consumption, and yet this is often enforced through regulations that reduce choice. Practices are rapidly changing here, but compared to the U.S. the difference in attitudes is striking.

Within a few blocks of my Südstadt apartment in Hannover, there are four bakeries, an apothecary (Apotheke) , drug store (Drogerie), a news stand, a book store, a bottle drink store and delivery service (Trinkhalle), an office and school supply store, and any number of kiosks and cafes. These are all owner-operated, single-location small businesses. (They coexist alongside the chain supermarkets in the area.)

I could take a bus out to the Staples and get my printer paper cheaper, but it is worthwhile for me to pay a bit more to save the time and hassle of getting there and to have a brief social interaction with my purchase, and leave with the feeling that I have supported a business and a person that I like.

But in late July and August, it can be a real pain in the ass, as small businesses here take a summer break (Sommerpause) and reduce their hours. I've been frustrated lately going to get bread (the bakery that makes the good Gästebrot was closed) and a notebook (the store closes early during Summer).

When I first started coming to Germany, I found the laws and norms around store opening hours inconvenient to the point of being oppressive. Under the Ladenschlussgesetz, the federal law that governed store opening and closing hours until 2006, most stores could open only Monday through Friday between 6:00am and 6:00pm and for a half day on Saturdays. Some cities and states additionally allowed extended hours on a "Long Thursday" (or other weekday) once a month. Stores in train stations and gas stations were exempt, and these grew into mini-supermarkets for emergency purchases. (Since 2006, state laws have replaced the federal regulation, and most have significantly loosed restrictions; two grocery stores in my neighborhood now stay open until 8:00pm six days a week.)

These hours can be a huge hassle as one tries to balance shopping for necessities with the other demands of daily life. But it also helps sustain small businesses, as many family-run stores cannot afford to stay open extended hours. So, it would seem, the market can make a rational choice for us here: we may value convenience more than the experience of shopping in local stores, and so the market responds. But it might also be the case that we find it difficult to place a clear value on the social externalities of going to our local stores, which heightens the attraction of a clear financial, euros-and-cents-in-my-pocket advantage.

Behavior economists have show that most of us are highly predisposed to take modest short term-gains over more lucrative long-term rewards. Would you rather I give you $1 right now or $2 in a few weeks? Waiting a bit would produce a 100% gain, but most would rather take the money now and run. Most smokers would like to quit and see the long term gain in abstinence, but the pull of the immediate hedonistic gain proves too compelling.

Might it be the case then that laws, regulations, and social norms that reduce our range of choice and individual freedom might make us better off? Not just better off physically or financially, but a greater self-defined, subjective sense of well-being, of being the sort of people we want to be, approaching an Aristotelian eudaimonia.

Having to do one's shopping on a Saturday sometime sucks. But the Saturday shopping experience also speaks to the social externalities of store opening hour laws. Forcing a concentration of shoppers at certain times brings folks from all walks of life into communion. Sure, it is convenient to grocery shop at 2:00am, but there are also benefits for us collectively when we all go out Saturday mornings and see each other.

It is not only store opening hours, but vacation times that can be a hassle for customers, as my late summer shopping experiences here have shown. By law, German workers get four weeks of paid vacation, although the national average is a much higher 7.8 weeks of vacation (paid and unpaid); the U.S. average is 3.9 weeks. All in all Americans work on average 1824 hours per year and Germans work 1480. The value added per employee in the U.S. is substantially higher, but productivity per working hour is higher in Germany.

This suggests one (economic) reason why Americans work more: their time is more valuable. Salaries are higher, and so taking time off become more costly. Other economists have suggested it is European tax rates: working is not as lucrative in Germany, which tilts the balance toward taking more time off.

Another, more plausible, solution also emerges from economics, namely that this is a coordination problem. Except for those at the extremes of the socio-economic spectrum, vacation time is not decided unilaterally. This is not just a matter of formal regulation but informal norms as well. A young associate in a law firm would be at a huge disadvantage if she took off on vacation while her colleagues worked. It might be the case that everyone at the law firm would love to take off more time, but the coordination problems of the network-the structures and incentives of the system as a whole-would thwart those desires. Americans might want to work less, but in the competitive economy there is little chance to coordinate such desires. In a recent paper, Alberto Alesina, Edward Glaeser, and Bruce Sacerdote (quoted in The Economist) argue that "national policies that enforce higher levels of relaxation can, at least in theory, increase welfare." And not just in theory, I would add.

Tuesday, July 20, 2010

Merle Hazard on the Greek Debt Crisis

Merle Hazard is at it again, this time explaining the Greek debt crisis, the complicity of Goldman Sachs allowing them to borrow short at a lower rate, and the danger now of the Euro crumbling "like Feta cheese." See and hear Merle Hazard's Greek Debt Song here.

Merle's song was the centerpiece of a PBS NewsHour story on the Greek crisis. As usual, the NewsHour was the one U.S. television outlet to go into real depth about the crisis in this 10 minute (yes, ten minutes!) report. We need more of this sort of depth in all our press coverage.

Sunday, July 18, 2010


I am here in Germany writing about Germany, the context providing my daily inspiration. The dachwohnung (roof apartment) where I stay is a fourth floor walk-up (which, translated into American conventions would be on the fifth floor—in fact I walk up six steps to get to the 0 floor).

I live in the Südstadt section of Hannover. This area of town is older than most and solidly middle class, with a few pockets of relative poverty and several sections undergoing a modest gentrification by young couples.

The streets here are quaint, in that slightly oppressive way quaint can be. Südstadt was built up during the 1920s and 1930s, with apartment buildings encircling entire blocks. It was spared the worst of the bombing that destroyed most of Hannover during the war. All around Südstadt are oddly winding streets, with contiguous rows of old reddish-greyish-brown brick apartment buildings. They are charming, well-kempt, Bauhaus or Art-Deco-ish in design, with the occasional whimsical element (such as a gargoyle or a jutting balcony).

There is always a slightly sinister undercurrent to this sort of German quaintness—that nice little family-owned cheese shop down the street whose sign proudly proclaims “Zeit 1933” in a typeface that looks at once Art-Deco-ish and fascist. On the edge of Südstadt is the Maschee, a man-made lake built in 1934-1935 as a public works and employment project. Around the shore are bike and walking paths, boat rental stands, and a number of statues of sportsmen, Aryan-esque nudes, and other motifs of the period. Here, for example, is the sculpture “Menschenpaar” (“Human Couple”), dated 1939 (artist: George Kolbe). (After 1937, the Hannover government was solidly Nazi, and over the next few years more than 2500 Jewish residents were deported to concentration camps.)

Inside the apartment blocks are large courtyards, sometimes planted with gardens, sometimes given over to parking. From any apartment, one can see the living and bedroom windows of almost everyone on the whole block, a panopticonic effect that was perhaps intended. I can hardly help but notice what my neighbors are watching on t.v. or when they have dinner or when they go to bed.

This monitoring, as Foucault point out, becomes internalized in ways subtle and profound. And yet, in Germany, such monitoring coexists with stringent post-war privacy laws meant to protect citizens from being singled out for approbation or retribution. One cannot even publish a photo or name without permission; in the newspaper, criminals are referred to by their first name and initial.

And it is these laws that vex operations such as Facebook and Google Earth in their German operations. Architecture and public service ads encourage Germans to show “Civil Courage” in calling out vandals and bad behavior, but not through institutional channels—decentralized. But Facebook shakes up this distinction between content provider and decentralized peer-to-peer communication.

Saturday, July 17, 2010

Flag Flying and German "Normalization"

The spirit here in Hannover got a lot more subdued after Germany lost to Spain in the World Cup semi-finals. But the flags are still flying, and this is somewhat surprising.

When I first started coming to Germany 20 years ago, you hardly ever saw a German flag except at key federal government buildings, and even then the display was less insistent than is the norm in the U.S.

The shift started with the 2006 World Cup hosted here. I was living in Hannover at the time, and almost out of nowhere, one started seeing a large number of flags hung from balconies and waved outside of stadiums. But with this year’s World Cup, there has been an explosion of proud German flag flying. You see flags everywhere: on balconies and car antennas, for sure, but also on sticks strapped to bike fenders, on t-shirts and backpacks, even painted on fans' cheeks. The Germans rediscovered their flag, and with a fervor.

Even six or seven years ago, all of this flag waving would have been seen at best as impolite, if not menacing or even threatening of national order. Pundits here claim that this is a clear sign of Germany's long awaited “normalization”—that the country has moved on from the legacy of the Third Reich to become a “normal”, flag-flying, sending-troops-to-Afghanistan nation. And while this certainly does bring Germany more into line with western norms, I can’t help but think something is lost as well.

There was and is virtue in Germany’s commitment to its historical debts, to remembering the depths to which nationalism and racism can bring us.

Maybe I'm just nostalgic, but I always thought that there was something profoundly right about Germany's vehemence in rejecting nationalism, in recognition of its devastating effects through the Third Reich. Of course, we can't stain today's youth with the blood of the Holocaust, but it is also the case that Germany isn't just any country. And it seems truly, sincerely virtuous that Germany has kept this history so front and center, in monuments and school texts but also myriad everyday ways.

How “normal” should Germany be?

Friday, July 16, 2010

A Positive Anthropology

I’ve been thinking lately of a sort of “positive anthropology.”

The notion takes off from the current fashion for positive psychology, a booming field that ranges from scientific studies of happiness to a flurry of popularizing books. In principle, it is a compelling idea. Psychology, especially the clinical variety, is, after all, meant to improve people’s lives. Yet, the field is also ripe for being misconstrued and co-opted into the sort of self-help genre that speaks to notions of spiritual poverty in the face of material wealth

Those concerns notwithstanding, it seems that there is a place for a constructive sort of positive anthropology. We anthropologists are very much driven by critique and exceptionalism. And we do critique very well, serving a useful disruptive, counter-hegemonic function (when we talk outside of our own circles, at least), making sure that cultural constructions are not misconstrued as being natural or predetermined.

A positive anthropology would offer a complementary approach, documenting and interpreting best practices around the world. The data are already out there in abundance, but a positive anthropology would require a shift of tone and framing—looking cultural norms and social structures that seem to work well and from which lessons could be extrapolated (and sometimes forms even more or less directly adopted). This could be something as concrete as a technique to induce more polite driving (as has worked in Bogota) or something as ethereally cultural as attitudes toward “fairness.”

Such an approach brings up the question of what “better” is, but a positive anthropology could be essentially ecumenical (what folks involved in a particular practice consider better, and this might be more or less transferable to other practices and contexts). It may also be the case that we could make claims about what a “better” for our own contexts and society could be. In this light, a neo-Aristotelian perspective offers a useful direction. Aristotle’s “good life” or “meaningful life” (eudaimonia) need not be wed to his provisional list of Greco-centric virtues (arete) but rather more broadly to the idea and ideal of virtues.

There is already a form of positive economics in development studies, particularly the influential work of Amartya Sen. Sen argues that development should be done in a way that promotes a meaningful life. And, for Sen, at heart always the economist, if one with a fondness for philosophy, that comes down to empowering people (ensuring that they have the “capability” to make decisions and carry out desires in a way that is meaningful). Sen stresses, and rightly so, the importance of capabilities. In material terms, a person fasting may be in the same condition as a person starving; but in this scenario, the capability to choose makes all the difference in the world.

The work of Sabina Alkire and James Foster at the Oxford Poverty and Human Development Initiative is breaking new ground in measuring capabilities such as physical safety, the ability to live without shame, and subjective wellbeing. They integrate these “missing dimensions” into a multidimensional poverty measurement compatible with the United Nations Development Programme’s Human Development Index. Alkire has advised Bhutan on its Gross National Happiness index, and countries from France to Chile are seeking to measure more holistic wellbeing rather than just GNP as a measure of progress.

This marks a major shift, not just a bit of statistical tinkering, in the ways we measure how well-off folks are. And has such it has huge foreign policy as well as domestic implications. If a government’s role is to promote overall wellbeing and not just economic prosperity and physical security, the required policy shifts. It might well be that obligatory European style vacations increase an overall wellbeing index while hurting GNP and productivity figures, for example.

A positive anthropology would contribute to this effort, documenting cultural norms, social structures, and institutional arrangements that seem to promote wellbeing in their specific contexts. These could form a vast social toolkit, not unlike the Chicago Boys’ more parsimonious market liberalization techniques for spurring economic growth. Critique would continue to be central to the enterprise, but complemented by attention to positive alternatives as well.