Part 1. The French anthropologist-demographer Emmanuel Todd, who is becoming increasingly fashionable in the Anglosphere, is also a scathing critic of the euro. I examine his “anthropological” views of Germany and the euro, which I also contrast with those of Michael Pettis.
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The other day I stumbled upon this innocently admiring blogpost on Emmanuel Todd which contained a video of him speaking in English about France and the euro. The clip is an excerpt of a panel discussion organised by Harper’s magazine (partial transcript).
In the Harper’s video Todd mostly wears his demographer’s hat and the anthropologist doppelgänger that is conspicuous in his French appearances is rather restrained. Around 18:20 he argues that the euro cannot work, in part, because the French population is much younger than Germany’s. There’s some truth in this, because a younger population may prefer more inflation and an older one may prefer more surpluses. But, arguably, Germany with its grumpy old people is more youth-friendly when it comes to employment policies, than France.
Between 2:30 and 3:30, Todd mentions that France had traditionally relied on currency devaluation in times of recession in order to achieve full employment and avoid fiscal austerity. That’s precisely what Eurozone countries can’t do today. That’s mentioned almost in passing, but it’s a key element of Todd’s views of Germany and the euro. He believes that for Germany “competitive disinflation is a nationalist strategy“, because German industry has achieved international competitiveness by restraining growth of labour costs at the expense of its European partners. But when it comes specifically to competing for a share of the export pie, there is no difference between Germany’s “internal devaluation” and the standard “external devaluation” that Todd would like France to be able to do. They are both competitive devaluations !
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A prominent French critic of the euro ubiquitous in the French media, Todd is an anthropologist-demographer who has documented the family structures of the world and their relation to political systems and ideologies. His very best book, L’invention de l’Europe, which has yet to be translated into English, reinterprets the whole of European history in terms of diverse family systems. (See Craig Willy’s masterly summary of the book.)
For anyone who follows France, Todd’s views of the euro should be familiar — the European situation cannot be analysed just economically, it requires the insight of the historian-demographer-anthropologist ; the euro is a vehicle for German domination ; the survival of the euro would imply the death of democracy ; François Hollande is not president of France but der deutsche Vizekanzler, etc. And he’s been saying such things for some time now.
Although he’s a brilliant polemicist who runs circles around his debate opponents, his rhetoric can be pretty crude and shrill, and he’s been criticised for “Germanophobia” (also here). In a French TV panel discussion, he argued, in a few years there may be “no French industry worthy of its name”, and the “attitude of the German bosses behind Angela Merkel” is to engineer the “elimination of Germany’s competitors”. When the co-panelist Ulrike Guérot protested that Germany is today a liberal pluralistic society, Todd replied, yes, we all know about the many Germanies but in the end the illiberal, authoritarian one always wins ! In the Harper’s transcript of its panel discussion, Todd said,
In this French TV debate with Marine Le Pen nodding across from him, Todd went all out (after 13:00) :
We speak of protectionism for Europe. Why don’t the Germans favour protectionism for Europe ? And why are the Germans so-called “free-traders” ? It’s not like the English. They are true free-traders, they committed suicide for free trade, they sacrified their industry for free trade…. The Germans are different…. And I repeat [tone of sarcastic pro forma gratitude] it’s an admirable culture, we owe them [this and that] But there is, in the German culture, a different conception of the nation and national solidarity. What does that mean ? If you were to implement in France a free trade regime, the French, the really nice universalists that we are, woud buy any old car, according to price and quality. Moreover we would buy foreign just because it’s nice to have foreign things. But that is not [waving his finger] German culture. It’s a culture of controlling its neighbours… The Germans hunt in packs… It’s a cultural thing. It’s not pretty, it’s very unpleasant for our French conception of the universal man. [interruption] But that’s what’s happening ! The truth is, the German citizen, not always, but statistically, will buy German…
The core problem, in Todd’s eyes, is a deep-seated chauvinistic quest across the Rhine for economic hegemony. His vision of the “German problem” is rather reminiscent of the one identified by Clyde Prestowitz in the 1980s, a jeremiad of Japanese economic hegemony. It’s not the conventional narrative of low-wage countries eating away at the industrial base of the rich economies. In an interview in Marianne, Todd compared Germany with China :
Since Todd is quite arrogant and condescending about having a deeper “anthropological” perspective on the European Union than other commentators, it’s worth exploring what that is exactly.
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According to himself, much of Todd’s analysis is a direct implication of his academic work. In Willy’s summary of Todd, the “stem family” that is characteristic of Germany is
In L’origine des systèmes familiaux, Todd’s magnum opus (also yet untranslated), the “stem family combines authority and inequality, essential bureaucratic values, and its ideal of continuity was one of the roads toward the modern state”. This implies :
The book which discusses some actual economics is the untranslated L’illusion économique. It argues that globalisation is defined by the interaction of two opposite yet complementary systems of capitalism — the Anglo-American or individualistic capitalism ; and the “integrated” capitalism exemplified by Germany and Japan. (The book also contains a whole chapter bitching about the lack of anthropological perspectives in economic analysis.)
I paraphrase Todd : Anglo-Saxon capitalism is focused on short-term profits and consumption, resulting in, simultaneously, high turnover amongst workers, frequent creative destruction of businesses, a low savings rate and high external deficits. This system requires for its perpetuation the existence of its “double negative”, the “integrated capitalism” of Germany and Japan where
…the true objective of the firm is not the optimisation of profit, the satisfaction of the shareholder, but the conquest of market shares, through the perfection and expansion of production. From an ideological point of view, the producer is king : the attention to technological progress and the training of labour are intensive. You have to excel in quality. The consumer is but a modest subject and one is tempted to assert that the deep logic of the system is to treat consumption as a necessary evil…
Germany and Japan are viscerally incapable of consuming the totality of goods produced by their industrial systems. Like Anglo-Saxon capitalism, the Germano-Nippon type is simultaneously coherent and unbalanced. Exports are a condition of survival, which presuppose the existence of its double negative, the capitalism of the importers.
Much of the above synthesises two strands of academic thought which were a vivid part of the Zeitgeist in the 1980s and 1990s : the “Asian economic model” as exposited in Chalmers Johnson’s MITI and the Japanese Miracle or Alice Amsden’s Rise of the Rest : Challenges to the West from the Late Industrialisers ; as well as Michel Albert‘s “capitalisme rhénan” or “Rhenish capitalism”, the Eurocentric variant of the “Asian model” argued in Capitalism vs Capitalism (which was more widely read in France than elsewhere). Both strands were ultimately rooted in older alternatives to British classical economics — the American institutional economics associated with Thorstein Veblen (and later with John Kenneth Galbraith) and the German historical school of economics. The ultimate genealogy for both might be the German Friedrich List (who heavily influenced Japanese planners in the 1880s and 1890s). In the 1990s, however, much of that fashion receded with Japanese stagnation, the Asian financial crisis of 1997-98, high unemployment in the “big” economies of Europe, and American economic boom.
Todd’s own idiosyncratic twist is the very Gallic anthropologisation of that “duality of global capitalism” :
Most of the significant traits of individualistic capitalism can be reduced to the fundamental values of the absolute nuclear family, which favour emancipation and mobility of individuals. At the most general level, the values of the nuclear family determine a preference for the short term, what Anglo-Saxon authors call “short-termism”. The nuclear family system does not have a lineage plan, it is defined by a continuous separation between generations [“ruptures générationnelles successives”]. Children, once adults, must leave [the family], begin a new story. The discontinuities which characterise the Anglo-Saxon world, whether it be the mobility of capital or of labour, are but the reflexion of the customs favouring mobility in general…
The long-term outlook of “integrated” capitalism, favouring technological research, investment, training of personnel and job stability within the firm — symmetrically [i.e., as a parallel with Anglo-Saxon capitalism] finds its source in the values of continuity which define the stem family. Strong parental authority, inequality of inheritance, existed only to assure the perpetuation of the lineage. The continuity of the past, noble or peasant, becomes the continuity of the firm and its projects.
The strong propensity to save and invest which characterise “stem capitalism” is but a particular economic manifestation accounting for this relationship with time. To save, to invest, is to project oneself into the future. Conversely, consumption, engrossed in the present, and escape into debt reflect, in a logically complementary manner, the mental universe of the nuclear family.
[Paraphrase : the differences between “nuclear” capitalism and “stem” capitalism could not be made manifest without globalisation.]
It’s because they can export that Japan and Germany have expressed their tendency to underconsumption ; it’s because they can import that the United States has expressed its tendency to overconsumption. Openness has not led to a convergence of systems but to their differentiation. Economic history does not follow La Fontaine’s fable : the ant (stem) lends to the cricket (absolute nuclear) what it needs — cars, television sets, computers — in order to continuing singing.
I think the above is very silly. Although I do agree there are cultural differences between “individualism” and “collectivism”, nevertheless Todd’s derivation of these traits from family structures is little more than literary semiotics. That’s perhaps why he can occasionally babble about “killing God” or “killing the father” (à la Freud) in La troisième planète (which has been translated into English as Explanation of Ideology).
The mapping of those individualist/collectivist traits to the macroeconomic aggregates we see today is all wrong. Todd wants to “essentialise” the macro conditions that have only existed since the late 1970s, but those are not deep-seated historical truths at all or manifestations of deep culture. They are instead highly contingent facts of politics and economics. England had been the premier surplus-savings exporter of the 19th century, contrary to everything Todd says. At the same time, the United States, despite its individualistic ethos that supposedly champions the consumer, nonetheless created an utterly producer-dominated system of quasi-monopolistic industrial trusts protected by tariffs. And it’s especially clear in retrospect that Japan and the East Asian tigers were high-surplus countries after 1945 only because the United States played along as part of the Cold War strategy of building up its allies.
In fact, Todd’s “essentialisation” of current account balances can easily be disproved by the record of the last 140 years (5-year moving averages of current account balances as % of GDP) :
[Source] South Korea, another “stem capitalism” country in Todd’s estimation, had actually been riddled with current account deficits before the 2000s when it decided to change policy as a result of the Asian financial crisis.
Todd’s “anthropological determinism” is misplaced. His vision of the hierarchical authoritarian German culture is much more geared toward explaining the German past, than the common thread running through both that past and the current realities of the Federal Republic. I’m not opposed to anthropological determinism per se. There are indeed deep cultural differences between Germany (or northern Europe) and the rest of Europe that affect the euro, but there is a better “anthropological” angle than the one Todd pushes. (*)
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Todd’s “anthropological” view of global balances clashes fundamentally with that aired by Michael Pettis, author of The Great Rebalancing, who is has become for the 2010s what Nouriel Roubini had been in 1998-2008. Pettis is not the Roubini of Dr. Doom, but another who popularly expounds a view of the world economy as a closed system in which current account imbalances play a commanding role. The drumbeat that Pettis constantly beats is that government policy, not the primordially thrifty behaviour of Chinese and German households, is the cause of global imbalances.
Germany’s export of its excess national savings (i.e., not needed for domestic purposes ) did help finance the debt binge in the crisis countries of Europe and, in the view of many, Germany’s large current account surpluses are inconsistent with economic recovery in the Eurozone. From Pettis’s article cited above :
In the 1990s Germany could be described as saving too little. It often ran current account deficits during the decade, which means that the country imported capital to fund domestic investment. A country’s current account deficit is simply the difference between how much it invests and how much it saves, and Germans in the 1990s did not always save enough to fund local investment.
But this changed in the first years of the last decade. An agreement among labor unions, businesses and the government to restrain wage growth in Germany (which dropped from 3.2 percent in the decade before 2000 to 1.1 percent in the decade after) caused the household income share of GDP to drop and, with it, the household consumption share. Because the relative decline in German household consumption powered a relative decline in overall German consumption, German saving rates automatically rose.
Notice that German savings rate did not rise because German households decided that they should prepare for a difficult future in the eurozone by saving more. German household preferences had almost nothing to do with it. The German savings rate rose because policies aimed at restraining wage growth and generating employment at home reduced household consumption as a share of GDP.
As national saving soared, the German economy shifted from not having enough savings to cover domestic investment needs to having, after 2001, such high savings that not only could it finance all of its domestic investment needs but it had to invest abroad by exporting large and growing amounts of savings. As it did so its current account surplus soared, to 7.5 percent of GDP in 2007. Martin Wolf, in an excellent Financial Times article on Wednesday on the subject, points out that
“between 2000 and 2007, Germany’s current account balance moved from a deficit of 1.7 per cent of gross domestic product to a surplus of 7.5 per cent. Meanwhile, offsetting deficits emerged elsewhere in the eurozone. By 2007, the current account deficit was 15 per cent of GDP in Greece, 10 per cent in Portugal and Spain, and 5 per cent in Ireland.”
( Pettis is a little too lenient on the PIGS countries. Leniency is perhaps deserved for Ireland and Spain, whose governments were not fiscally reckless as their economies were growing in the 2000s, although their fiscal policies might have been even tighter given all the capital inflows ; and it was their private sector which absorbed their countries’ current account deficits. But in Portugal and especially Greece, it was government budget deficits which fuelled the current account deficits. That was not “inevitable”. )
Two things to keep in mind, which are tautologies I won’t bother explaining : (a) trade surplus/deficit (more precisely, current account surplus/deficit) is the mirror reflexion of the national savings surplus/deficit, or the excess over GDP of total domestic spending by consumers, businesses and the public ; and (b) national savings is not the same thing as household savings. Changes in national savings can be caused by shifts in the behaviour of governments and businesses, not merely through the stirrings in the bosom of the thrifty burgher. So while it’s true that the Germans are thriftier than many of their neighbours,
the German household savings rate has changed relatively little, in comparison with the country’s current account balance :
So Germany as a country is not, contra Todd, some intrinsically surplus-producing economy. Still less was the turn from deficit to surplus in Germany’s current account an element of some mercantilist-hegemonist export strategy by the Reich to “exterminate” its neighbours economically, as Todd would have it. Unlike China’s current account balances, Germany’s are a by-product of domestic developments, and in fact I will argue — contra Pettis — the external surpluses were not even really intended at a policy level.
I repeat, I do believe there are deeper “anthropological” reasons for Germany’s economic behaviour. I only reject Todd’s traditional family structure as the explanation. But part 2 discusses roots of German economic behaviour.
[ The comments section of Part 1 is now closed. In order to comment, please go to Part 2, “The Anthropology of Financial Crises“. ]
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Very amusing title. A few reactions in general:
* I do think Todd tends to over-generalize from his work on family systems and essentialize.
* I am looking for corroborating evidence to Todd’s family work (admittedly I haven’t read La Diversité du monde or L’Origine des systèmes familiaux) to put his findings in a wider context. For example, where is the work on politics and contemporary family structures (e.g. consanguinity in Islamic world, single motherhood in Africa, emerging postmodern European family)?
* Where I think Todd is essential is in beginning to think about national character and its relationship with the dynamic, temporal (I can’t think of a better word) process of modernity. That is where L’Invention de l’Europe shines, in rehabilitating national character, which globalists, Europeanists and blank-slatists said didn’t exist and so we’d all converge. Nations’ differing reactions to the eurozone and to global capitalism show however that, indeed, there deep-rooted internal dynamics at work in each country.
* I for one am not necessarily against “anthropological determinism,” but anthropology is not limited to family systems, but rather goes more deeply to a population’s cultural, social and other characteristics. It seems to me one has to go further than Todd and take the full spectrum of human diversity into account.
* The question with regard to Germany and the eurozone is then one on Germany’s national character. This is a very difficult, “big leagues” question and I don’t claim to be informed enough to know the answer. Clearly Todd does not deal with the topic with as much nuance and sensitivity as one might like, but I also understand his frustration when arguing in front of ninnies who deny the very existence of a German national character.
* On a technical level, the problems of the eurozone stem in part from a difference in macroeconomic culture between Germany and the rest. Germans are ordoliberal, they defer to their central bank, they promote self-discipline (Stabilitätskultur) and wage restraint rather than quick fixes. In contrast, labor costs rise through the natural process of wage/labor bargaining in France/Southern Europe which means devaluations are necessary to maintain competitiveness and the Anglo-Americans are notorious in their resorting to “Keynesian” money-printing and deficit spending (Pumpkapitalismus) to maintain consumption levels. The question is whether these differences in macroeconomic policy culture stem from national character. I would tend to think they must in part.
* My impressions: I would not be surprised if there were some truth to the claim that Germans on average have more spontaneous deference to authority. Germans are less selfish than Anglos and less narcissistic than French. They tend to “penser collectif” (have team spirit). (Compare for example, the career German MEPs happy to work discretely out of the limelight, and many French or Italian MEPs who see the European Parliament as a temporary hardship posting or are merely there for the monies). Or consider the particularly rigorous and indeed authoritarian way the Federal Republic enforces political correctness and marginalizes nationalists, meticulous illiberalism in the name of liberal democracy, which strikes me as very much in line with German history. Equally there is a curious elitism in German politics, of deference to “the expert,” whether incarnated by the Bundesbank, the Constitutional Court, the government or whatever. French politics is of course notoriously presidentialized, but the people are equally-famously rebellious, and prone to throw away regime and Constitution when it suits their fancy. I am also struck that German ruling elites have almost always rejected the idea of the sovereignty of the German people, whether we are talking about the feudal monarchies, the Kaiserreich, the Third Reich, the GDR, the Federal Republic or the Europeanized reunified Germany (“I had to act like a dictator” to impose the euro (thus eliminating German sovereignty), Chancellor Helmut Kohl has said).
* So it does seem to me that the willingness of the Germans to meet the rigors and self-discipline of ordoliberalism and hard money may well stem from national character, which in turn may arise from the stem family (among other things).
* So in short, for Todd: National character matters and therefore we shouldn’t be jamming two or three dozen nations according to one model and expect everything to be fine.
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thanks for the excellent comments, you read part 2 i assume ? just to be clear i do NOT have a problem with “anthropological determinism” but i don’t think german economic behaviour originates in its family structure and i would be much more reductive than calling it “national character”, i also prefer explanations that apply to the continental germanic-speaking countries plus finland as a whole because of their macro- and microeconomic similarities. will post more later.
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The question is whether these differences in macroeconomic policy culture stem from national character. I would tend to think they must in part.
but the longue durée ! before the great war the idea that the state should actively manage aggregate demand, whether through fiscal or monetary channels, simply did not exist anywhere in the world. the anglosphere may NOW be known for active demand management, but it definitely was NOT before the 1930s. a major populist movement for currency devaluation before the 20th century, the free silver agitation of the american populists, failed. i’m sure you know britain was the guardian of the international gold standard. in the interwar period the anglosphere practised deflation, britain returned to gold in 1925 at some preposterously high parity. and i thought milton friedman had convinced everybody of this ? — fed policy in 1930-32 was tighter than the gold standard required. and as you know germany ultimately resorted to inflationary finance of the first world war reparations because the reichstag could not agree on the taxes to meet the obligations. under enough stress even the germans buckle. but perhaps it’s possible to say the threshold for “buckling” to the easy fix is lower for some countries.
why did france devalue the franc several times in the 1950s for example ? well you had slow export growth, middling productivity growth, high expenditure from colonial wars and militant unions demanding double-digit wage increases. easier for a government of a very divided country to let wages rise and devalue the franc as the official rate became overvalued relative to black market rates. for me “national character” is too vague and loose. i see (1) lower productivity growth (relative to germany) which made the wage demands more problematic than otherwise and (2) a much more divided society in which political conflicts raged over taxation, redistribution and wage demands ; and (3) a less patient society.
there’s a framework to think about this — macroeconomic populism. at its worst (in latin america in the 1960s and 1970s) you have a toxic combination of a low capacity to tax, populations with expectations in wages and consumption rising faster than productivity growth, and governments attempting to maintain popularity through income transfers ; at first all that might be financed through state control of commodity exports but as those were volatile many countries ultimately resorted to foreign borrowing and/or inflationary finance.
france is far far above that level because it has high productivity, a sense of limits on inflationary finance, and strong institutions, but compared with germany along all dimensions it is a bit closer to the argentina end of the spectrum.
this is the reductionism i’m moving toward : low productivity (relatively speaking), social conflict, rising egalitarian expectations => macroeconomic populism.
but why i am mincing words ? i think the deepest level explanation is that the germanic-speaking countries have a higher level of social trust & cohesion than france, britain and southern europe and the populations of the germanic-speaking countries have a lower discount rate / time preference than southern europe (definitely) and france & britain (possibly).
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Should we regard (very) high IQ North Italy as part of southern Europe? It is south of anything Germany. Average IQ in the UK, most of Spain, and in large parts of France is not really lower than in Germany (as far as I know). The Finns are the smarter of the lot of course (cold climates make you smarter, specially if you are not a hunter gatherer). We need other factors, like personality (big 5!) and culture (we shouldn’t become genetic determinists just because of the hype!).
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We need other factors, like personality (big 5!) and culture
instead of asserting that can you tie it back to the issue at hand, which is economic policy ?
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Also, Murray’s map of origins of significant European figures and the “blue banana” urban corridor are very similar. They are not exactly North Europe, but “core Europe”.
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Does that really matter ? the blue banana is not an independent economic zone, it exists as part of a larger policy area.
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“but why i am mincing words ? i think the deepest level explanation is that the germanic-speaking countries have a higher level of social trust & cohesion than france, britain and southern europe and the populations of the germanic-speaking countries have a lower discount rate / time preference than southern europe (definitely) and france & britain (possibly).”
Data on this would definitely be worthwhile. Probably Todd’s stem families should ceteris paribus correlate with higher cohesion and lower time preference.
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the social capital literature is vast but truly…bordélique, every single paper seems to come up with unique and incommensurable metrics based on social surveys. but a paper i like with lots of national-level data that you can google is eve parts (author) “indicators of social capital in the european union”… my biggest data wish is a large cross-country dataset of individual-level measurements of time preference based on representative national samples and not samples of university students that showed up when behavioural econ labs placed adverts for volunteers. (google wang reiger time preferences across countries) short of that there are inferences from savings rates and interest rates but those are crude metrics.
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“Indicators of Social Capital in the European Union” http://www.iareg.org/fileadmin/iareg/media/papers/WP2_02.pdf
“How Time Preferences Differ: Evidence from 45 Countries”
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1481443
“we evaluate the results from the \wait-or-not” question ($3400 this month or $3800 next month). Figure 2 shows the percentage of the participants in each country who chose to wait for $3800 next month…Note that the implicit interest rate in this question is as high as 11.8% per month (i.e., an annual discount rate of 280%), which is far higher than the market interest rate and inflation rates in any of these countries at the time of the survey.”
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