Crisis Resistance of Inequality

Transcription

1 Crisis Resistance of Inequality Stephan Pühringer and Lars Bräutigam Johannes Kepler University Linz, Institute for Comprehensive Analysis of Economy, Altenbergerstraße 69, 4040 Linz, Austria, Abstract This paper investigates crises dynamics and crises narratives on the background of the recent financial crisis. Its main focus is on the possible ways in which inequality can rise or persist in the course of economic crises and the representation of inequality, private wealth and public expenditures in the speeches and addresses of Angela Merkel, Chancellor of Germany. The first section discusses some theoretical aspects of crises and crises intervention policies and their impact on inequality in terms of income and wealth distribution which remain widely unnoticed. The second part reflects on the public discourse and the dominating narratives. The speeches and addresses of Angela Merkel are assumed to be representative for the most influential patterns of argumentation that channel public opinion on the crises and the political agenda. The third section discusses which important aspects are neglected by the way how the financial crisis is mainly interpreted. The Economic Dynamics of Crises Interventions Financial turmoils reach back into the ancient days of history. Although the reasons vary often, they mostly have one element in common: someone did not possess the money he owed to somebody else. Usually a crisis can be defined as a chain of defaults or the thread of multiple failures in paying debts. Financial crises can have severe effects on basic economic processes; this is especially true with regard to the era of capitalism from its very beginning. The way important players such as governments and central banks responded to upcoming crises changed over time as did the character of the crises themselves (Tugan-Baranowsky 1969, 152, 166). The first signs of the Lender of last resort function can be traced back to the 18 th century. A variety of actors, among them the Bank of England extended its line of credit and supported bankers, merchants and companies in two crises, preventing a spread of defaults (Bouniatian 1976, 134ff). In 1836, the bank was quite successful again in 1

2 preventing a crisis from spreading all over England (Bouniatian 1976, 292) but it did not always react to monetary crises in the same way. The Bank of England was also the first banking institution which performed central bank functions. From the very beginning of central banks coming into existence until today, the response to crises by these banks and governments can be regarded as a constant process of learning by doing. It can be questioned whether this process will ever come to end. It rather should be questioned, to which ends this process should be directed. However, huge advantages have been made in the previous centuries to fight the effects of financial and economic crises. Next to the lender of last resort function, the benefit of additional expenditures and welfare programs became obvious to governments. The Depression of 1929 finally led to a series of important regulations and limited the abilities of the financial sector in causing instability. Public welfare and investment programs had some positive effects, though the real success of the New Deal remains to be a controversial topic among economic historians and scholars. The general use of public expenditures to overcome recessions by substituting private demand was first emphasized by Keynes. Later, Minsky clearly analysed the effects of Big Government on the economy while reflecting about the growing tendency towards financial instability (2008, 106) after a long post-war era of economic stability. In response to a crises, the government could sustain aggregate demand by its expenditures thereby preventing the deep depressions of the past and all the effects of a debt deflation process (ibid.). Nevertheless, this way of fighting economic crises also had side effects. Minsky mentions chronic inflation and the frequent return of financial instability (ibid.). This return has also been brought in connection with deregulation and a growing influence of financial agents on economic processes. A series of deregulations and certain historical incidents such as adaptable exchange rates and the growing mobility of financial capital led to a global regime of finance. This regime brought a return of financial turmoil into capitalist societies while it became the focal point of financial, economic, social and jurisdictional alignment of various other agents itself. The well-being of financial markets is obviously favoured to the shape or condition of the welfare state today. It is definitely close to a contradiction that the same type of economic agents, who repeatedly caused crises by the infinite longing for profits, could gain control over the creditworthiness of countries and those 2

3 legislative processes that could restrict their economic freedom and the destabilizing potential connected to it. Among other reasons, the ability and the necessity of governments to intervene, triggered new incentives for financial actors such as excessive risk-taking but also shifted them into a superior position. The effects of these developments are not only to be seen in the growing importance of a certain group of agents and their gain of influence on other economic actors. It is far more amazing that abstractions fundamental to such terms as the markets also prevent to address specific actors and their interests, and, in addition, a discourse on in-/equality and dynamics unfolded by the distribution of wealth. 1 In general, the scientific and political discussions on financial crises and its far-reaching effects have been caused to a halt by certain expressions, cover terms and ideological persuasions where the foundations of important economic research begin and gain relevance for social and welfare politics. The indication of this problem is one of the general concerns of this article. To this end, it is important to reflect at this point on the analysis of Hyman Minsky to illustrate the consequences that affect the way in which political agents and social elites (should) respond to financial crises. Like many others, Minsky acknowledges the positive effects of crises interventions by central banks and governments in preventing deep depressions (2008, 106). However, in his analysis of financial crises the side effects of such interventions become obvious. In stabilizing the economy, governments and central banks also stabilize the wealth of those economic agents who possess financial assets and stocks. In a certain way, it is impossible to prevent the occurrence of financial losses in favour of avoiding a severe downturn of economic processes. In this context, it is important to search for the basic reasons that can trigger financial instability and cause the beginning of a debt-deflation process. While standard economic theory emphasizes the overall efficiency of financial markets, according to Minsky, financial agents are apt in financing investments by filling their portfolios with more and more risky assets up to point where the first severe signs of financial collapse appear. Whenever the economy in general turns into a euphoric state, financial and economic prospects of the agents are getting far too optimistic. Not only financial actors but also entities 1 Only a few authors and institutions deal with this topic. Lately (January 2014), the IMF published a Policy Paper on Fiscal Policy and Income Inequality ( Nevertheless, this topic is underrepresented in economic research and thus only a few revealing papers Kumhof and Rancière (2010), Alvaredo et al. (2013) and books Piketty (2014), Zucman (2014) have been written which deserve an intense discussion among a majority of scholars. 3

4 from the real economic sector jointly induce a boom that is based on the additional demand they unfold whenever they shift their expectations about the economic future. According to Minsky, financial agents expand the money supply in this process endogenously, first by decreasing the amount of liquid assets in their portfolios and investing their financial means into assets that promise higher earnings. Secondly, these agents sell additional short-term liabilities to finance their investments. The whole financial system thereby reduces its liquidity reserves by creating more and more debts. Financial instability results from this transformation of portfolios. Financial agents (like other economic actors) get prone to shocks, which do not happen because of extraordinary incidents but because of the reduction of financial reserves which help the banking system to cope with defaults in normal times. A financial crises is thus inherent to and the logical consequence of the behaviour of economic actors. The way in which financial agents increase the money supply of other economic entities is always connected to financial innovations. With regard to the financial crises of the 1960s and 1970s which Minsky analysed in detail, he concludes that [i]n each case, an instrument or an institution that had grown rapidly over the preceding boom was the focal point of the disturbance, and each time, the Federal Reserve intervened to facilitate the refinancing of the threatened position (ibid.). Thus Minsky clearly shows that central banks (and governments as well when they finally take over liabilities by guarantees and credit lines) always support those actors or financial instruments which failed in producing efficient market results by replacing the position of an insolvent debtor. Whenever a central bank or the state intervenes it protects creditors that would suffer losses. This is due to these losses could cause the overall collapse of the economic system by a debt-deflation process. The necessity to generate liquidity out of assets (fire sales) causes financial instability (2008, 227). Central banks and governments are thus always one step behind financial markets. They cannot prevent financial innovations and their implicit crises potential (except by decisive reforms) but have to react in the right moment to stop a deflationary process at its beginning. It is important to note at this point that some positive effects result from deflations. Generally, a debt-deflation process reduces debts and has a balancing effect on incomes and the distribution of wealth. It may also direct profits to those agents who preferred risk-averse strategies and stable balances. The process that 4

5 brings up these results takes a long time and cannot outweigh its huge negative consequences and side effects for the majority of households making it highly unfavourable to let it happen. Obviously, no alternative exists to prevent a bigger evil by accepting the smaller one; the side effects of the intervention mechanism. Interventions add to the already existing incentives to take risks. However, preventing deflation in this way stabilizes not only the economy in the short run, preserving the potential for speculation and the return of financial instability; it also forces a shift in the distribution of income when financial agents and, respectively, the private owners of wealth are bailed out while state expenditures rise together with consolidation pressures of public finances. In theory, institutional as well as private owners of financial wealth seem to gain from financial crises as long as the state intervenes while governments have to cut their overall expenditures or have to raise taxes to remain creditable debtors. Fiscal consolidation can increase inequality if not the right adjustment measure are taken by governments though the consolidation may still lead to reduced incomes for the poor in the short term (IMF 2014, 44). This effect has to be regarded in the context of a remarkable growth of the income share accruing to the economic elite, at least in Germany as Bach et al. (2009) illustrate for the time between 1992 and 2003 or Atkinson et al. (2011, 4) for the US, where the share of total income for the top decile rose up to 50 percent in There is more empirical evidence. A part of the private owners of wealth is represented by the millionaires in Germany, Austria and Switzerland. For this group of households a ten per cent increase of wealth can be stated between 2008 and 2009 (Valluga 2010). The top one per cent income share in the US fell in the same period but the share increased again from 2010 onwards (Alvaredo et al. 2013, 5). In addition, the more wealthy members of society can use offshore operations to evade taxes (Zucman, 2014, 74f, 79ff.) thereby further increasing inequality of incomes and participation in carrying the costs of a crisis. Without question, not all parts of the society have to bear the costs of the crises in equal shares and inequality increases through various channels. Surprisingly or not, all these aspects of interventions are hardly mentioned in public and scientific discourses on the crisis. How can it be that those who need financial support in the crisis can sanction public spending and force cuts in social services? Why is there a clear mismatch between the general principle of capitalism in theory (succeeding in competition by efficiency) and the dealing with failure of 5

6 capitalist agents in reality? If deflation is not an option and inflating markets by supplying them with additional money has side effects (like minor growth or economic stagnation as well as unemployment, higher taxes and cuts in social services), economists and politicians should focus on possible alternatives for the status quo of regulation. Already Minsky remarked the lack of effective reforms while searching for ways to restrict the potential of financial instability (2008, 106). Consequently, there is a difference between the lender of last resort function and the necessary reforms to either prevent financial crises from reoccurring or to balance the side effects of the interventions. The simple bail out of creditors and flooding of financial markets with liquidity (quantitative easing) generates income and profits for those heavily engaged in financial activities and speculation while it causes unemployment for the middle and lower income classes when public expenditures are cut and economic processes lack the necessary supply with credit. Exactly these problems are either evaded in public discourses or vanish sooner than later after a crisis. Instead of addressing these topics, the general priority in public discourses is on the reestablishment of financial stability and the sovereignty of financial markets over government expenditures. There is an obvious tendency that in the aftermath of a crisis public finance serves those who own the necessary financial means to revitalize economic growth. While government expenditures have to be consolidated, forcing cuts in social services, education and the field of culture while economic development brings growing pressure to lower and middle income classes, it can be stated that the rich get even richer already in the years following the crisis. It has to be questioned, in which way all these topics are addressed in the speeches of political leaders and why. Does growing inequality form an essential part in political discourse or in which way do questions related to the concentration of wealth enter the crisis debate? Before these questions can be answered, some introductory remarks on discourse analysis and its methodological framework will be necessary. Political language and discursive power balances in the crisis This section examines the prevailing discourse profiles of political leaders in the aftermath of the financial crisis. The concept of discourse profiles in this context is understood as the outcome of a meta-analysis of patterns of argumentation, rhetorical strategies and usage of language. The investigation mainly bases on an 6

7 analysis of the metaphorical content of official speeches and addresses to main economic actors, thereby following the metaphor-conceptions of Lakoff and Johnson (1980, 1999; Lakoff 1995, 2002). Metaphors in their understanding reflect the way people think and speak. Lakoff and Johnson illustrate in detail and with many examples (Lakoff and Johnson 1980) that every text is saturated with metaphors and that metaphors are an indispensable part of the functioning of the human brain in general. Especially Lakoff (1995, 2002) also applied this metaphor approach in his analysis of the political discourse of the Conservatives and the Liberals in the US. The work of Lakoff and Johnson symbolizes a turning point of metaphor analysis from the classical approach to metaphor coined by Aristotle s Rhetoric and Poetic to the cognitive approach. In the classical metaphor approach, metaphors are interpreted as a rhetorical element of language, because metaphor in this conception might be envisioned as a transfer of meaning or significance from one term to another... (Kirby 1997, 532). In Aristotle s pattern metaphors belong to the figurative and therefore non-literal sphere. As a consequence the necessity of an analysis of metaphors was for a long time restricted to the sphere of linguistics and literary studies. The relevance of the metaphorical content of scientific language was thus rather unimportant following the classical approach to metaphors. In contrast, in the cognitive conceptualization metaphorical language is not only a rhetorical element but reflects how realities are constructed: Far from merely adding rhetorical flourish to pieces of information, metaphors are viewed as being conceptual in nature and essential for the creation of social realities (Musolff 2012, 302). Lakoff and Johnson state that metaphors are part of every kind of language use, especially in texts or speeches describing abstract and general statements about real events like the financial crisis. Metaphors, in such an interpretation, combine abstract ways of thinking with sensory perception and experiences of the body. Metaphors map a source domain (e.g. a concrete machine like a computer) on a target domain (e.g. the economy): the economy is described as a rational mechanism (Ötsch 2009a). The language of political leaders in a crisis There is already much literature about the specific language of political leaders. Lockhart and Moellick (2013) offer a broad overview of the discursive strategies of powerful Political Women in the US in which they show what core arguments and 7

8 images are brought forward by female political leaders like Hillary Clinton or Sarah Palin. Pennebaker and Lay (2002) analyze the specific use of language after largescale events and crisis and find that there exist a strong feeling of solidarity which manifest in a significantly higher use of the word we than I by individuals and political leaders as well. Political language and especially the language used by political leaders therefore always tend to be very inclusive. Wodak et al. (1999:160) also believes that the repetition of the word we is a persuasive linguistic device which helps invite identification and solidarity with the wegroup, which, however, simultaneously implies distancing from and marginalization of others. Edelman (1985:10) already in 1985 pointed out the importance of political language: So political language is political reality; there is no other so far as the meaning of event to actor and spectators is concerned. A Study of the specific usage of language, thus the argumentative strategies as well as the rhetoric or metaphorical analogies in speeches of political leaders allows a better understanding of their basic convictions and moral concepts. In times of severe crisis, for example in the beginning of the financial and economic crisis in 2008, the struggle over political power also reflects a struggle over discursive power in the explanation of the causes of the crisis and the right economic policies to fight the crisis. This fight for discourse hegemony about crisis narratives takes place on many different levels and consists of scientific debates about economic causes and consequences of the crisis as well as the debates in mass media. Another important role in the economic crisis discourse is played by political leaders or their specific crisis narratives respectively. Especially after the financial crisis and the policy following it, one could observe a massive concentration of power in the hands of just a view people 2 and at the same time a very high media presence of political leaders like the German Chancellor Angela Merkel (Sorge 2013). Due to the central role of Germany in the European crisis policy for instance in the debates about a debt brake in the European Fiscal Compact a study of the arguments and discursive strategies brought forward in Merkel s speeches about the crisis offers a possible explanation for the predominance of austerity policies in Europe. The question to which extent Merkel s policy is influenced by specific economic theories and her economic advisors is hard to verify. There is at least much evidence that the 2 See for instance the close circle of Jens Weidmann, Jörg Asmussen and Axel Weber in the rescuing programs for German banks (Pühringer/Hirte 2014b). 8

9 strong focus on sovereign debts in the European crisis policy especially before the implementation of the Fiscal Compact is based on the studies of Reinhart/Rogoff (2010a, b). Their key finding, which was later proved to be just an artifact of wrong calculation in Excel (Herndon et al. 2013), was that sovereign debts above 90% threat economic prosperity. Merkel herself, as well as the German minister of finance, Wolfgang Schäuble and also the president of the German Bundesbank, Jens Weidmann, referred to Reinhart/Rogoff as the sound scientific basis of the austerity policies (Pühringer 2014). Methodological framework and research design This following section provides an analysis of speeches of Angela Merkel to core economic actors in which she refers to the financial or economic crisis illustrating her attempts to provide a specific interpretation of the sources and possible consequences of this crisis. Distinct metaphors of the crisis led to distinct recommendations for handling the crisis. To demonstrate this it will be analyzed how and with which metaphors Merkel describes and interprets the crisis and to which extent she refers to social consequences or inequality in general and the consequences for the distribution of wealth and income in specific. The analysis is based on a corpus of original speeches to core economic actors and does not take into account their reception in influential media. Hence, the aim of this article is not an analysis of the role of the mass media in the discourse about the financial crisis. 3 The explicit focus on speeches of Angela Merkel is based on the conviction that political language is a strong tool to propagate basic moral concepts and narratives. Due to Merkel s enormous presence in the media, the specific crisis narrative of her speeches coins the public debate about European crisis policies. In addition, one important argument derives from her speeches for the dominance of austerity measures over alternative economic policies in the struggle over hegemony politico-economic discourses. As Wilson (2001:34) points out We not only use language to shape reality, but we use it also to defend that reality, against those whose alternative values might threaten ours. The analysis in this article is based on a corpus of speeches and addresses of Merkel to core economic actors. The sample of chosen texts consists of 32 speeches 3 The impact of economic journalists on the reporting about the financial crisis is well described in Engelen et al. (2011) as well as in Starkman (2009) or for the German-speaking media discourse in Arlt and Storz (2010) or Imhof (2009). 9

10 and addresses with about 300 pages from 2008 to 2014 (Table 1). The first selection of texts for the sample was made with a standardized retrieval from the electronic archive of the German federal government and a collection of speeches of German Chancellors 4 with the catch-phrases Angela Merkel in combination with Krise ( crisis ) and Wirtschaft ( economy ). In a second step those 150 texts were reduced to those speeches in the sample, where Merkel directly addresses private economic actors or economic associations. This procedure verifies that the sample consists of speeches or addresses of Angela Merkel to core economic actors, where she explains her crisis narratives and her basic convictions of how to handle the economic crisis. Table 1: Text corpus of analyzed newspapers and magazines Audience Place Text fragments Speeches and Addresses World Economic Forum Davos, Switzerland 22 4 Banks and financial institutions Germany 38 5 German meeting economic-leaders Berlin, Germany 24 4 German Handwerkstag Germany 19 4 Receptions of the German Industrie- und Handeslkammer Annual reception of the German Economy Germany 22 5 Germany 16 2 Day of the German Industry Berlin, Germany 15 4 others Germany, US Spain, 22 4 This text corpus was reduced to relevant text fragments with statements about main causes of the crisis and the tension between the logic of the market and the role of the state in crisis policy. The result is a list of 178 decontextualized text fragments, which were used to illustrate the crisis narrative of the German Chancellor and the patterns of argument used to explain specific policies in the aftermath of the crisis. 4 The source for speeches and addresses consists is a combination of an official source ( and a corpus of speeches from German Chancellors compiled by Adrien Barbesi (2013). 10

11 Crisis narratives and its consequences for the European crisis policy The time period of the analysis from 2008 to 2014 is long enough to illustrate, how Merkel s patterns of arguments connected to the financial crisis describe and change her thinking about the functionality of economics. Over this period of time a massive shift in the public discourse about the crisis can be observed, which also reflects in Merkel s speeches. It is quite enlightening that the discourse about debts in the European Union is dominating the debate on the financial crisis in the beginning of 2009 while the possible exclusion of several debt-states is nearly totally separated from the discourse about bank rescuing programs and stimulus packages in the aftermath of the crisis. This is probably best described by the separation between Finanz- und Wirtschaftskrise (financial and economic crisis) and Staats- oder Euroschuldenkrise (sovereign or euro debt crisis) in the German public discourse. 5 It is obvious that even during the period of stimulus packages and banking rescuing programs Merkel repeatedly stresses that this state interventions are an extraordinary measure in extraordinary circumstances, whereas solidity is always the main focus of her economic policy. At 23 January 2009 Merkel explicitly said: This is an extraordinary situation, we have to handle. However, we must not forget the sustainability, the reduction of our debts. Living-beyond-ones-means in a debt-union The systematic analysis of the decontextualized text fragments of 32 speeches and addresses of Angela Merkel to core economic actors allows a deeper understanding of her basic crisis narratives and the foundation of the European crisis policies at least in Continental Europe. The coining patterns of argument (as well as the economic convictions they are based on) on the one hand and the discursive strategies and metaphorical analogies used to promote them on the other hand will be presented in the following two steps: Causes and characterization of the crisis Consequences of the crisis for economic policies ( How to handle the crisis ) 5 Neubäumer 2011 and Turowski/Mikfeld 2013 present a critical view on this separation. 11

12 Causes and characterization of the crisis The first main strand of Merkel s argumentation is about the causes of the crisis and the relation of the financial crisis to the euro crisis or sovereign debt crisis. Especially in her first speeches after the outbreak of the crisis, Merkel sometimes mentions that the initial root of the crisis is located in the financial markets or, respectively, in the irresponsible behavior of a few distinct market actors. In this context it is important for her to direct her critique on market excesses, whereas she insists at the same time that market forces in general can never be the source of a crisis. In an address at the World Economic Forum in Davos 2009 Merkel formulated five main challenges for the future of the world economy. The first is a declaration to the market forces and the market economy, which should leave the market forces sufficient leeway, to unfold free and powerful. This was the driving force of growth before the crisis and will be the driving force of growth after the crisis. It is quite enlightening that yet in a time of a severe economic crisis (the GDP of Germany went down by about 5% in 2009) for Merkel the declaration to the market forces remains the top priority. This is also supported by her frequent reference to freedom and the natural and vital metaphorical analogies she uses to describe the advantages of free market forces. The far more important narrative for the crisis for Merkel, however, is that certain countries or people were living beyond ones means before the crisis. In a speech at the German Handwerkstag 2011 this narrative is getting quite obvious: The debt crisis has arisen over the years, over a long period of time almost all Europeans have lived beyond their means. Although Merkel remarks that the economic stimulus packages and bank rescuing programs played a role in the rise of the sovereign debts too, she states several times that the debt crisis is the consequence of debt policies in the European debt union before the crisis 6. Following the line of argument in Merkel s speeches, there is clear differentiation between the financial crisis and the sovereign debt crisis in Europe. The latter is not seen as a direct consequence of the former. The separation between those two crises, especially by laying the emphasis on the euro and sovereign debt crisis can also be observed in public discourses as well as in economic discourses (Pühringer/Hirte 2014a/Turowski/Mikfeld 2013) 6 Many mainstream economists share this view as well. A critical view on this topic is presented by Horn et al. (2010) or Truger/Will (

13 During the debate about the sovereign debt crisis there has been an intensified discussion about the role of speculators and the potential threat of speculations for the economic recovery in Europe. For Merkel, however, speculation has positive indications for economic policy as it forces governments to follow the rules of the market. In a speech at the WEF meeting 2011 she remarks: These speculation have a real background, because we give occasion to speculation ( ) the reason for the speculations is the high indebtedness of states. In another statement at the annual reception of the IHK (the German Chamber of commerce) in Magdeburg 2011, Merkel moreover stressed that speculation forces us, to deal with our own weaknesses. Consequences of the crisis for economic policies As a consequence of the crisis narratives brought forward in Merkel s speeches, her conclusions for economic crisis policies mostly refer on the central issue of reducing debts and transferring the debt union to a stability union. Already in the beginning of 2009 Merkel promoted the German debt brake, sometimes also referred to as the starting point of European austerity policy, which should rebuild confidence of financial market actors. In her argumentation Merkel opposes the economic critique against the debt brake (e.g. Bofinger/Horn 2009), which mainly rests on the fear that it limits the scope for economic and fiscal policies in general. The first and central task for economic policy after the crisis is to establish strong market mechanisms again. The debt brake as a shining example of a German culture of stability, as Merkel pointed it out, should serve as a mechanism of self-conditioning for economic policy, which allows no excuses. Merkel s ambitions of establishing a culture of stability and solidity in Europe lead to the ratification of the European Fiscal Compact in The concrete content of the Fiscal Compact, especially the automatic sanctions and the reversed qualified majority voting in case of noncompliance with the Treaty indeed dramatically limit the scope for political decisionmaking and symbolize a shift of power from legislative to executive authorities, in this case specifically to the European Commission (Schulmeister 2012, Truger/Will 2012, Mathieu/Sterdyniak 2010). Moreover, the Fiscal Compact promotes a subordination of political discourses to seemingly economic necessities or, in Merkel s words, to the markets as ultimate judges. This subordination of politics to the market (Ötsch 13

14 2009b) was shown impressively in a statement at a press conference 2011: Of course we live in a democracy and it is a parliamentary democracy [ ] so we shall find ways to shape parliamentary co-determination so that it nonetheless conforms to the markets (Merkel cited in: Zepp-LaRouche 2011). Summing up, the central aim of Merkel s patterns of arguments brought forward by a variety of discursive strategies is the re-establishment of market forces, which is based on the strong belief in the superiority of market mechanisms over active economic policy measures. The ordo-liberal concept of the German Soziale Marktwirtschaft, which is representative for Merkel s understanding of the economy, 7 formulates a clear task sharing between the state and the market. The government is responsible for the economic policy framework, the demarcation lines for the economy, as Merkel puts it but should never intervene in economic processes. Following this understanding, at a speech to the German Economy, Merkel stressed that she is looking forward to the day, when everything is working again on its own, only managed by the forces of the market. The predominance of market mechanisms serves several ends in Merkel s economic policies. On the one hand, especially financial markets have to be calmed to rebuild confidence in economic policies, which is often the explanation for austerity measures. Therefore Merkel stresses that even in times of economic crisis it is necessary that market forces may not be distorted (Merkel in a speech at the WEF meeting in 2009). On the other hand markets and central market actors are provided with discursive and real political power to punish debts with downgrading or speculations. Merkel insists in this context on the disciplining function of markets and depicts the role of markets as ultimate judges for economic policies. Referring to market discipline, Merkel states at a speech at the German Economic Leaders meeting 2010: Our deep conviction is ( ) that market mechanisms, for instance different interest rates, should have a disciplining function. In a speech to bank leaders in 2009 she remarks that we need market discipline as central part of market mechanisms. The coining narrative in this context is the argumentation for free markets, within the ordo-liberal framework. The superiority of free markets to active economic policies is promoted; the central focus is directed on the free entrepreneur as the only source of economic prosperity. Referring on the question, how to give rise to 7 Merkel frequently states that she is an ardent supporter of the German Social Market Economy. 14

15 economic growth in a speech to the annual reception of the German Economy in 2013, Merkel opposes the possibility of government interventions because of their debt increasing consequences. On the contrary she states: I focus on the forces of a society, which alone can create growth, and these are enterprises. The role of the government, however, is always just to lay the foundations for free as possible framework conditions. Moreover Merkel stresses that the government also serves its own interests by keeping out of the economy as far as possible: We receive more tax revenues, as long as we do not cause irritations in the economic sphere. If one, on the contrary causes complete irritations, he has to accept a tentative attitude and less growth in general (Merkel at the day of the German Industry 2013). Merkel`s strong commitment to free markets and an open economy is always accompanied by strong natural metaphorical analogies for market forces or the market mechanism as a whole ( powerful forces, vital forces ) as well as for entrepreneurs as the central driving force of the economy. Especially in the crisis her main task is to also discursively support these driving forces. As a consequence Merkel is very cautious to annoy economic powerful elites and eschews to even talk about distributions issues or increasing inequalities in the aftermath of the crisis. Inequality and the super-rich Political language and especially the language used by core political leaders in times of a crisis is a strong tool to promote distinct economic policies based on distinct ideological convictions. The dominance of specific sub-discourses and patterns of arguments supporting them, as well as the leaving out of other discourse strands intentionally, therefore reflects discursive power balances on the one hand and insights in the basic logics of thinking of specific actors on the other hand. When taking a closer look at the speeches, addresses and other discursive manifestations of Angela Merkel, it is getting obvious that the topics of economic inequality and the concentration of wealth are almost always left out. In the whole corpus of 32 analyzed texts the words inequality ( Ungleichheit ), distribution ( Verteilung ), the rich ( Reiche ), wealth ( Vermögen ) are hardly mentioned. In fact, Merkel only once mentions the rich while she opposes the critique that her tax policy only serves the rich and four times wealth whereas the latter is always used to reassure her audience that she rejects any kinds of wealth taxes or property levies. 15

16 This may partly rest in the audience of Merkel s speeches, core economic actors in Germany, but the same is true for speeches from Merkel to union leaders. There is much evidence that in many political debates after the crisis inequality and the concentration of wealth is not a central issue. Freeland (2012) points out the broad political consensus in the US that politicians should not speak about the rich, especially the super-elite of economic power. The same is true for social inequality. Although there is a clear commitment for poverty alleviation and many of the economic powerful are organized in charity foundations, there are many efforts to separate these topics from a broad discussion about social inequality or just distribution in general. Branko Milanovic (2011) even points out that most research promotion agencies or think tanks eschew to fund research about inequality at all: Yes, they would finance anything to do with poverty alleviation, but inequality was an altogether different matter. The explanation for this refusal is also psychological: Because my concern with the poverty of some people actually puts me in a very nice, warm glow: I am ready to use my money to help them ( ) But inequality is different: Every mention of it raises in fact the issue of the appropriateness or legitimacy of my income. (Milanovic 2011:84) Merkel eschews to speak about wealth and inequality or the concentration of wealth in the hands of a few super-rich respectively. At the Day of the German Industry in 2012 she explains her refusal against wealth taxes in the following way: We consider this (wealth taxes, remark SP/LB) as wrong ( ), because we know about the volatility of capital and are happy about anything, which is here. In another address at the annual reception of the German Economy 2013 Merkel opposes higher taxation for companies, the people who work hard and make money : We have to be careful that we don t touch ( ) the substance of companies, because we would then bite the hand that feeds us. Discussion and Conclusions Due to different reasons, an increase of inequality in most European countries can be observed before, due to and after the crisis. While real wages stagnated or even went down during the last decades, there is a continuing process of concentration of wealth. A group of super-rich exists also in European countries as for instance in Germany or Austria. The Liechtenstein wealth management company Valluga AG (2010) published a study with the title the comeback of millionaires, indicating that 16

17 the wealth of Austrian, German and Swiss millionaires went up by 9.5% and the number of millionaires went up by 8.2%. The increase in wealth was even higher for billionaires and this development remained stable in the following years until today (Valluga 2014). Freeland (2012:5) formulates a similar thesis of a crisis resistance of the rich, whom she calls the new virtual nation of mammon. Due to its enormous wealth, this group of super-rich is of great importance for financial institutions as well as for politics. Freeland cites a 2005 memo of strategists of Citigroup, where they wrote: The World is dividing in two blocs the Plutonomy and the rest: In a plutonomy there is no such animal as the US consumer ( ). There are rich consumers, few in their number but disproportionate in the gigantic slice of income and consumption they take. The speeches and addresses of Angela Merkel give not only evidence for a strong bias towards the dominance, sovereignty and superiority of markets in general and the financial markets in specific. In addition, all social effects and systemic shortcomings of market behavior are subdued, reversed and hidden behind one central word: debts (denoting solely public debts). Clearly, growing government debt is the reverse side of additional state expenditures to bridge economic recessions, stabilizing economies and securing social standards. Nevertheless, the way in which the sovereign debt crises is analysed by the German Chancellor, does not allow for any of the highly relevant relations or connections to the financial crisis of 2007; it rather suggests a strict division of those phenomena of which one is stressed while the other is utterly neglected. The connotations in markets are entirely positive; any of the financial markets negative potential which was unfolded before the sovereign debt crisis in Europe set in. The dominant narrative of public debt shifts the crisis of private debt and private responsibility entirely out of the focus and, in addition, all the connections that exist between the two crises as well as the possible alternatives of dealing with the financial crisis of 2007 and its devastating consequences. The emphasize of the hierarchical relation between the financial markets at the top and sovereigns that have to submit to financial discipline below hides those who earn the profits of the financial sector or hold the shares of banks and other financial entities. As a result, there seems to be not one single alternative to the public guarantees and the financial support for devastated markets and austerity programs for the immense increase of public debt. Bach et al. (2011, 2) state that the ratio of public debt to GDP 17

18 reached 87 percent at the end of 2010, representing an increase of more than 20 percentage points from where it was prior to the crisis. Without question, there are important links between financial crises, private and public debts. Decades of government expenditures that replaced private demand in the years following a crisis and subsidising the social costs of making economic profits resulted in huge amounts of government debt, causing consolidation pressures while necessary reforms of the financial system were avoided or diluted. Because government debts have become a subject of speculation themselves, the call for austerity and financial discipline has to be rejected instead of being promoted. The redistribution of wealth and income from the bottom to the top, which is a core impact from crises policies, has to be stopped in favour of those alternatives that are kept out of the public discourse on the financial crisis. One alternative would be lowering taxes and support lower incomes to stabilize private demand. Austerity programs that spare the rich will largely reduce the speed of economic recovery and welfare. The negative consequences of fighting crises by avoiding deflation by all means have to be balanced with the participation of income losses for the wealthiest members of society to overcome crisis effects by redirecting purchasing power. One big advantage of this participation could be the rising interest of the rich to voice for a more stable and just financial system thus preventing or reducing (the effects of) crises. Obviously this way would afford to address economic problems, conditions and relations such as the concentration of wealth and rising inequality. However, the course of crises policies and the dominating crisis narrative seems to reflect the balance of economic power with its strong bias in letting others carrying the costs of the crisis. References Alvaredo Facundo, Anthony B. Atkinson, Thomas Piketty and Emmanuel Saez (2013): The Top 1 Percent in International and Historical Perspective. Journal of Economic Perspectives, Volume 27, Number 3, Summer 2013, Arlt, Hans-Jürgen / Storz, Wolfgang (2010): Wirtschaftsjournalismus in der Krise. Zum massenmedialen Umgang mit Finanzmarktpolitik. Eine Studie der Otto Brenner Stiftung. OBS Arbeitsheft 63, Frankfurt/Main. Atkinson, Anthony B., Thomas Piketty and Emmanuel Saez (2011): Top Incomes in the Long Run of History, Journal of Economic Literature 2011, 49:1, 3 71, URL: Bach, Stefan, Giacomo Corneo and Viktor Steiner (2009): From Bottom To the Top: The Entire Income Distribution in German, Review of Income and Wealth, Volume 55, Issue 2, pages , June

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