Crashed: How a Decade of Financial Crises Changed the World

by Adam Tooze

that means first of all clearing up our financial situation, our budgets. We have a demographic problem. We know that we have too few young people and nevertheless we live at the expense of the future by running up debts. That means that we rob future generations of their room for investment and development and that is immoral.”18 Needless to say, this was music to the ears of business lobbyists concerned to see taxation and state spending held in check. But Angela Merkel’s first government was a grand coalition with the defeated SPD.19 Fiscal consolidation, like Hartz IV, commanded a consensus across the center ground of German politics. The finance ministry was claimed by Peer Steinbrück, an acolyte of the legendary SPD chancellor of the 1970s and 1980s, Helmut Schmidt.20 Steinbrück was profoundly committed to a supply-side, anti-Keynesian vision of economic policy. For him restoring “fiscal room” was not merely a matter of financial stability. The ossification of the government budget under the impact of quasi-automatic entitlement spending and interest payments was indicative of a broader problem affecting the developed world: the crisis of democratic politics and democratic participation. What choice could political parties offer to voters if the room for budgetary maneuver was restricted by “entitlement spending,” debt service and low tax rates to 1 percent of GDP one way or another? One could of course go the route of the Cheney wing of the Republicans and simply bl...