DEVELOPMENT-GERMANY: East Asian Crisis Looms Over German Election

By IPS Correspondents Reprint | | Print |

Ramesh Jaura

BONN, Sep 16 1998 (IPS) - The economic crisis that began last year in Asia — and has now engulfed Latin America and Russia — is beginning to cast its shadow on Germany as it inches towards a crucial country-wide general election on Sep 27.

Latest figures by the federal statistics office reveal a 4.4 percent decline in Germany’s exports to East Asia in the first three months of the year. These dropped in the first quarter of 1998 by 870.6 million marks (512 million dollars).

The total value of goods German traders sold to the countries of East Asia amounted to 18,856 million marks (11,094 million dollars). Exports to Japan, which bought goods worth 4,927 million marks (2,898 million dollars) from Germany, declined by 9.4 percent.

The Hamburg-based East Asia Association attributes the negative export growth also to the crisis-laden, erstwhile ‘Tiger’ economies of South Korea, Thailand and Indonesia as well as the Philippines.

Exports to South Korea dropped by 38.2 percent or 840 million marks (494 million dollars), to Thailand by 22.3 percent or 127.8 million marks (75.2 million dollars), to Indonesia by 17.9 percent or 171 million marks (100.5 million dollars) and to the Philippines by 22.3 percent or 127.8 million marks (75.2 million dollars).

The longer this downward trend continues, the more the export dependent German economy will suffer, warns Detlef Kotte, an economist with the globalisation and development strategies division of the U.N. Conference on Trade and Development (UNCTAD).

The message is writ large, he says: growing unemployment in Germany which has already at its highest since 1945. Some four million people, close to 10 percent of the country’s labour force, are already out of job.

The potential hazards of the current economic crisis, which have already spanned three continents, are enormous, warns Kotte who co- authored UNCTAD’s Trade and Development Report 1998, published Wednesday.

“The current Asian economic crisis is more serious, in terms of its scope and repercussions, than any other such crisis in the past three decades, and its full effects have yet to be felt,” says the report.

Its authors estimate the cost of the crisis in East Asia at about one percent of global output this year or some 260 billion dollars, equivalent to the annual income of sub-Saharan Africa.

UNCTAD was set up in 1964 as an organ of the U.N. General Assembly with the objective of promoting trade and development world-wide. But the founding of the World Trade Organisation (WTO) two years ago has raised questions about the role of the 188 member agency.

“The fact however is that the UNCTAD remains an important forum for North-South dialogue,” says Kotte. Its experts, he says, swum against the tide by consistently warning against the hazards of international financial instability.

“We argued along those lines in our report last year,” said the UNCTAD economist. The fact is that much of the activity of financial markets is no longer related to wealth and job creation. It is rather concerned with speculation and arbitrage.

In its last year’s trade and development report, UNCTAD indeed came out once more against “big-bang” financial liberlisation in developing countries. It pointed out that successful examples of modern industrialisation and development distinguished themselves by the ways they managed integration into the global economy.

Germany itself has been experiencing — also a very painful impact — of economic and financial liberalisation since unification of western and eastern Germany nearly eight years ago.

Almost the entire industrial base of the old East German state was destroyed and jobs were abolished overnight without the prospect of immediate alternative employment for workers and employees.

The dangerous social and psychological impact has been soft- cushioned by transferring some 8,000 million dollars from western to eastern Germany from the public exchequer — which itself has been falling short of revenues.

The result of this is characterised as ‘structural unemployment’ by the coalition government comprising the Christian Democratic Union (CDU) of Chancellor Helmut Kohl, its Bavarian sister Christian Social Union (CSU) and the liberal Free Democratic Party (FDP).

The problem, they say, has been aggravated by the rapid globalisation of the world economy, prompting German entrepreneurs to have their goods produced in low-wage countries where social insurance costs are low or non-existent.

CSU Prime Minister of Bavaria Edmund Stoiber, who bagged 52.9 percent of the vote in the state assembly election on Sep. 13, sees the future in the large number of high tech jobs in new, forward looking industries in Bavaria, which has the lowest unemployment rate in the country.

The opposition Social Democratic Party (SPD), however, blames unemployment on the lack of appropriate policies by the government and its failure to realise the earnestness of the problem.

Both Kohl, Gerhard Schroder, the SPD challenger for the Chancellor’s job, and the SPD’s left-oriented chairman Oskar Lafontaine avoid overstating the impact of the East Asian economic crisis on the German economy.

On Sep. 7, Kohl and the Prime Minister of Singapore, Goh Chok Tong issued a joint press statement on deepening cooperation between the two governments and countries, their main trading partners in Europe and South-East Asia.

“The two heads of government regard the joint declaration also as a contribution to the deepening of relations between Europe and Asia,” noted the German version of the statement issued in Bonn.

But this partnership could at best prove to be a proverbial drop in the ocean. As the UNCTAD report points out, under-employment and poverty are reaching “alarming levels” in East Asia. As the crisis drags on, it will be increasingly difficult for the poor to recover from deprivation and return to their previous jobs and ways of life.

And from the evidence of growing child malnutrition and declining primary school enrolments, the impact of the crisis on human resources will spill over into future generations, UNCTAD warns.

This presents specific challenges, says Kotte, not only for the political and social situation in East Asia, but also in the implications holds for democracy in the region.