Germany

Our political leaders’ sometimes strained relationship with the truth pales into insignificance when compared with the extent of fraud and deceit on display at the highest level of government in Germany. It is the affair of a man with many names: Karl Theodor Maria Nikolaus Johann Jacob Philipp Franz Joseph Sylvester Freiherr von und zu Guttenberg, the German Minister of Defence.

It is a very useful experience to travel to the scenes of political disaster. Because they hold lessons for us to learn. At least that’s my own experience travelling between Europe and Australia.

In Australia, we have so far tried to ameliorate the effects of our unaffordable housing market only with first-time buyers grants and public housing. To make the whole market much more affordable, perhaps we should copy the German model instead.

The strong link between local government finance and housing development fully explains why German and Swiss house prices have been steady for decades. To say it with Sherlock Holmes, improbable as it seems “all other explanations are more improbable still”. If Australians really cared for making housing more affordable in the long run, they should be studying the German and Swiss experiences more closely.

The theory of an Australian housing market bubble shows all signs of a proper religion. There are rituals like the recurring publication of house price indices. There are miracles when house prices rise despite interest rate hikes. Then there are true believers in the theory that Australian house prices are not in any way exaggerated. And finally there are heretics who take great pleasure in questioning just that.

When a German language book causes a global stir, it must be of relevance beyond the narrow national confines. This explains the scores of articles dedicated to Deutschland schafft sich ab (Germany abolishes itself). Written by former politician and central banker Thilo Sarrazin, it covers topics such as the effects of the welfare state on the country’s underclass, demographic change and the ageing society, the failure of public education, and the problems of integrating Muslim migrants.

In their open confrontation with the Americans and other European countries, the Germans have good arguments on their side. Trade restrictions are certainly not the way out of the world economy’s problems; and to prevent moral hazard, bondholders need to bear the costs of defaults.

Germans are also learning the hard way that some groups are more willing to integrate into Western society than others. The debate is now about Islam for a reason. No integration issues are reported with respect to Danes, Poles or Vietnamese, all of whom live in Germany in great numbers.