One on inflation, and four on Germany’s reunification

As a student of economics, I think I’ve read one article too many on Germany’s inflation. In fact, one of the many joys of writing this blog has been discovering how bad inflation was in other parts of the world: the version of economic history that I have studied has underplayed this.

(Name four countries that experienced hyperinflation: Germany! Zimbabwe! Venezuela! Uhhhhhh…..)

But that being said, learning more about Germany this month wouldn’t be complete without at least one article about it’s hyperinflation. And the reason I enjoyed the one I excerpt from below is because while it is full of interesting anecdotes about the period of hyperinflation, it also speaks about how it all ended – and with what consequences. And a fun fact which you may have not known earlier: the root of the word credit means to believe. That’s modern finance, in a nutshell.

Obviously, though the currency was worthless, Germany was still a rich country — with mines, farms, factories, forests. The backing for the Rentenmark was mortgages on the land and bonds on the factories, but that backing was a fiction; the factories and land couldn’t be turned into cash or used abroad. Nine zeros were struck from the currency; that is, one Rentenmark was equal to one billion old Marks. The Germans wanted desperately to believe in the Rentenmark, and so they did. “I remember,” said one Frau Barten of East Prussia, “the feeling of having just one Rentenmark to spend. I bought a small tin bread bin. Just to buy something that had a price tag for one Mark was so exciting.”

All money is a matter of belief. Credit derives from Latin, credere, “to believe.” Belief was there, the factories functioned, the farmers delivered their produce. The Central Bank kept the belief alive when it would not let even the government borrow further.

The political “give” that was needed to get the political, economic, cultural and civilizational “take”, in an interesting article from DW. The set of links at the bottom of this article are also worth a read. (Note that I have added the WIkipedia link to the 2 Plus 4 Agreement, it is not there in the original).

The 2 plus 4 Agreement, also called the Treaty on the Final Settlement with Respect to Germany, recognized all European borders established after World War II, resolving this outstanding dispute once and for all. Bonn and Berlin’s signatures to the treaty meant that a newly reunited Germany would recognize national borders as they stood, not as they once were. Coupled with the reduction in military concentrations, the acceptance of current borders was a significant step toward an enduring peace in Europe at large.

An unusually short excerpt by my own standards, but this is the last sentence in the Wikipedia article about German reunification. It deserves to be read in the full, the entire article, especially if you were under the impression that reunification in Germany was relatively quick, painless and that there was much happiness all round.

The absorption of eastern Germany, and the methods by which it had been accomplished, had exacted a high price throughout all of Germany.

But there is an argument to be made that it was worth it, because one way of thinking about it is this: West Germany purchased access to culture by sharing economic prosperity, while East Germany purchased access to economic propserity by sharing culture. Costs matter, but maybe, just maybe, culture trumps economics?

“On average, people in the East are less successful, less productive and not as wealthy. Materially speaking, they’re less happy,” Seemann said. “But that’s exactly why cultural diversity in the eastern states plays a more important role than in the West. People in eastern Germany are aware that there are things which are more important than making money and paying taxes. They see the arts as a creative process of ‘togetherness.’ We need to strengthen this consciousness, because that’s the only way to ensure culture and society continues to thrive — regardless of where we stand economically in the years to come.”

Note that there are links at the bottom of this article about whether lessons from German reunification can apply to Korea. Alas, the article says no. I am an Indian, so double the alas for me, please.

And finally, a reminder that these things take time! This article is about the reunification of not Germany, but of the German language. Note that the East Germans had to adapt, and not the other way around. Maybe, just maybe, economics trumps culture?

The former East and West Germany have grown closer together in many areas over the past 26 years. At the same time, some differences are still marked precisely by the former border between East and West, such as economic strength, family structure and wealth. Furthermore, stereotypes about Wessis and Ossis have still not been consigned to history. According to a study carried out by the Berlin Institute for Population and Development, it will take another generation before German unity is firmly anchored in people’s minds. It has, however, long been reflected in the way they speak.

Understanding Poland’s Future

Making forecasts is a fool’s game, and while I’ll be the first to admit that the adjective in question is applicable to me more often than not, it’s not because of making forecasts!

This post, then, is not about quantitative forecasts about where Poland’s economy might go. It is, instead, about Poland’s recent trends that might continue in the near future, and what that would mean for Poland, and her neighbours.

  1. “The attractiveness of their promises are difficult to outdo, as they represent a long-desired ambition by Poles. However, on other issues the PiS is found wanting and at odds with the values and opinions of the majority of Poles. The conflict between local level activism and centralistic ambition will determine the course of the Polish politics in the next decade. Poland’s recent history surely should not let us think that the outcome is already known. ”
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    On how Poland’s recent political trends don’t bode well for the future.
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  2. “In 1989, it would have been considered utopian or plainly misplaced to imagine that, in 2019, most Polish people would live in the countryside despite only 10 per cent of the population working in agriculture. Today, the countryside is more than ever the ‘happening’ place in Poland. Four trends drive this phenomenon: re-ruralisation, de-agrarisation, de-urbanisation, and internal migration.”
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    This report came as a complete surprise to me. The notion, as an Asian and especially as an Indian, that urbanization will decline going forward was completely (pardon the pun) foreign to me. Also, the first time that I read about “water in the tap” – that’d certainly be my pick.
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  3. “The growth rate is predicted to continue slowly decreasing in the years to come and should reach -0.50% by 2035. The population is predicted to be 37,942,231 by 2020 and 36,615,500 by 2030.”
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    Those are literally the only two lines in the entire article about the future of Poland’s demographics. That being said, the article is still worth reading if you want to better understand Poland’s demographics today, about which I do not think we have learnt so far.
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  4. “They assert that the modern Polish Republic rests on “two pillars: the European Union and NATO,” and that these communities are not at odds with one another. This is the strategic balance this is needed to shield Poland. What it is pursuing at the moment is strategic imbalance. As the saying goes in Polish, “nie stawiaj wszystkiego na jedną kartę”—don’t gamble everything on one card.  ”
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    Broadly speaking, the article suggests that Poland cosying up to the United States of America might not be the best idea for securing Poland’s future, not least because it is subject to the whims and fancies of just one man.
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  5. “A few weeks ahead of COP24, the Ministry of Energy published a draft Energy Policy for Poland 2040, by the Ministry of Energy, with updated projections beyond 2030–perhaps the beginnings of a clearer path toward the green transition. The report provides a summary of Poland’s vision for eventually transforming the energy sector. Coal will remain a significant part of the energy mix through 2030 and decline more rapidly by 2040, shifting to nuclear power, renewable energy and high-efficiency cogeneration.”
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    A useful summary of Poland’s economics since 1989, its stellar performance in terms of achieving climate change goals until 2015, and then a tapering off of its enthusiasm – and some optimism about its targets in the two decades to come.

RoW: Poland and her geopolitics

Back in the day, Poland and her geopolitics would have been shaped by two nations, Russia (or the then USSR) and Germany. Now, one is domestically stronger, and no longer a threat, whereas with the other, it is quite the opposite. Five articles that tell us a little bit more about Poland and her neighbors today.

  1. “Countries in the north, particularly Poland, have chosen two paths to limit the Russian threat. One is forging defense ties with countries in the region that share similar fears, while closely working with the U.S. This contributes to the Intermarium, the containment line against Russia from the Baltics to the Black Sea. But Poland knows that the West is in no position to fight against Russian influence further east and that NATO and the U.S. are unlikely to react to a potential Russo-Ukrainian escalation. This is why Poland’s second path to limit the Russian threat is to try to keep Kiev closer to Warsaw and the West, challenging Russia’s role in the former Soviet periphery.”
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    Ukraine and Russia’s designs on Ukraine are key to understanding Poland’s geopolitical concerns today.
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  2. “Both Poland and Russia had accused each other for their historical revisionism. Russia has repeatedly accused Poland for not honoring Soviet soldiers fallen in World War II for Poland, notably in 2017, in which Poland was thought on “attempting to impose its own version of history” after Moscow was not allowed to join an international effort to renovate a World War II museum in Poland and destroyed monument honoring Soviet soldiers fallen in the war. Meanwhile, Poland also accuses Russia for its unlimited historical distortion, notably back to 2014 when Putin signed a bill using any comparison of Nazi to Soviet crimes as a punishment, as the Poles were also treated brutally by the Soviets; although Russia’s historical revisionism might have influenced Poland’s Andrzej Duda over its Nazi war crime laws and Poland also has concerned that Russia’s political and historical revisionism might put Poland at risk.”
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    The entire Wikipedia article is worth reading, but this section was reminiscent of so much in so many other places.
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  3. Is Poland an Easern European nation? Well, it depends. If you mean geographically, no. If you mean it form a historical perspective, not so much. If you ask from a geopolitical perspective, hell no. Why then would most people guess yes?
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    “We see that the current geographical theories place Poland outside Eastern Europe. How come than that Poland is still often considered an Eastern European country? Of course, because of history. The cold war has created a division that influenced generations of Europeans and has an impact to this day. Historically, all countries that have been under the influence of the former Soviet Union were considered an eastern bloc (Poland, Czech Republic, Slovakia, Hungary, Ukraine, Belarus, Lithuania, Latvia, Estonia, Romania, Moldova, Croatia, Serbia, Montenegro, Macedonia). This cold war legacy influences the perception of Western Europeans and despite big historical shifts (most of the countries from the former eastern bloc joined the European Union in early 2000’s) associations between these countries and the former Soviet Union are still being made.”
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  4. Speaking of the other large neighbour, Germany – how’s things these days? Uh, not great. Energy, the Holocaust, independence of the judiciary in Poland – or lack thereof, and immigration are points that mean that the two large neighbors don’t always see eye to eye.
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    “”In 2013, 70 percent of Germans described their country’s relationship with Poland as “good.” Now that number is down to 31 percent. Why did it happen, and what are the current problems?”
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  5. “The question of permanently stationing U.S. troops in Poland, for which Warsaw is prepared to pay $2 billion annually, is still unresolved. Some military officials have said they prefer retaining elements of the rotational scheme that is currently used to manage between 4,000 and 5,000 U.S. service members working in the country, many at the Powidz air base.”
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    My biggest learning form this article? Fort Trump is a thing.

ROW: Links for 4th September, 2019

  1. “Culinarily, they are among the most homesick people I have ever met.”
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    Guess who? The last paragraph I enjoyed thoroughly, by the way
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  2. Sanjaya Baru on the (new?) geopolitics of Asia.
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  3. speaking of which
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  4. On aspirations.
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  5. Would you recognize the queen if you happened to bump into her?

Row: Links for 28th July 2019

  1. “Until the 1985 Plaza Accord no one outside a tight official circle knew when the seven finance ministers met or what they agreed upon. The summit was announced the day before and a communiqué was issued afterwards.”
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    Today’s articles are about the G-7. Its history, its purpose, and its shortcomings. The excerpt above is from the Wikipedia article about the G-7’s formation. I learnt today that it was earlier called the Library Group.
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  2. “They have similar names and similar functions. While the G7 mainly has to do with politics, the G20 is a broader group that focuses on the global economy. It’s also known as the “Summit on Financial Markets and the World Economy” and represents 80% of global GDP.”
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    Time Magazine explains the difference between the G-7 and the G-20. That last sentence is a useful way to understand the 80-20 rule, by the way.
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  3. “In addition to its internal divisions, the G7 is no longer as influential as it once was, many analysts note. Some argue that without China and other emerging global powers, the group lacks relevance. In 2018, Jim O’Neill and Alessio Terzi of the European research institute Bruegel wrote that the G7, “in its current formulation, no longer has a reason to exist, and it should be replaced with a more representative group of countries.””
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    CFR weighs in on the future of the G-7, and finds it to be pretty bleak. Worth reading for the charts alone.
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  4. “Some enterprising chronicler of the leisure industry should surely write a full account of the importance of hotels in political history. After all, now that the president of the United States is a hotel tycoon, and is seemingly always keen to use politics and diplomacy to advance his hotel-building business plans, the interface between hotels and politics has rarely been more relevant.”
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    Martin Kettle in the Guardian, in a snarky but informative piece about the roles that hotels have played in important historic events, including snippets about hotels in Biarritz.
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  5. A list of other country groupings from Wikipedia. I cannot believe they didn’t think of a way to turn CAME into CAMEL.

Links for 18th April, 2019

  1. “According to the Wall Street Journal, Mickey Mouse and his gang (including Minnie, Goofy, Pluto, and Donald Duck) sold $3 billion in merchandise in 2018, a figure that includes both adult and children’s products. Shockingly, that is only about half of what Mickey made in 2004, when Disney heavily pushed out products in celebration of his 75th birthday.”
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    The Fast Company on the gift that (literally) keeps on giving for Disney. But you should also read Ben Thompson to understand that this is planned – way back when.
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  2. “American involvement in military and economic capacity building could facilitate or overlap with India’s interests in its neighbourhood – to some extent. Delhi has traditionally been skeptical, if not suspicious, of extra-regional actors’ activities and influence in its neighbourhood. Its resistance to such activity on the part of the U.S. has historically only been tempered when Delhi has had even greater concern about a Chinese presence. Now, with increasing Chinese activity in the region and limited Indian capacity to compete alone, Delhi once again seems more willing to work with – and perhaps begrudgingly accept or welcome greater interest from – partners like Japan and the U.S.”
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    A useful article to read to understand Indo-American relations today, and also how to think about these two countries and the Indo-Pacific region in light of the gorilla (or is it the panda) in the room.
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  3. “The world loves meat, but that love puts pressure on the world. The United Nations has estimated that livestock are responsible for 14.5 percent of the greenhouse gas emissions that are trapping heat in the atmosphere. Project Drawdown, a group of scientists pursuing climate solutions, puts the figure at 18 to 20 percent, and some studies have suggested even that’s way too low. In any case, meat is a significant contributor to the climate crisis, and as millions of families in India and China join the meat-eating middle class, its contributions could soar.”
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    An interesting article that helps you understand the players (politicians, firms and individuals) involved in the race to produce plant based meat.
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  4. “The report finds 54.4% of girls had access to menstrual hygienic management tools. However, in terms of wealth quintiles, we see massive variation. While 71.6% of the surveyed girls in the upper wealth quintile report access to MHM tools only 42.6% of girls in the lower wealth quintile report similar access. When inquired about reasons for not using MHM tools, about three-fifths of the surveyed girls reported that they couldn’t afford them and since the government does not provide them, they choose to stick to traditional methods.”
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    A useful, and interesting survey about the aspirations of teenaged girls in India.
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  5. “Readers today are unlikely to confuse an adolescent with an armload of brushwood used for fences and hedges. Still, the magazine’s copy editors dutifully hyphenate “teen-ager” even as we half-heartedly enforce the ban on “balding”—the editor William Shawn preferred “partly or partially bald”—without knowing exactly what is wrong with it.”
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    Grammar nerds and readers or this blog: rejoice.