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The Taxman Rings Twice

You might have seen the headlines. You might have seen curious press pics and television news clips with German top managers, such a Klaus Zuminkel, the (since pushed into resigning) CEO of Deutsche Post, led in handcuffs from their homes, a battalion of tax investigators bearing boxes of documents trailing triumphantly.

So, German managers are dodging taxes. Germany's admittedly high taxes. Aren't we all? (Ahem, NOT ME, of course. I ALWAYS pay my taxes. And in any case, I wouldn't have any rucksacks of euros abroad for clandestine and not-so-clandestine investments).

Liechtenstein bankers and politicians have, in recent weeks, tried to play down the issue.

Germany's taxes are too high.

Yes. So what?

Germany's tax system is too complicated.

Oh, really? Most of us manage to file our taxes with the help of an able tax accountant.

Germany is deploying "Gestapo" methods and hasn't learnt anything since World War II about treating its smaller neighbors.

Oh, paaaaalease!

But, leaving the German-Liechtenstein skirmishes aside here, what is the outrage about, really?

Why are all the politicians -- including usually industry-friendly Conservatives -- publicly exclaim their disgust and anger about German managers not living up to their status as "role models" for the country (as German Chancellor Angela Merkel put it)?

Because this is about far more than simple acts of tax fraud. It's not even about somebody like Zumwinkel, who was the boss of almost 500,000 employees and stood in front of HIS staff (who earn on average a hundredth of HIS monthly salary or less) and that THEY should be responsible and not ruin his company and the country by too-ambitious wage demands.

This is about something a lot more fundamental: the clash of economic systems.

In one corner, straightforward, everybody-for-himself capitalism (as in the U.S. and, to a lesser degree, in the UK). And in the other, Germany's Soziale Marktwirtshcaft (literally it's social market economy, but I have always called it "capitalism with a social conscience.")

Soziale Marktwirtschaft is what made Germany's postwar economic miracle and it defines Germany as an industrial society. It's a reasonable balance of power between the have-lots and the have-littles, with the state as mediator and compensator.

But let's look at this strange animal SOZIALE MARKTWIRTSCHAFT a bit more closely:

Definition

- An economic system developed by neo-liberals such as A. Müller-Armack and Ludwig Erhard.

- A mixed economy model where the state takes on the task to correct "undesired" effects of the "market economy."

Particularly, it's up to the state (government) to:

- create the conditions for efficient and fair competition

- to correct the income and wealth distribution in the interest of those groups who do not participate in the economic process (i.e. jobless, homeless, pensioners, children etc.)

- to support low-income groups and financially weak groups of society through a grid of support measures (such as social security, unemployment benefit, child-support benfit etc.)

- to take on tasks the free market doesn't supply or only offers insufficiently (health, education etc.)

- to help smooth our fluctuations in economic cycles via its economic policy measures

Now, do you understand why this all might be about a lot more than some top manager dodging taxes? Germany is battling to salvage its particular economic success model.

I, for one, who grew up and prospered through it, would be very sorry indeed to see it go.

More later. Ciao for now.

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