Der Todd des Euro

Part 1. The French anthropologist-demographer Emmanuel Todd, who is becoming increasingly fashionable in the Anglosphere, is also a scathing critic of the euro. I examine his “anthropological” views of Germany and the euro, which I also contrast with those of Michael Pettis. 

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The other day I stumbled upon this innocently admiring blogpost on Emmanuel Todd which contained a video of him speaking in English about France and the euro. The clip is an excerpt of a panel discussion organised by Harper’s magazine (partial transcript).

In the Harper’s video Todd mostly wears his demographer’s hat and the anthropologist doppelgänger that is conspicuous in his French appearances is rather restrained. Around 18:20 he argues that the euro cannot work, in part, because the French population is much younger than Germany’s. There’s some truth in this, because a younger population may prefer more inflation and an older one may prefer more surpluses. But, arguably, Germany with its grumpy old people is more youth-friendly when it comes to employment policies, than France.

Between 2:30 and 3:30, Todd mentions that France had traditionally relied on currency devaluation in times of recession in order to achieve full employment and avoid fiscal austerity. That’s precisely what Eurozone countries can’t do today. That’s mentioned almost in passing, but it’s a key element of Todd’s views of Germany and the euro. He believes that for Germany “competitive disinflation is a nationalist strategy“, because German industry has achieved international competitiveness by restraining growth of labour costs at the expense of its European partners. But when it comes specifically to competing for a share of the export pie, there is no difference between Germany’s “internal devaluation” and the standard “external devaluation” that Todd would like France to be able to do. They are both competitive devaluations !

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A prominent French critic of the euro ubiquitous in the French media, Todd is an anthropologist-demographer who has documented the family structures of the world and their relation to political systems and ideologies. His very best book, L’invention de l’Europe, which has yet to be translated into English, reinterprets the whole of European history in terms of diverse family systems. (See Craig Willy’s masterly summary of the book.)

For anyone who follows France, Todd’s views of the euro should be familiar — the European situation cannot be analysed just economically, it requires the insight of the historian-demographer-anthropologist ; the euro is a vehicle for German domination ; the survival of the euro would imply the death of democracy ; François Hollande is not president of France but der deutsche Vizekanzler, etc. And he’s been saying such things for some time now.

Although he’s a brilliant polemicist who runs circles around his debate opponents, his rhetoric can be pretty crude and shrill, and he’s been criticised for “Germanophobia” (also here). In a French TV panel discussion, he argued, in a few years there may be “no French industry worthy of its name”, and the “attitude of the German bosses behind Angela Merkel” is to engineer the “elimination of Germany’s competitors”. When the co-panelist Ulrike Guérot protested that Germany is today a liberal pluralistic society, Todd replied, yes, we all know about the many Germanies but in the end the illiberal, authoritarian one always wins ! In the Harper’s transcript of its panel discussion, Todd said,

In this French TV debate with Marine Le Pen nodding across from him, Todd went all out (after 13:00) :

The core problem, in Todd’s eyes, is a deep-seated chauvinistic quest across the Rhine for economic hegemony. His vision of the “German problem” is rather reminiscent of the one identified by Clyde Prestowitz in the 1980s, a jeremiad of Japanese economic hegemony. It’s not the conventional narrative of low-wage countries eating away at the industrial base of the rich economies. In an interview in Marianne, Todd compared Germany with China :

Since Todd is quite arrogant and condescending about having a deeper “anthropological” perspective on the European Union than other commentators, it’s worth exploring what that is exactly.

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According to himself, much of Todd’s analysis is a direct implication of his academic work. In Willy’s summary of Todd, the “stem family” that is characteristic of Germany is

In L’origine des systèmes familiaux, Todd’s magnum opus (also yet untranslated), the “stem family combines authority and inequality, essential bureaucratic values, and its ideal of continuity was one of the roads toward the modern state”. This implies :

The book which discusses some actual economics is the untranslated L’illusion économique. It argues that globalisation is defined by the interaction of two opposite yet complementary systems of capitalism — the Anglo-American or individualistic capitalism ; and the “integrated” capitalism exemplified by Germany and Japan. (The book also contains a whole chapter bitching about the lack of anthropological perspectives in economic analysis.)

I paraphrase Todd : Anglo-Saxon capitalism is focused on short-term profits and consumption, resulting in, simultaneously, high turnover amongst workers, frequent creative destruction of businesses, a low savings rate and high external deficits. This system requires for its perpetuation the existence of its “double negative”, the “integrated capitalism” of Germany and Japan where

Much of the above synthesises two strands of academic thought which were a vivid part of the Zeitgeist in the 1980s and 1990s : the “Asian economic model” as exposited in Chalmers Johnson’s MITI and the Japanese Miracle or Alice Amsden’s Rise of the Rest : Challenges to the West from the Late Industrialisers ; as well as Michel Albert‘s “capitalisme rhénan” or “Rhenish capitalism”, the Eurocentric variant of the “Asian model” argued in Capitalism vs Capitalism (which was more widely read in France than elsewhere). Both strands were ultimately rooted in older alternatives to British classical economics — the American institutional economics associated with Thorstein Veblen (and later with John Kenneth Galbraith) and the German historical school of economics. The ultimate genealogy for both might be the German Friedrich List (who heavily influenced Japanese planners in the 1880s and 1890s). In the 1990s, however, much of that fashion receded with Japanese stagnation, the Asian financial crisis of 1997-98, high unemployment in the “big” economies of Europe, and American economic boom.

Todd’s own idiosyncratic twist is the very Gallic anthropologisation of that “duality of global capitalism” :

I think the above is very silly. Although I do agree there are cultural differences between “individualism” and “collectivism”, nevertheless Todd’s derivation of these traits from family structures is little more than literary semiotics. That’s perhaps why he can occasionally babble about “killing God” or “killing the father” (à la Freud) in La troisième planète (which has been translated into English as Explanation of Ideology).

The mapping of those individualist/collectivist traits to the macroeconomic aggregates we see today is all wrong. Todd wants to “essentialise” the macro conditions that have only existed since the late 1970s, but those are not deep-seated historical truths at all or manifestations of deep culture. They are instead highly contingent facts of politics and economics. England had been the premier surplus-savings exporter of the 19th century, contrary to everything Todd says. At the same time, the United States, despite its individualistic ethos that supposedly champions the consumer, nonetheless created an utterly producer-dominated system of quasi-monopolistic industrial trusts protected by tariffs. And it’s especially clear in retrospect that Japan and the East Asian tigers were high-surplus countries after 1945 only because the United States played along as part of the Cold War strategy of building up its allies.

In fact, Todd’s “essentialisation” of current account balances can easily be disproved by the record of the last 140 years (5-year moving averages of current account balances as % of GDP) :

South Korea, another “stem capitalism” country in Todd’s estimation, had actually been riddled with current account deficits before the 2000s when it decided to change policy as a result of the Asian financial crisis.

Todd’s “anthropological determinism” is misplaced. His vision of the hierarchical authoritarian German culture is much more geared toward explaining the German past, than the common thread running through both that past and the current realities of the Federal Republic. I’m not opposed to anthropological determinism  per se. There are indeed deep cultural differences between Germany (or northern Europe) and the rest of Europe that affect the euro, but there is a better “anthropological” angle than the one Todd pushes. (*)

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Todd’s “anthropological” view of global balances clashes fundamentally with that aired by Michael Pettis, author of The Great Rebalancing, who is has become for the 2010s what Nouriel Roubini had been in 1998-2008. Pettis is not the Roubini of Dr. Doom, but another who popularly expounds a view of the world economy as a closed system in which current account imbalances play a commanding role. The drumbeat that Pettis constantly beats is that government policy, not the primordially thrifty behaviour of Chinese and German households, is the cause of global imbalances.

Germany’s export of its excess national savings (i.e., not needed for domestic purposes ) did help finance the debt binge in the crisis countries of Europe and, in the view of many, Germany’s large current account surpluses are inconsistent with economic recovery in the Eurozone. From Pettis’s article cited above :

( Pettis is a little too lenient on the PIGS countries. Leniency is perhaps deserved for Ireland and Spain, whose governments were not fiscally reckless as their economies were growing in the 2000s, although their fiscal policies might have been even tighter given all the capital inflows ; and it was their private sector which absorbed their countries’ current account deficits. But in Portugal and especially Greece, it was government budget deficits which fuelled the current account deficits. That was not “inevitable”. )

Two things to keep in mind, which are tautologies I won’t bother explaining : (a) trade surplus/deficit (more precisely, current account surplus/deficit) is the mirror reflexion of the national savings surplus/deficit, or the excess over GDP of total domestic spending by consumers, businesses and the public ; and (b) national savings is not the same thing as household savings. Changes in national savings can be caused by shifts in the behaviour of governments and businesses, not merely through the stirrings in the bosom of the thrifty burgher. So while it’s true that the Germans are thriftier than many of their neighbours,

the German household savings rate has changed relatively little, in comparison with the country’s current account balance :

So Germany as a country is not, contra Todd, some intrinsically surplus-producing economy. Still less was the turn from deficit to surplus in Germany’s current account an element of some mercantilist-hegemonist export strategy by the Reich to “exterminate” its neighbours economically, as Todd would have it. Unlike China’s current account balances, Germany’s are a by-product of domestic developments, and in fact I will argue — contra Pettis — the external surpluses were not even really intended at a policy level.

I repeat, I do believe there are deeper “anthropological” reasons for Germany’s  economic behaviour. I only reject Todd’s traditional family structure as the explanation. But part 2 discusses roots of German economic behaviour.

[ The comments section of Part 1 is now closed. In order to comment, please go to Part 2, “The Anthropology of Financial Crises“. ]