The Berlin Wall came down 32 years ago this November, ushering in a new era of freedom and opportunity. But judging from the results of a recent local election, it looks as if socialism is trying to stage something of a comeback in Germany’s capital city.
In a referendum that coincided with Sunday’s general elections in Germany, a majority of Berliners approved a measure to have apartments forcibly seized from landlords. The move would socialize nearly a quarter of a million flats, costing the city between $34 billion and $46 billion.
Supporters of the referendum believe this will help control rent hikes, but they’re forgetting a couple of things. One, living costs are rising not necessarily because of greedy property owners, but because construction of new housing has not kept pace with surging demand. Kicking out the landlords does nothing to address this persistent problem.
And two, inflation is hitting all sectors right now, not just rental property. Germany’s annual rate of inflation hit a 13-year high in August (one of the reasons many of its citizens have been loading up on gold). So why stop at apartments? Why not socialize food? Clothes? Automobiles?
Pretty soon, Berliners could find themselves back behind the Iron Curtain.
Around the world, socialist-minded lawmakers and politicians celebrated the referendum’s passage. In a tweet, Canadian Member of Parliament (MP) Don Davies called the measure “a creative and bold way to deliver affordable housing.”
Mick Barry, an Irish lawmaker representing Cork, tweeted: “Time to take on the corporate landlords here too.”
Meanwhile, a candidate for Los Angeles City Controller floated the idea of similarly seizing property owned by “private real estate companies/developers.”
I’ll admit, ours would be a perfect world indeed if everyone had a comfortable place to live rent-free. But as Margaret Thatcher said, “The trouble with socialism is that eventually you run out of other people’s money.”
Angela Merkel Crystallized Germany as an Economic Powerhouse
It isn’t just Berlin. Germany as a whole is set to shift left after the country’s Social Democratic Party (SPD) narrowly won the biggest share of votes on Sunday, with finance minister and former Hamburg mayor Olaf Scholz expected to succeed Angela Merkel as chancellor.
Like Margaret Thatcher, she reined in government spending, kept bureaucracy in check and oversaw a period of strong economic growth. A former research scientist, Merkel deftly navigated Germany through a number of crises, including the 2007-2008 recession, helping to crystallize her country’s role as not just Europe’s largest economy but also its de facto leader. On her watch, Germany’s GDP per capita growth topped that of all other G7 countries.
But the time has come to look beyond Merkel, and if I’m being honest, Berlin’s socialist referendum makes me slightly uneasy.
I know nothing about Olaf Scholz, the presumed chancellor-in-waiting, other than he’s a member of the SPD, a party that has its roots in Marxism. Among his campaign pledges are to increase housing—which I believe will do more to quell rent hikes than socializing rental property ever could—expand renewable energy and raise the minimum wage.
Can We Reverse Course?
Germany’s flirtation with socialism is part of a troubling trend that’s hitting the world’s biggest economies, from Justin Trudeau in Canada to Alexandria “Tax the Rich” Ocasio-Cortez in the U.S.
Although the People’s Republic of China has always been socialist, President Xi Jinping has lately taken aim at Western-style capitalism in a bid to revive Chairman Mao’s Marxist vision. According to reporting by the Wall Street Journal, Xi seeks to build a China “in which the party does more to steer flows of money, sets tighter parameters for entrepreneurs and investors… and exercises even more control over the economy than now.”
Like Berliners who seems to have forgotten the struggles living under Soviet rule, President Xi seems to have forgotten that it was Deng Xiaoping’s decision in 1978 to liberate parts of China’s economy that helped the country undergo some of the fastest growth the world has ever known.
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The Canadian government on Friday warned that U.S. Legislative proposals to create new electric vehicle tax credits for American-built vehicles could harm the North American auto industry and run afoul of trade agreements, according to a letter seen by Reuters.
Canadian Trade Minister Mary Ng told U.S. lawmakers proposed credits if approved “would have a major adverse impact on the future of EV and automotive production in Canada, resulting in the risk of severe economic harm and tens of thousands of job losses in one of Canada’s largest manufacturing sectors. U.S. companies and workers would not be isolated from these impacts.”
(Reporting by David Shepardson in Washington and David Ljunggren in Ottawa; Editing by Chris Reese)
LONDON — Britain’s economy unexpectedly regained momentum in October and cost pressures rose by the most in more than 25 years, according to a survey on Friday that could encourage the Bank of England to raise interest rates for the first time since the pandemic.
The preliminary “flash” IHS Markit/CIPS flash Composite Purchasing Managers’ Index rose by the largest amount since May to hit 56.8 from September’s 54.9. By contrast, a Reuters poll of economists had pointed to a further slowdown to 54.0.
“The UK economy picked up speed again in October, but the expansion is looking increasingly dependent on the service sector, which in turn looks prone to a slowdown amid the recent rise in COVID-19 cases,” said IHS Markit’s chief business economist, Chris Williamson.
The rise in the PMI was driven by Britain’s services firms as consumers and businesses picked up their spending. Travel firms benefited from a relaxation of COVID-19 travel rules.
Service sector activity outpaced manufacturing output by the widest margin since 2009 as factories struggled again with shortages of supplies and staff and recorded barely any growth.
A rise in overall employment was close to August’s record high, despite problems in filling vacancies.
Higher wages and the worsening supply shortages resulted in the fastest increase in average costs since the combined composite index was launched in January 1998. Separate PMIs for the services and manufacturing sectors showed prices charged by firms rose by the most since these series began in 1996 and 1992 respectively.
With inflation set to hit more than double its 2% target soon, the BoE is expected to raise borrowing costs soon as it tries to make sure that rising inflation expectations do not become embedded in British businesses’ pricing decisions.
The Confederation of British Industry said on Thursday that manufacturers were raising prices by the most since 1980 in the face of some of the biggest increases in costs and labor shortages since the 1970s.
The PMI for the services sector rose to 58.0, its highest in three months, while the manufacturing PMI’s output component – which IHS Markit says currently gives a better picture of the sector than the headline index – sank to its lowest since February at 50.6.
Despite the improved picture for most companies, many consumers are concerned about the outlook for the economy.
A survey published earlier on Friday showed Britons were their most downbeat since they February, when they were under lockdown, and are increasingly worried about the year to come as prices and COVID cases rise. (Reporting by William Schomberg; Editing by Hugh Lawson)
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