An exhibition on German saving, the virtue turned problem

By C.G. | BERLIN

“THE German problem: Why its surplus is damaging the world economy” read our cover in July 2017. We criticised Germany’s record trade surplus, of €249 billion ($264 billion) in 2016, the world’s largest. Disapproval of savings-mad, export-happy Germany has also come from America, the European Commission, the International Monetary Fund and even from within Germany, notably from the German Institute for Economic Research (DIW). They have all demanded an end of Germany’s strict austerity policy. With little success: after a trade surplus of €245 billion in 2017 and a federal budget surplus of €36.6 billion, the biggest since German reunification, there is still little appetite for more spending, whether in business or in government.

The financial assets of German citizens—a whopping €5.6trn in 2016, according to the Federal Association of German Banks—reveal a deep-rooted bias for saving. And not just saving, but cautious, conservative saving: despite lingering low interest rates (a source of perennial German grumbles since the euro crisis began), Germans have socked away €2trn in low-yielding saving and current accounts, and €2.1trn in insurance and retirement funds. Only €373bn is invested in shares. For many years “Geiz ist geil”—“Greed is great”—was the slogan of Saturn, an electronics retailer. But if that makes you think of the arrogant Gordon Gekko from “Wall Street”, Saturn meant the opposite. “Greed” means “Don’t waste money showing off in a posh shop; take advantage of our rock-bottom prices.”

In a new show, which began on March 23rd, the German Historical Museum in Berlin takes a look not only at the financial but the cultural roots of German saving. “We want to generate some understanding for the German saving behaviour and the German financial policy during the euro crisis,” says Raphael Gross, the museum’s director. The exhibition presents not only savings boxes of all kinds, savings books, newspaper clippings, advertising posters and explanatory texts but also controversial video recordings of financial boffins explaining the pros and cons of public and private spending (and a copy of our July 2017 cover).

The show explains the history of saving in Europe from the first elements of institutionalised saving in the 15th century: the Catholic-run institutions to which the rich would donate funds that could be lent to the poor in exchange for a pawned item of value. Nor was the first idea for a savings bank German, either: Hugues Delestre, a French financial official, suggested in 1611 giving ordinary people a chance to save their money and earn a bit of interest to provide for old age, disease or death. But the French regent, Marie von Medici rejected his idea. It took more than 200 years before the first French savings bank was founded in Paris in 1818.

In the meantime, the Germans had jumped ahead, with the world’s first savings bank founded in Hamburg in 1778. The show’s curator, Robert Muschalla, explains in the catalogue that the timing was due to a new focus on poverty during the Enlightenment. But it also drew on earlier Reformation ideas challenging the notion that poverty was divinely ordained, and only to be soothed by almsgiving. Germans came to see charity as a cause of poverty, not a cure for it, and came to favour work and thrift instead. Further savings banks popped up in the post-Napoleonic era. And during the age of industrialisation employers like Alfred Krupp founded factory banks to weaken the growing workers’ movement. Workers with assets kept by the company, so they reckoned, will be less intrigued by revolution.

During the first world war large shares of German savings went into war bonds. Defeat led to punishing reparations, unbearable state debt and hyperinflation during the Weimar Republic, leading to a devastating devaluation of saving accounts. But it left the German habit of saving unchanged. On the contrary: Germans came to distinguish virtuous saving, based on creative work, in contrast to the “money-grubbing” of Jewish capital, believed to play a role in the hyperinflation.

A remarkable example of anti-Semitic propaganda is seen in a short cartoon from 1933: “Save it for a rainy day” shows a group of busy bees in the summer, preparing their honeycombs for the winter while locusts and other insects live the high life, days drinking and doing nothing. When winter comes and the bees are cooking and knitting in their warm beehive, the ugly lazy insects who “wasted and lost everything” knock on their door. Pointing to their door sign reading “No pain no gain”, the bees refuse entry to the hungry and cold creatures. This well-crafted image and the dangerous sentiment that goes with it seems to have sneaked into the minds of some Germans today when it comes to migrants.

The purposes of saving have changed since the second world war, especially in the years of the West German Wirtschaftswunder (economic miracle). With growing prosperity people saved money more for consumer goods than for social welfare. East Germans began doing the same after reunification. The international financial crisis has only strengthened the general German belief that one can only spend what one has first saved. There are shops, bars and restaurants that still do not take credit cards, and Germans are still more attached to physical cash than even their northern European neighbours; notes and coins make it harder to spend what you do not first have.

International critics of the German budget surplus might not see this show. But they will keep an eye on Olaf Scholz, Germany’s new finance minister. In the next four years the government has agreed all of new spending, tax cuts and balanced books. Which wins out—the desire for change or the habit of frugality at all costs—is now “the German problem” that Germans themselves must solve.