What $ 2 Trillion Can Do For You

As we are watching the global stimulus packages being implemented, it makes sense to step back and reflect on comparable interventions. Germany has invested around 4% of its GDP every year since 1990 into the reconstruction of former East Germany. This amounts to around $ 2 trillion a number comparable to the $ 5 trillion that countries worldwide pledged in their stimulus packages. Peter Gumbel develops the analogy in Time Magazine,

In the past year, as the world economy has plunged into recession, governments have pledged to spend as much as $5 trillion of taxpayers’ money to ward off a prolonged slump. For the most part, these massive programs are based on little more than theory: nobody advocating them has experienced a downturn as dramatic as this one. But Dagmar Szabados has seen such spending before — she knows what it’s like to be on the receiving end of a gigantic fiscal infusion. Szabados, a chemist by training, is the mayor of Halle, a mid-sized town in the middle of what used to be the German Democratic Republic (GDR), the formerly communist eastern part of Germany. Since the Berlin Wall fell, the old GDR has been showered with money. Overall, some $2 trillion has been pumped in — the equivalent of about 4% of Germany’s economic output every year.

What do you think of it? Was it a success? I live in Erfurt, a stunningly beautiful medieval city in the East that clearly profited from the process, but what does that mean? What answer would satisfy such a question?

About Philipp

Philipp Müller works in the IT industry and is academic dean of the SMBS. Author of “Machiavelli.net”. Proud father of three amazing children. The views expressed in this blog are his own.

14. May 2009 by Philipp
Categories: Blog | Tags: , , , , | 2 comments

Comments (2)

  1. sebastian.haselbeck@gmx.com'

    I think it is generally unfair of the – let’s call it anglo-saxon – press and some academics (Krugman et. al) to accuse Germany of being so skimpy when it comes to answering this economic crisis. Not only do most Germans not experience it (yet), there’s also no empirical evidence for these stimulus packages to have any proven impact on time, not to mention that yes, we’ve already spent trillions to prop up our economy….

  2. sebastian.haselbeck@gmx.com'

    I think it is generally unfair of the – let’s call it anglo-saxon – press and some academics (Krugman et. al) to accuse Germany of being so skimpy when it comes to answering this economic crisis. Not only do most Germans not experience it (yet), there’s also no empirical evidence for these stimulus packages to have any proven impact on time, not to mention that yes, we’ve already spent trillions to prop up our economy….