25 September 2012 - German reunification

Remember the German reunification in 1990? Markets went crazy, foreseeing German strength in the long run as if it were already there, and it’s fascinating to see how the prediction slowly came true: Germans chose a politically generous and economically ruinous path to reunification, struggled massively to integrate the backward East German economy and the population who had been raised in a system that rewarded loyalty over ability—and largely failed. Finally, after years in economic quicksand, the situation became so desperate that German politicians broke their deadlock and passed reforms that the economy had needed all along, and that’s how Germany became the powerhouse it is now. Moral for Americans: If you need reforms and can’t push them through, then you haven’t messed up enough yet. But don’t worry, you will!