“balanced budgets uber alles”
As the Great Depression descended on Germany in 1930, its government — a coalition of centrist parties headed by Chancellor Heinrich Brüning — insisted on balancing its budget in order to convince its creditors (the nations to whom it was paying economically ruinous reparations as compensation for World War I) that it was a responsible debtor. In the hope that the creditor nations would respond by eventually canceling those reparations, Brüning slashed social spending and investment. He trod the path of fiscal rectitude even as unemployment reached record heights — the same policy, under the same depression conditions, to which today’s chancellor, Angela Merkel, has demanded Greece adhere.
There was, to be sure, an unfortunate downside to Brüning’s policy. As the Depression deepened and Germany’s centrist and even social democratic parties continued to insist on a policy of balanced budgets uber alles, increasing numbers of voters abandoned the center for extremist parties in the 1932 election. Soon thereafter, one of those extremist leaders — I think his name was Hitler — became chancellor.