The role of language in shaping German economic philosophy

Against the background of the Eurozone crisis, Germany’s economic thinking has been subject to intense public debate in the english speaking world, and historical experiences and cultural differences have sometimes been adduced to explain Germany’s preoccupation with balanced budgeting and independent central banking. In this post Caroline Bhattacharya argues that German economic policy is deeply intertwined with the German language.

All member-states of the  Eurozone got a flavour of the peculiarities of German economic thinking in recent years, with the German government romanticising the ideals of the ‘German export model’. In light of Germany’s crisis management, and it’s commitment to economic nationalism, there has been a renewed discussion – predominantly among Anglo-American commentators – whether there is a distinctive school of German and Austrian economic thinking, commonly referred to as ordoliberalism.

When explaining the preoccupation with central bank independence (as embodied by the Bundesbank), Germany’s historical experience of hyperinflation tends to be brought up. Some also speak of a Calvinist savings culture, which manifests itself in a widespread aversion to debt. Germany, Austria and Switzerland have the lowest rates of home ownership in Europe. A cross-country consumer behaviour study shows that only around one third of consumers in Germany and Austria own a credit card and cash is still used in 80 percent of purchases.

But what about language?

During the crisis, it has been mentioned frequently that the German word for debt, Schulden, is very similar to the word for guilt, Schuld. And this has been used by critics to illustrate the moralistic nature of German orthodox economic policy. The bigger question here though is whether language is merely a transmitter of our thoughts and culture, or does the language we speak shape how we see the world and think?

This question has been debated for a long time among linguists, psychologists, anthropologists and philosophers. In linguistics, this debate has been shaped by proponents and opponents of the ‘Sapir-Whorf hypothesis’. According to Edward Sapir and Benjamin Lee Whorf, the structure of language affects cognition (linguistic relativity) and therefore it can strongly influence the way people view the world and behave, e.g. organise their societies (linguistic determinism).

But recently, economic scholars have also began to explore the role of language in economic behaviour.

Psychologists from the University of Chicago asked a deceptively simple question: Would you make the same decisions in a foreign language as you would in your native tongue? Contrary to popular belief, they find that thinking in a second language reduces decision-making biases, especially emotions, that adversely affect our perceptions of risks and benefits.

Victor Gay et al. show that grammatical gender (i.e. the extent to which a language distinguishes between female and male) relates to female labour-force participation and occupational choices as well as the usage of gender political quotas.

In his original study, M. Keith Chen establishes a link between language and future-oriented behaviour like saving: Speakers of languages with little to no grammatical distinction between the present and the future are more likely to value savings and save more money (for retirement). In Switzerland, he finds that French, Italian and Romansh speakers save less than half of what German speakers save.

In December 2008, Chancellor Angela Merkel commented on the failing of Lehman Brothers: “One should have simply asked a Swabian housewife. She would have told us her worldly wisdom: in the long run, you cannot live beyond your means.” Since then, Angela Merkel has become the symbol of the Swabian housewife and Europe’s austerity postergirl, as she personifies frugality and balanced budgeting. Similarly, Austrian politicians refer to the “tidy housewife” who puts the “house in order”.

The (Swabian) housewife ideal draws an analogy between households and states and between a household diary and a national budget.

This thinking translated into political reality, for example, when Germany introduced the so-called ‘debt brake’ (Schuldenbremse) in 2011, and encouraged it among all Euro states. This policy instrument has been enshrined in the constitution and forbids the federal government to exceed a structural deficit of 0.35 percent of GDP. From 2020 onwards, the Länder will not be permitted to run any deficit at all. Public budgets are thus expected to be in the black like a housekeeping book.

In Austria, ‘zero deficit’ (Nulldefizit) was voted word of the year in 2001. In Germany, ‘black zero’ (schwarze Null) became second in the 2014 word of the year ranking – 18 years after ‘savings package’ (Sparpaket) and ‘holes in the budget’ (Haushaltslöcher) topped the list.

Is it just another coincidence that the German word for household, Haushalt, is also the word for budget? It would seem that Germany not only has a culture but also a language of saving and fiscal conservativism. Further, as Volker Kauder, the chief whip of Merkel and Schäuble’s Christian Democratic party, once said in 2011, when proclaiming German budgetary discipline as a model for the rest of the EU: “Now Europe is speaking German.”

Caroline Bhattacharya is a PhD student of political science at the Department of Political and Economic Studies, University of Helsinki. She is currently a visiting researcher at the University College Dublin’s European Institute.