To Spark Germany, Shrink The State

There's an old joke about European attitudes toward authority. The tag line for Germany runs: "And everything that isn't expressly allowed is forbidden." A stereotype, maybe, but it still has an uncomfortable ring of truth.

Chancellor Helmut Kohl is trying to change all that. He wants Germans to assume more economic risk and take more responsibility for their own lives. At his ruling Christian Democratic Union's mid-October party congress in Karlsruhe, Kohl urged his fellow citizens to "break the mold" and escape from their "outworn thought processes."

Jawboning the voters, however, is not enough. During his 13 years in office, Chancellor Kohl has done precious little to promote risk-taking and individual enterprise. Instead, the state bureaucracy has grown ever larger. The government now accounts for more than half of gross national product in Germany, a level Kohl himself once castigated as communistic. This growth occurred even as Germany agonized publicly over whether exorbitant costs and over-regulation were destroying it as a place of business in the global economy.

If he sincerely wants to break the inertia, Kohl needs to borrow the approach of U.S. House Speaker Newt Gingrich and forge a Contract with Germany. It is a simple device--simplistic, even--but it's a wonderful way to focus minds clearly. There is no shortage of ideas about what such a contract should contain. For instance, the Petersberg Declaration, signed by 16 leading German business organizations early in October, is a starting point.

A key demand the businesses make in the declaration is for lean government. One of the most urgent points is to cut taxes, which are now an intolerable average of 60% on German business, compared with an international average of 35% to 40%. But it also means privatizing faster, reforming the welfare state, slashing away red tape, and rolling back nannylike regulations that tell merchants, for instance, when they may open their shops.

Faced by high taxes and all-embracing controls, ordinary German citizens and businesspeople are showing enormous energy and enterprise--in circumventing them. Germans are pouring their creativity into tax-bilking, organizing capital flight, and exporting jobs. Kohl needs to channel that energy into pumping up German dynamism. Downsizing his own government would be an important start.

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