Taboo on politics distracts markets

This is my latest comment from Fund Strategy. It is about free speech rather than growth scepticism but it may be of interest to some readers.

European central bankers and financial markets were last week preoccupied with questions which should be no part of their professional concern: the genetics of Jews and the role of Muslims in society.

The controversy came after Thilo Sarrazin, a board member of the Bundesbank and former Berlin finance minister, made contentious remarks while promoting his new book: Deutschland schafft sich ab (“Germany Abolishes Itself”).

In it, he evidently wrote: “I don’t want my grandchildren to live in a mostly Muslim country where Turkish and Arabic are widely spoken, women wear headscarves and the day’s rhythm is determined by the call of the muezzin.”

He inflamed the situation when he told a Sunday newspaper that: “All Jews share a particular gene that makes them different from other peoples.” Later he expressed regret for the annoyance his remarks had caused and said they were based on reports of an article in the American Journal of Human Genetics he had apparently misunderstood.

In any western country such remarks would be contentious. In Germany they were inflammatory. The Bundesbank, lacking the power to dismiss Sarrazin, asked Christian Wulff, the country’s president, to sack him. Angela Merkel, the Chancellor, described his remarks as “absurd”. He is likely to be expelled from the Social Democratic Party (SPD).

However, this hysteria is misplaced. Sarrazin uttered the words but he did not create the conditions in which they stirred such controversy.

The background to the affair, paradoxically, is the depoliticisation of society. One aspect of this trend is central bank independence: making central bankers responsible for key decisions, such as setting interest rates, which should be in the political realm.

Another related tendency is the reluctance of politicians to have difficult discussions on contentious issues such as immigration. When they are discussed, it is in narrow technical terms rather than addressing the hard arguments.

The Sarrazin affair showed that such questions are, one way or another, likely to enter the public domain even if politicians try to suppress them. The more politicians make such topics taboo, the more the public will, quite rightly, resent their actions.

In this case it has also meant that central bankers became embroiled in a political controversy rather than focusing on monetary policy.

If politicians were willing to do their job, running the country and promoting public debate, Sarrazin’s remarks would have received little attention.

* 10 September correction. I have been told by a native German speaker who has followed the debate that Sarrazin did not say that Jews are different from other people.