In Which I Admire Millions of Tiny German Lawsuits And Annihilate Several Canards About the Law

The U.S. is famous in Germany for its 'runaway' juries which hand down zillion-dollar lawsuits against poor defenseless companies. Yet, as I told my dumbfounded students, Germany is a far more litigious society than the USA. In fact, according to a book-length 1998 study, Germany is the most lawsuit-happy country on earth:

Country Cases per 1,000 Population

• Germany 123.2
• Sweden 111.2
• Israel 96.8
• Austria 95.9
• U.S.A. 74.5
• UK/England & Wales 64.4
• Denmark 62.5
• Hungary 52.4
• Portugal 40.7
• France 40.3

My German students were dumbfounded by this fact. Most of them got their image of the world from the mainstream press. And, as usual, German journalists tended to obsess over the real or imagined failings of other countries, while remaining ignorant of what was going on in their backyard.

But aside from the good clean fun of this tu quoque response, it's interesting to think about why Germany is so litigious. I think there are 4 main reasons:

  • Legal insurance (Rechtschutzversicherung). Millions of Germans have legal insurance policies that pay for lawyers both to file claims and defend against them. This insurance is affordable because litigation costs in Germany are low. Legal insurance is actually an excellent idea, every country in the world could benefit from widespread legal insurance. What it means in Germany, though, is that if you have a policy, you don't have to think twice about filing a lawsuit. Granted, the lawyer is not supposed to file if you don't have a claim, but many do anyway. Legal insurance also provides a lifeline for many small-time lawyers -- they can patch together a decent livelihood by having a constant docket of 40-50 small time cases going on at any time. None of these cases will generate a huge verdict, but a steady stream of small payments is enough.
  • Lawsuits are a fact of life. Nobody really takes them seriously. If your landlord hikes your rent, you use your legal-insurance lawyer to fight it. The landlord uses their legal-insurance lawyer to defend. After all, if you don't sue, you'll certainly have to pay the extra 10% in rent. If you do sue, you might end up with a discount. The landlord would probably do the same thing in your position, and knows this.
  • Close neighbors make bad blood. Germany is a small country packed with people. Everything you do in public is going to have some effect on your neighbors. If a potted plant falls off your city balcony, it's going to hit someone or something below. If your cat likes to relieve themselves on your neighbor's lawn, they're going to notice. And might just take lethal action. Your barbecue smoke is going to trigger someone's asthma 5 houses down. The list goes on and on. Every German state has a long, complex "neighbor law" (here's the one (g) for my state), and many lawyers do nothing else. And once again, these petty squabbles are going to end up in court because it's so easy to go to court because of legal insurance. 

And finally, no lawsuit is too tiny. As Wagner once said, a German is someone who will always do something for its own sake. Which means Germans will file a suit over anything. Why, here's a story (g) from the excellent criminal-defense blog lawblog. Two retirees went fishing for deposit bottles in Munich, a favorite pastime of poor Germans, or just ones who need some way to fill their days in the fresh air.*

They approached a large man-sized glass-recycling container, whipped out their grabbers, and started fishing around inside the container. Recycling containers are supposed to be reserved for bottles which don't have a deposit on them, like wine bottles. But many people don't care or don't know how to tell a deposit from a non-deposit bottle, and just toss everything in.

Sure enough, our two hunters found 15 deposit bottles with a total value of € 1.44. Two other Germans, who were certainly feeling very German that day, called the police and reported the bottle-fishers for theft. Wait, what? Two people minding their own business, helping recycle glass, augmenting their puny incomes, harming nobody, and their fellow Germans report them to the cops? Welcome to Deutschland, my friends.

Now German prosecutors are obliged to investigate every credible accusation of crime that comes to their attention, the famous "Principle of Legality"**. This they did. The first thing they had to determine was what the value of the theft was. Technically, this was a theft -- once you throw a glass bottle into a recycling bin, it becomes the property of the recycling company. So you might think that the amount of the theft was the deposit value of the bottles. But no! It turns out that the recycling company does not separate out deposit bottles from other ones. Scandalous, I know. So all the bottles just get melted down. The prosecutor asked the recycling firm how much value the bottles would have as recycling material, and the firm said: basically, it's too small to even put a number on.

At this time, the prosecutor chose to halt the proceedings (einstellen) based on the idea that there was no public interest in prosecuting the offenders. The writer at lawblog thinks this was the wrong reason to stop the prosecution -- he thinks a better theory is to deny the people had any attempt to commit theft, because they had no intent to take possession of the bottles -- their ultimate goal was simply to transfer them to a different owner. 

Be that as it may, the main thing to notice here is that several different government employees spent hours of their time and used considerable resources to investigate an accusation of a crime which, at the very most, involved the lordly sum of € 1.44. It's probably only a slight exaggeration to say that the German state spent 1000 times more money investigating the theft than it was actually worth in the first place.

Now, am I going to snigger about this? Of course I am, and so are you. But at the same time, I'm not going to go too far. The most important thing to keep in mind about high numbers of lawsuits is that they are an important sign of social health. In the vast majority of societies, lawsuits are prohibitively expensive and courts are woefully underfunded and corrupt, so nobody trusts them. Germans and Americans trust courts to usually resolve legal disputes in a fair and equitable manner, otherwise they wouldn't seek them out so often. They're right to do so; both the USA and Germany have exceptionally fair and efficient legal systems, despite their imperfections. A fair, professional, and generally non-corrupt legal system is one of humanity's most important achievements, full stop. Most countries don't yet have one. If you happen to live in a country which does, take a moment and thank your lucky stars. 

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Mark Blyth on The Origins of Neo-Nationalism

It's not often you stumble across some professor who says he's going to explain the world, and then watch him actually do it.

I stumbled across Mark Blyth via MetaFilter. Mark Blyth is political science professor at Brown University -- Wait! I know, you're thinking Brown University, the tiny, ultra-expensive US liberal arts college which is a hotbed of the most demented form of political correctness? Can any professor there be capable more than soft-focus P.C. pieties?

Well, Mark Blyth can. Perhaps because he's Scottish. Very Scottish, if you listen to him. In 2016, Blyth accomplished a pretty impressive trifecta in 2016: he accurately predicted Brexit, the Italian constitutional referendum, and Trump. His big idea is Global Trumpism, which involves defections both to the right and the left from the globalist neoliberal consensus. Whether it's Podemos in Spain or Trump in the U.S., middle-class voters in the West are reacting to 30 years of tectonic changes in the global political and economic landscape which have seen their quality of life being gradually eroded.

The end result is a sense of seething frustration in the middle and lower classes of Western countries. Unions have been crushed, more and more risk shifted onto the shoulders of individuals, job security is a thing of the past, international competition and automation are destroying millions of jobs which will never come back, the small luxuries of middle-class life are drifting out of reach, and each generation is seeing a decline in its standard of living compared to the last one.

All the while, the rich are getting almost exponentially richer, and mainstream politicians -- whether center-right or center-left, there is no meaningful difference -- seem at best helpless or disinterested at worst actively corrupt.

Here's some remarks he published in Foreign Policy (previous link), which are a bit heavy on the economics but still get the point across:

Back in 1943, [Michal Kalecki] he argued that once you target and sustain full employment over time, it basically becomes costless for labor to move from job to job. Wages in such a world will have to continually rise to hold onto labor, and the only way business can accommodate that is to push up prices. This mechanism, cost-push inflation, where wages and prices chase each other up, emerged in the 1970s and coincided with the end of the Bretton Woods regime and the subsequent oil shocks to produce high inflation in the rich countries of the West in the 1970s. In short, the system undermined itself, as both Goodhart and Kalecki predicted. As countries tried harder and harder to target full employment, the more inflation shot up while profits fell. The 1970s became a kind of “debtor’s paradise.” As inflation rose, debts fell in real terms, and labor’s share of national income rose to an all-time high, while corporate profits remained low and were pummeled by inflation. Unions were powerful and inequality plummeted....

But if it was a great time to be a debtor, it was a lousy time to be a creditor. Inflation acts as a tax on the returns on investment and lending. Unsurprisingly in response, employers and creditors mobilized and funded a market-friendly revolution where the goal of full employment was jettisoned for a new target—price stability, aka inflation—to restore the value of debt and discipline labor through unemployment. And it worked. The new order was called neoliberalism.

Over the next thirty years the world was transformed from a debtor’s paradise into a creditor’s paradise where capital’s share of national income rose to an all-time high as labor’s share fell as wages stagnated. Productivity rose, but the returns all went to capital. Unions were crushed while labor’s ability to push up wages collapsed due to the twin shocks of restrictive legislation and the globalization of production. Parliaments in turn were reduced to tweet-generating talking shops as central banks and policy technocrats wrested control of the economy away from those elected to govern.

Seen this way, what we see is a reversal of power between creditors and debtors as the anti-inflationary regime of the past 30 years undermines itself—what we might call “Goodhart’s revenge.” In this world, yields compress and creditors fret about their earnings, demanding repayment of debt at all costs. Macro-economically, this makes the situation worse: the debtors can’t pay—but politically, and this is crucial—it empowers debtors since they can’t pay, won’t pay, and still have the right to vote....

The traditional parties of the center-left and center-right, the builders of this anti-inflationary order, get clobbered in such a world, since they are correctly identified by these debtors as the political backers of those demanding repayment in an already unequal system, and all from those with the least assets. This produces anti-creditor, pro-debtor coalitions-in-waiting that are ripe for the picking by insurgents of the left and the right, which is exactly what has happened.

In short, to understand the election of Donald Trump we need to listen to the trumpets blowing everywhere in the highly indebted developed countries and the people who vote for them. 

The global revolt against elites is not just driven by revulsion and loss and racism. It’s also driven by the global economy itself. This is a global phenomenon that marks one thing above all. The era of neoliberalism is over. The era of neonationalism has just begun.

Blyth actually shines in videos; he's an outstanding and engaging speaker. I switched this video on to run in the background while I did some housework, but found myself repeatedly rushing to the computer to replay something I didn't quite get. This video is the best exposition of his theory as a whole. You'll have to get used to his Scottish burr:

Although his main critique is aimed at the technocratic managers of national and international economic policy, he also directs withering critiques at center-left politicians, who hurl accusations of politically-incorrect thoughtcrime to appear "left" while simultaneously suckling at the teat of the financial and technological elite and doing nothing to improve the lot of the middle class.

Blyth thinks the U.S. will stumble through, but Blyth believes that the outlook for Europe is much bleaker (this discussion starts at about 41:00). The Euro is a disaster which cannot be fixed, but European technocrats still refused to understand this, and continue to inflict crippling austerity on the European South in a doomed attempt to save it.

Merkel's Superfluous and Irritating Election Statement

Merkel's statement scolding congratulating Donald Trump for his election victory is getting a lot of press:

Germany and America are connected by values of democracy, freedom and respect for the law and the dignity of man, independent of origin, skin color, religion, gender, sexual orientation or political views. I offer the next President of the United States close cooperation on the basis of these values.

The statement's being met with mixed reviews even in the German press, with center-right commentators like Alexander Kissler (g) denouncing it for its self-righteous sanctimoniousness.

I tend to side with Kissler on this one. America neither needs nor wants lectures from Germans on protections of minority rights. One thing most Germans will never understand is that even when interpreted by conservative Republican judges and officials, the US constitution and laws offer more protection for religious and racial minorities than German law does. Let's look at a few highlights:

  • Gays can marry in the United States, but cannot in Germany.
  • Women have just as many opportunities in the USA as in Germany. They participate in the labor force at a slightly higher rate in the USA than in Germany, and they have a higher median income in the USA than in Germany.
  • The US has banned racial and religious discrimination in private contracts since 1964, Germany only since 2006.
  • German anti-discrimination laws are toothless. Discrimination lawsuits are notoriously hard to win, and the penalties for discrimination are much too weak to have any deterrent effect. Verified accounts of blatant discrimination in housing and employment are easy to find in Germany.
  • American class-action discrimination lawsuits regularly result in damages verdicts of tens of millions of dollars. This is impossible under German law.
  • The US has an official federal government agency, the EEOC, which sues American companies who engage in racial, gender, or other forms of illegal discrimination. This agency forces the companies to pay massive damages judgments, accept public responsibility for their action, and remedy their policies. This level of accountability is unknown in Germany. The only thing Germany has is a federal agency that publishes reports and non-binding guidelines.
  • Foreigners and people not born in Germany are over-represented in Germany prisons at a rate comparable to blacks in American prisons. And for the same reasons -- crime is more common in these populations.
  • American laws do not discriminate among religious faiths; German laws do, giving massive privileges to the two established churches -- including a € 460 million yearly subsidy (g) based on obscure 19th century state contracts. Scientologists and members of other odd religious groups can operate freely in the US, while in Germany they are spied upon and harassed by officials who consider them dangerous cults.

This is not to say that Germany is backward or oppressive. All societies make different policy choices and have different levels of protection for minorities. All societies have failings when it comes to providing equal opportunity. But the USA is, objectively, ahead of Germany in many ways. Disputes about voter registration or transgender bathroom use are side issue. America's core protections for minority rights are firmly entrenched in powerful, popular laws and institutions which transcend partisan politics and which are fully accepted by all mainstream political actors. 

A Trump presidency will do absolutely nothing to change that, just as two Bush presidencies didn't. Merkel's condescending warning is as superfluous as it is irritating.