I was wondering if anyone would care to comment on the following article in the Washington Post:
http://www.washingtonpost.com/wp-dyn/content/article/2010/11/23/AR2010112306280.html
It attributes Germany’s economic success (in contrast to the USA) to ‘stakeholder capitalism’, “Mixing social democratic values with Jimmy Stewart localism.”
It’s easy to come up with any narrative as to “why” it is successful. We have no way of testing how any which way can be successful.
Anyways, I think some interesting things to take into account would be German culture/work ethic, the fact that they are in the center of the Eurozone, and they trade mostly with other countries that also use euros. I don’t think the ECB has inflated the Euro the way the Fed has the USD. Of course, less credit expansion should lead to a smaller boom/bust. Other countries have problems with social democracy, other cultural values, and they deal with other nations. They might also have economies that are not as diverse.
Or I could be way off-base and it could just be that they are in another bubble.
Or the article could be right.
I guess Germany’s central-planners are less stupid than the British and American central-planners. This says nothing, however, about the desirability of central planning over free markets.
Clayton -
Oh, I guess they’ve got rich off everyone else’s backs then. The whole world has been hurt by the importation of Volkswagens, and those despicable Germans have benefitted at our expense. Damn them! Trade is a war, after all. It makes me want to go out and vandalise the nearest BMW… (Maybe a government minister’s 7-series, although that is hideous enough to begin with.) Perhaps I’ll drive my Polo into a lake, just to spite the Axis powers, even though it was assembled in factory outside Port Elizabeth… That must have been an anomalous failure on the part of the German state to retain its essential manufacturing jobs at home, of course.
Every country on Earth must endeavour to export more goods than it imports! This all makes perfect sense. After all, Hong Kong is just a poor little fishing village no one has ever heard of. In fact, it’s still the 17th Century, and The Netherlands are the poorest states in Europe.
The figure varies depending on where you get it from… Eurostat thinks it’s 6.7% as of November 2010. I suppose this isn’t surprising, considering what a contrivance it is. Still, there’s this air of certainty when people who are paid for their economic opinions quote stats… Personally, I regard a percentage symbol as a type of emoticon imparting a sarcastic or insincere tone to the figures which appear before it. Like a wink in an email.
Let’s not get into the question of what actually causes ‘unemployment’ to begin with…
So China and Germany are fighting with each other to see how many real resources they can waste funding illusory economic activity which is not demanded by the market? Paying someone with stolen money is not legitimate economic growth. My German isn’t great, but doesn’t “kurzarbeit” translate to “get-rich-quick scheme”? “Short work”.
“Kurzarbeit” is an insidious unionist scheme. It’s advertised as an ‘alternative’ to lay-offs when a company is faced with the need to downsize. Instead of firing the workers it doesn’t need, everyone working for the company is forced onto half-time, regardless of what they actually do for the company and the economy. If a worker elects to undergo some sort of esoteric, undemanded job training scheme on their days off, the balance of their salary gets paid for by the taxpayer.
It precludes rational resource reallocation and consumer sovereignty. When advocates charge that kurzarbeit engenders a local, long-term focussed mode of production, what they mean is that local union old boys benefit in the long-term at the expense of the local economy.
Irrational “shareholder capitalism” results from a situation whereby long-term entrepeneurial calculation is rendered impossible thanks largely to unnatural interest rates and various related disincentives to save money long-term. Wall Street is habitually drunk, but this is only because they’re linked up to an IV-drip full of Federal Reserve alcohol.
Although it’s America suffering now, I do not see how ‘kurzarbeit’ helps ameliorate the underlying problems of rational resource allocation. The bell isn’t tolling for Germany right now, but that seems purely coincidental to me.
One thing they forgot to mention: in the past ten years Germany has drastically increased exports to fellow EU/EMU members. This was a direct consequence of the European Unification movement. Exports to countries like Italy, Spain or Greece have risen by about 33% while imports from these same countries have tumbled down. I have already explained many times why this came about: Germany has been able to fuel its economy by cajoling “weaker” EU members into accepting measures which hurt their economies in return for vague promises of stability and help should the need arise. We are all seeing for ourselves how these promises are turning up.
Another thing it forgot to mention is the fact that Germany has one of the most “industry friendly” taxation systems in Europe. Capital investment per worker is extremely high, resulting in superb worker productivity. Innovation is actively encouraged. Sure, the system is far from perfect but when compared to other European countries it shows a minimum amount of concern for the private sector, something countries like Italy or Spain can only dream about.
They point to the only nation in the Euro zone that’s not in a fiscal crises/on the brink of a complete and systemic economic catastrophe (yet). The rest of Europe (and the U.S. for that matter ) completely invalidates the quasi-socialist-capitalist experiment that the world has pursued since the end of world war 1, and yet, as long as there’s a single welfare state that’s not on the brink of disaster, the fantasy lives on.. Of course, the devaluation of the Euro has helped German manufacturers tremendously. But what would Germany look like if it was a free economy? The most efficient welfare state pales in comparison to the relatively free economies that characterized the latter 19th and early 20th centuries, where economic growth and technological innovation reached a global maximum. So the point of the article is that Germany (with a 7.5% rate of unemployment), at least right now, is doing better than the U.S. So what, who cares? This doesn’t tell me much…
The only time the German economy was worse off than it is now was during Weimar Republic, not a hard thing to beat. As a German I would prefer to have Americas long term problems (even when including the latest US government power grabs) than Germanys.
Also I wish I could just once ask one of these clueless journalists to their face, what would happen if all the countries of the world decided to become successful by all exporting more than importing. Do this people see a countries economy like a simple computer game where one gets more points the more one exports ?
I lost sight of that. Thanks, esuric.
That IS what they are all trying to do.
Yes.
Saving for future use.
This, and this only.
“Kurzarbeit” was a disastrous welfare scheme poised to prolong necessary market corrections for years to come. Fortunately for the Keynesian schemers, their brethren in China had been fueling an even more disastrous monetary bubble that increased “aggregate demand” for BMWs, beer and heavy machinery enough to revive the German labor market - for a while at least. Once that bubble pops, Germany will be working kurz again.
In the meantime, supposedly conservative chancellor Merkel announced that the march towards a CO2-neutral economy must continue. Energy prices are rising due to heavy subsidization of inefficient “green” energy production and as a consequence, the energy-intensive core of the German economy is either stagnating or emigrating or going bankrupt.
Let the right-wing Keynesians at the WSJ rejoice over their temporary victory. It’s old wine in even older wineskins.
“Germany’s economy is the strongest in the world.”
I’m pretty sure that near last place in GDP growth and industrial production growth (both highly negative) does not indicate great strength. More like running on fumes.