The German Model(handelsblatt.com)
handelsblatt.com
The German Model
http://www.handelsblatt.com/politik/konjunktur/nachrichten/report-the-german-model-seite-all/6966662-all.html
9 comments
Most of the German economists know and say that Germany is only at the top right now because it has profited so much from the Euro
hmm must be a different Germany you live in ;-)
DER SPIEGEL from july 24th (http://www.spiegel.de/wirtschaft/soziales/euro-krise-oekonom...): 172 renown German economists published a joint appeal to stop the government from implementing the ESM. While in response only 17 renown european economists made their plea in favor of the governments pro-Euro policy.
hmm must be a different Germany you live in ;-)
DER SPIEGEL from july 24th (http://www.spiegel.de/wirtschaft/soziales/euro-krise-oekonom...): 172 renown German economists published a joint appeal to stop the government from implementing the ESM. While in response only 17 renown european economists made their plea in favor of the governments pro-Euro policy.
No, actually he is spot on. The European crisis is layered like an onion and if you peel away the outer layers like banking, sovereign debt and all the things we hear so much about in the press, then you will arrive at the core.
That core is a inner-European trade imbalance which makes the existence of the Euro blatantly unsustainable. If you look at the overall trade balance between the EU and the rest of the world, you will see that lately, imports have been about 20 % larger than exports.
Germany on the other hand is (and has been for years) an extreme exporter. Now if you add up the numbers, you will see that obviously there must be some very heavy importers within the EU. These importers are the countries that we all know and love from the news reports and the way through which they financed their extreme trade imbalances was through massive private debt (not public debt, that's an outer layer).
Here are some numbers on the trade balances (yeah, I know, it's wikipedia. But they present both figures in a readable manner and they list the sources.): http://de.wikipedia.org/wiki/Au%C3%9Fenhandelsstatistik#Entw...
Germany was only able to reach its position as such a massive exporter by
1. Being incredibly competitive to begin with 2. Artificially boosting competitiveness by 10+ years of nonexistent wage increases, (also crippling German domestic demand) 3. Having a majority of its most important trading partners locked inside the Euro, so that they couldn't mitigate their trade imbalance through inflation (better cash in your Lira fast...), thus boosting the net worth of German exports
And that number 3 is why this crisis is never going away. Yes, never.
All "they" can do is to repair parts of the outer onion shells, buying time. However, that inner core continues to exert a force towards destabilizing the European system. Every single fix to the trade imbalance problem, probably also all partial fixes, are politically infeasible.
You cannot have a continuous flow of money from one part of the European Economy towards the other without some sort of approximately equal flow of money in the other direction. What kind of flow? If we look at the United States as a group of States that is of roughly equal size and has about the same internal inequalities between states as the EU there emerges a list of transfers that are effective in couteracting trade imbalances:
Social security, Medicare, Common Bank Insurance, Military spending (wanna bet there are per capita more soldiers from Alabama than from Maryland?) and so on.
If this is what can fix this crisis, then I am all for it. However, it seems that I am part of a minority here in Europe. So collapse it is. Ein Ende mit Schrecken oder ein Schrecken ohne Ende.
That core is a inner-European trade imbalance which makes the existence of the Euro blatantly unsustainable. If you look at the overall trade balance between the EU and the rest of the world, you will see that lately, imports have been about 20 % larger than exports.
Germany on the other hand is (and has been for years) an extreme exporter. Now if you add up the numbers, you will see that obviously there must be some very heavy importers within the EU. These importers are the countries that we all know and love from the news reports and the way through which they financed their extreme trade imbalances was through massive private debt (not public debt, that's an outer layer).
Here are some numbers on the trade balances (yeah, I know, it's wikipedia. But they present both figures in a readable manner and they list the sources.): http://de.wikipedia.org/wiki/Au%C3%9Fenhandelsstatistik#Entw...
Germany was only able to reach its position as such a massive exporter by
1. Being incredibly competitive to begin with 2. Artificially boosting competitiveness by 10+ years of nonexistent wage increases, (also crippling German domestic demand) 3. Having a majority of its most important trading partners locked inside the Euro, so that they couldn't mitigate their trade imbalance through inflation (better cash in your Lira fast...), thus boosting the net worth of German exports
And that number 3 is why this crisis is never going away. Yes, never.
All "they" can do is to repair parts of the outer onion shells, buying time. However, that inner core continues to exert a force towards destabilizing the European system. Every single fix to the trade imbalance problem, probably also all partial fixes, are politically infeasible.
You cannot have a continuous flow of money from one part of the European Economy towards the other without some sort of approximately equal flow of money in the other direction. What kind of flow? If we look at the United States as a group of States that is of roughly equal size and has about the same internal inequalities between states as the EU there emerges a list of transfers that are effective in couteracting trade imbalances:
Social security, Medicare, Common Bank Insurance, Military spending (wanna bet there are per capita more soldiers from Alabama than from Maryland?) and so on.
If this is what can fix this crisis, then I am all for it. However, it seems that I am part of a minority here in Europe. So collapse it is. Ein Ende mit Schrecken oder ein Schrecken ohne Ende.
Thank you for making your post so rich in information while at least giving me the information that you're not responding to anything I said right away.
No, actually he is spot on
No he is not. I'm not even arguing against the euro or ESM. The majority of german economists are.
No, actually he is spot on
No he is not. I'm not even arguing against the euro or ESM. The majority of german economists are.
Ok. I'll admit that I got carried away and failed to actually respond to your 170 economists.
I'm a physicist and one thing that I have learned throughout the crisis is that macroeconomics is plagued by an inflated importance of "schools of thought". Current mainstream macroeconomists disagree on ridiculously many things that a layman would expect to be basic facts. In that regard, it is a huge problem that what you are referencing to is "the majority of German economists".
"The majority of German economists" belong to only one school of thought which has not really proven to be "the" school of thought.
For me personally, the most striking thing about this crisis is that what may ultimately break our neck (our as in we the informed public, having our destiny in our hands) is the existence of language barriers. Believe it or not, but the intellectual frame of reference that is taken by the German press and many German economists (and of course all of the politicians) is very different from that of most of the rest of the world. Several things that should urgently be debated in Germany are not debated, since _everyone just knows_ that they are wrong.
For instance, have you ever read an argument for higher inflation from a German economist (not Munchau) in an important German newspaper? Why not? Why is the hyperinflation of Weimar mentioned every now and then but no one publicly gives thought to why there were (and are) many countries that manage to live with inflation higher than 2% (the long term italian rate was around 4-5% throughout the eighties and nineties)?
Why is there no discussions of historical occurences of deflation and the problems/catastrophes they caused?
But let us add something more useful:
How should a non-economist judge if a text written by an economist is trustworthy?
Exclusion criteria:
* Claiming things without citing historical examples or adequatly discussing historical counterexamples. Believe it or not, most things out there have happened before.
* Inability to understand the frame of reference/underlying assumptions of the people whose opinion is _opposite_ to yours. If you think that "they" are all idiots, then you have not understood them or the problem.
* Not having a model. By model I mean that assertions of the type "When X happens, then Y should follow and Z should be impossible." or such are made.
Tldr: At this point there is no reason to just trust economists, no matter how great their number.
I'm a physicist and one thing that I have learned throughout the crisis is that macroeconomics is plagued by an inflated importance of "schools of thought". Current mainstream macroeconomists disagree on ridiculously many things that a layman would expect to be basic facts. In that regard, it is a huge problem that what you are referencing to is "the majority of German economists".
"The majority of German economists" belong to only one school of thought which has not really proven to be "the" school of thought.
For me personally, the most striking thing about this crisis is that what may ultimately break our neck (our as in we the informed public, having our destiny in our hands) is the existence of language barriers. Believe it or not, but the intellectual frame of reference that is taken by the German press and many German economists (and of course all of the politicians) is very different from that of most of the rest of the world. Several things that should urgently be debated in Germany are not debated, since _everyone just knows_ that they are wrong.
For instance, have you ever read an argument for higher inflation from a German economist (not Munchau) in an important German newspaper? Why not? Why is the hyperinflation of Weimar mentioned every now and then but no one publicly gives thought to why there were (and are) many countries that manage to live with inflation higher than 2% (the long term italian rate was around 4-5% throughout the eighties and nineties)?
Why is there no discussions of historical occurences of deflation and the problems/catastrophes they caused?
But let us add something more useful:
How should a non-economist judge if a text written by an economist is trustworthy?
Exclusion criteria:
* Claiming things without citing historical examples or adequatly discussing historical counterexamples. Believe it or not, most things out there have happened before.
* Inability to understand the frame of reference/underlying assumptions of the people whose opinion is _opposite_ to yours. If you think that "they" are all idiots, then you have not understood them or the problem.
* Not having a model. By model I mean that assertions of the type "When X happens, then Y should follow and Z should be impossible." or such are made.
Tldr: At this point there is no reason to just trust economists, no matter how great their number.
> And that number 3 is why this crisis is never going away. Yes, never.
It'll go away when there is a huge financial and fiscal integration of the Eurozone (with a finance ministry, and large, integrated taxes). This, of course, looks right now like a pipe dream. But as the only way out, it may become true anyway.
It'll go away when there is a huge financial and fiscal integration of the Eurozone (with a finance ministry, and large, integrated taxes). This, of course, looks right now like a pipe dream. But as the only way out, it may become true anyway.
The question whether or not to support the ESM is completely separate from the question where Germanys current success is coming from.
The 172 renowned economists are basically stating the obvious that covering for the spending sprees that our lending-power allowed the slow-economy EU countries will hurt the German economy.
To me the question if we should or shouldn't support the ESM is a moral one to which i don't have an answer. We benefited from the Euro the most and the very system that allowed our success is now asking who pays the bills. Tough question to answer.
The 172 renowned economists are basically stating the obvious that covering for the spending sprees that our lending-power allowed the slow-economy EU countries will hurt the German economy.
To me the question if we should or shouldn't support the ESM is a moral one to which i don't have an answer. We benefited from the Euro the most and the very system that allowed our success is now asking who pays the bills. Tough question to answer.
I don't think the number game is very interesting, but you have more than 17 european economists arguing for banking union (e.g. http://www.voxeu.org/article/manifesto-banking-union-economi...). That call from the 172 make a lot of noise because it went against the consensus, not because they are for the consensus.
One issue of the debate is that so much of it is covered with most moralistic arguments that are not very useful to solve the issue (Greece is bad, they must pay, Germany benefited from the Euro, they must pay, etc... the level is often that low). I think Germany's position is really hard: a breaking of the euro would be catastrophic for everyone, but particularly for Germany. OTOH, they will have to pay a big share of the damage, and long terms outlook for Germany are not good (bad demography in particular, see for example http://marginalrevolution.com/marginalrevolution/2011/11/how...).
One issue of the debate is that so much of it is covered with most moralistic arguments that are not very useful to solve the issue (Greece is bad, they must pay, Germany benefited from the Euro, they must pay, etc... the level is often that low). I think Germany's position is really hard: a breaking of the euro would be catastrophic for everyone, but particularly for Germany. OTOH, they will have to pay a big share of the damage, and long terms outlook for Germany are not good (bad demography in particular, see for example http://marginalrevolution.com/marginalrevolution/2011/11/how...).
Do you have articles about this "benefiting from the Euro" thing? Being German myself, I still don't understand what they mean - and btw this seems mostly to be an accusation by the struggling European countries, not "most German economists"?
So how does it work - how do we profit from the Euro, on the cost of other EU countries?
So how does it work - how do we profit from the Euro, on the cost of other EU countries?
It's a strawman. In every country, you will find sectors (and the associated people) who have a net gain from the EUR and some with a net loss. It doesn't really matter and would be impossible to figure out who benefits and loses more, both on the micro and the macro level.
I myself think about it in this (admittedly broad stroke) way:
1) The EUR is not just an economic project. It is a political instrument. That's why it exists, and that's what will determine its future. The economics is only a constraint (alas, now binding) not the objective.
2) No matter the history, a breakup now would be incredibly costly for everybody. Bob Rubin, US treasury secretary under Clinton, aptly described it as "Lehman times x". That's why a complete reversal is highly unlikely.
3) There is a solution: Peripheral states must accept a German-dominated external voice in their fiscal affairs; Germany must let the ECB monetize the debt. Neither of which is politically realistic.
4) In the absence of a conventional political solution, the continent "needs" a holy-shit-moment, something that will scare enough people sufficiently s.th. politicians can reach the costly compromise (3). So I expect one to happen.
5) What journalists, economists, and whoever writes about the success of a country ex post does not matter, it's just noise. Think about what people wrote about Japan in the 80s, the "Asian tigers" in the 90s, the "Washington consensus", etc etc. Until just a few months ago, it was China's state-dominated model, now it's Germany's social-consensus-based turn. Or, to stay with Germany, remember the Economist cover about "the sick man of europe"? It's quite similar to the attribution bias when successful people write autobiographies (or have biographies written about themselves). People like "the illusion of control", and a nice story with a neat, understandable "explanation" with max three identifiable causes or "factors" that led to the observation supports it.
Personally, I think the best way to test your understanding of how the world works is to make predictions and bet on them, preferably money, less preferably your reputation or your ego. So yeah, this article is probably blah but I will read it anyway because it will probably make me feel good, having grown up in and thus having links to the successful system du jour ;-)
I myself think about it in this (admittedly broad stroke) way:
1) The EUR is not just an economic project. It is a political instrument. That's why it exists, and that's what will determine its future. The economics is only a constraint (alas, now binding) not the objective.
2) No matter the history, a breakup now would be incredibly costly for everybody. Bob Rubin, US treasury secretary under Clinton, aptly described it as "Lehman times x". That's why a complete reversal is highly unlikely.
3) There is a solution: Peripheral states must accept a German-dominated external voice in their fiscal affairs; Germany must let the ECB monetize the debt. Neither of which is politically realistic.
4) In the absence of a conventional political solution, the continent "needs" a holy-shit-moment, something that will scare enough people sufficiently s.th. politicians can reach the costly compromise (3). So I expect one to happen.
5) What journalists, economists, and whoever writes about the success of a country ex post does not matter, it's just noise. Think about what people wrote about Japan in the 80s, the "Asian tigers" in the 90s, the "Washington consensus", etc etc. Until just a few months ago, it was China's state-dominated model, now it's Germany's social-consensus-based turn. Or, to stay with Germany, remember the Economist cover about "the sick man of europe"? It's quite similar to the attribution bias when successful people write autobiographies (or have biographies written about themselves). People like "the illusion of control", and a nice story with a neat, understandable "explanation" with max three identifiable causes or "factors" that led to the observation supports it.
Personally, I think the best way to test your understanding of how the world works is to make predictions and bet on them, preferably money, less preferably your reputation or your ego. So yeah, this article is probably blah but I will read it anyway because it will probably make me feel good, having grown up in and thus having links to the successful system du jour ;-)
1) The EUR is not just an economic project. It is a political instrument. That's why it exists, and that's what will determine its future. The economics is only a constraint (alas, now binding) not the objective.
This can not be repeated often enough. All the gloom and doom commentators making break-up predictions are highly underestimating this aspect. EU behavior can not be explained by rational/economic factors based logic.
This can not be repeated often enough. All the gloom and doom commentators making break-up predictions are highly underestimating this aspect. EU behavior can not be explained by rational/economic factors based logic.
People like "the illusion of control", and a nice story with a neat, understandable "explanation" with max three identifiable causes or "factors" that led to the observation supports it.
Hmm. Reminds of a comment I just read here on HN. Trying to put my finger on it... :)
Hmm. Reminds of a comment I just read here on HN. Trying to put my finger on it... :)
Great comment. Can you explain what 'Germany must let the ECB monetize the debt.' means exactly?
Flood the debt with inflation ;) That means the ECB buys the debt basically, but of course it creates the Euros out of nothing, so that creates more Euros for the same economical situation.
The reason behind that is that if the ECB buys the debt, it can keep the rates under a certain level, buying everything that's above with its - theoretically - unlimited buying power. Of course that has a few flaws. The Euro is then less valued, so that's a reason more for wanting even more return on bonds.
The reason behind that is that if the ECB buys the debt, it can keep the rates under a certain level, buying everything that's above with its - theoretically - unlimited buying power. Of course that has a few flaws. The Euro is then less valued, so that's a reason more for wanting even more return on bonds.
[deleted]
good comment
1) Cheap currency:
"For German companies, the sinking euro acts as a kind of crisis buffer. While it reduces demand for German products within the euro zone, these make up only around 40 percent of the country's exports. But for the rest of the world, a weak euro means cheaper German products, which means they're more competitive."
2) Cheap credit: "But recently even interest rates on German bonds with longer maturities have decreased significantly. The federal government is saving a bundle. The reason for the windfall? Amid the ongoing euro crisis, Germany is one of the few borrowers that are still regarded as a safe haven. Many investors would rather lend the government money at bargain-basement rates than risk losses."
3) Inability of other countries to (quickly) adjust given single currency constraints, leading to, for example: "As mass protests form in Spain due to high unemployment among young people, Germany is benefiting from an influx of new skilled professionals. An increasing number of southern Europeans looking for work are heading north to prosperous Germany."
http://www.spiegel.de/international/europe/profiting-from-pa...
2) Cheap credit: "But recently even interest rates on German bonds with longer maturities have decreased significantly. The federal government is saving a bundle. The reason for the windfall? Amid the ongoing euro crisis, Germany is one of the few borrowers that are still regarded as a safe haven. Many investors would rather lend the government money at bargain-basement rates than risk losses."
3) Inability of other countries to (quickly) adjust given single currency constraints, leading to, for example: "As mass protests form in Spain due to high unemployment among young people, Germany is benefiting from an influx of new skilled professionals. An increasing number of southern Europeans looking for work are heading north to prosperous Germany."
http://www.spiegel.de/international/europe/profiting-from-pa...
A good article about it in german is here: http://www.handelsblatt.com/politik/international/vorteile-d...
the tl;dr:
Germany is and was always a strong export oriented nation with our main-markets being in the direct vicinity. Before the Euro many of those neighbors hadn't had the economic lending power to build up their infrastructure and buy german goods.
With the introduction of the Euro these countries could suddenly lend money on the international markets with the support of the german rating, and spend that borrowed money to a large degree in Germany. (Greece is still buying German tanks...)
tl;dr of the tl;dr:
Germany is rich because other countries bought our stuff with money they could lend because of the trust the Euro had because of Germany.
the tl;dr:
Germany is and was always a strong export oriented nation with our main-markets being in the direct vicinity. Before the Euro many of those neighbors hadn't had the economic lending power to build up their infrastructure and buy german goods.
With the introduction of the Euro these countries could suddenly lend money on the international markets with the support of the german rating, and spend that borrowed money to a large degree in Germany. (Greece is still buying German tanks...)
tl;dr of the tl;dr:
Germany is rich because other countries bought our stuff with money they could lend because of the trust the Euro had because of Germany.
Does it really make sense to think about Germany as a separate entity from the rest of the Euro Zone? Economically, I think Germany is more like the center of a huge country with Spain and Greece being the poorer provinces... It is a very strange situation caused by too diverse countries having the same currency.
OK I get that, but won't that backfire in a big way? It's happening right now, I guess... Still, I don't really think Germany can be blamed. Unless you think of the "weaker" countries as children who can't take responsibility for themselves. But why would Germany be smarter?
I think overall we are just lucky atm (or were lucky for a while...).
I think overall we are just lucky atm (or were lucky for a while...).
Thats why i said, the euro put Germany in a very fortunate situation. I can't imagine Ex-Chancellor Kohl expecting it to play out this way.
Its not that Germany is in any way smarter, Germany would probably have done the same, even if it were just on a governmental or banking level, as private lending is very conservative in Germany.
Its not that Germany is in any way smarter, Germany would probably have done the same, even if it were just on a governmental or banking level, as private lending is very conservative in Germany.
"Still, I don't really think Germany can be blamed. Unless you think of
the "weaker" countries as children who can't take responsibility for
themselves."
Well, you can't directly blame Germany, that's right.
But someone had to lend all that money, and I don't believe, that no one could see the real financial situation in these countries.
So, what did the banks wrong, and why nobody looked after the banks?
Well, you can't directly blame Germany, that's right.
But someone had to lend all that money, and I don't believe, that no one could see the real financial situation in these countries.
So, what did the banks wrong, and why nobody looked after the banks?
The banks are very well looked after, billions after billions of tax payer money are used to bail them out of their problems. I think for the banks just lending as much as they can makes perfect sense. They have no risk in this modern age.
Because Germany is an export-oriented economy with a huge trade surplus, primarily trading with other EU countries.
If the Euro didn't exist, the natural course of events would be for countries at the receiving end (who are running a trade deficit) to devalue their currencies. That would cut into German exports. But with a unified currency, devaluation to counter trade or current account imbalances is impossible.
If the Euro didn't exist, the natural course of events would be for countries at the receiving end (who are running a trade deficit) to devalue their currencies. That would cut into German exports. But with a unified currency, devaluation to counter trade or current account imbalances is impossible.
I have to admit, I never understood the point of devaluing your currency, except maybe for sneaking taxes by your citizens.
Say you want to buy a German car that costs 20000€, and your country uses Drachme, not Euro. How does devaluing Drachme help you afford the car? if you say "no, a Drachme is not worth 0.5 Euros anymore, it is only worth 0.05Euros", it only means you have to 10 times more Drachmes for the car than before?
Say you produce olives, and one pound of olives goes for 1 Eur. So you need to sell 20000 pounds of olives to afford the car. How does the valuation of Drachme enter into that?
Say you want to buy a German car that costs 20000€, and your country uses Drachme, not Euro. How does devaluing Drachme help you afford the car? if you say "no, a Drachme is not worth 0.5 Euros anymore, it is only worth 0.05Euros", it only means you have to 10 times more Drachmes for the car than before?
Say you produce olives, and one pound of olives goes for 1 Eur. So you need to sell 20000 pounds of olives to afford the car. How does the valuation of Drachme enter into that?
You don't buy a BMW. But:
1) You buy a local car because the foreign ones are all too expensive
2) BMW decides to build a plant in your country because it is so much cheaper.
Both of those things help grow your economy, growth leads to a stronger currency, and then you buy a nice new BMW.
1) You buy a local car because the foreign ones are all too expensive
2) BMW decides to build a plant in your country because it is so much cheaper.
Both of those things help grow your economy, growth leads to a stronger currency, and then you buy a nice new BMW.
Why is it cheaper to build the factory in your country? Instead of paying with a devalued currency, you could simply pay less Euros? Same for buying local vs foreign cars - I just don't see how the currency makes a difference (or the possibility to devalue the currency).
Let's stick to olives: either you get x Euros for a pound of olives, or y Drachmes. In the end, if you want to buy a car, you have to exchange the Drachmes into Euros. You should get exactly x Euros for y Drachmes. Otherwise there would be an opportunity to get infinite olives for free. So it doesn't matter how much you devalue the Drachmes, you'll always get the same amount of Euros per pound of olives.
Let's stick to olives: either you get x Euros for a pound of olives, or y Drachmes. In the end, if you want to buy a car, you have to exchange the Drachmes into Euros. You should get exactly x Euros for y Drachmes. Otherwise there would be an opportunity to get infinite olives for free. So it doesn't matter how much you devalue the Drachmes, you'll always get the same amount of Euros per pound of olives.
If Drachmes are devalued, labour in Greece is cheaper than labour in Germany - workers get paid the same number of Drachmes as before devaluation, but they're paid less Euros.
So it is mainly just cheating your citizens. I can't believe economists seriously put this forward as a problem. They should seek to educate the population, not defraud them.
No, it's raising tariffs on imported goods by stealth.
<em>The currency only matters at the border</em>, so if the thing or person under consideration doesn't cross the border, devaluation doesn't matter.
<em>The currency only matters at the border</em>, so if the thing or person under consideration doesn't cross the border, devaluation doesn't matter.
Ah, but the thing is, Greeks then find it massively easier to get out of debt to the other Euro nations.
Inflation has been called "austerity done right".
Inflation has been called "austerity done right".
That is kind of a "milk maid" equation, as we call it in Germany. If the Greeks wouldn't have the Euro, perhaps nobody would have lent them money to begin with. So at least if you advocate countries having their own currencies, you should be aware of that aspect. It's not as if problems (debts) just evaporate with control over the currency. You would have other problems instead.
Yes, but it's much better to have a problem you can actually solve by taking responsibility yourself, rather than a problem whose solution relies on someone else being nice to you against their own interest (Southern Europe being on the same currency as Germany).
But maybe those states would have been bankrupt much sooner, not being able to borrow without the Euro. That is what I mean - no problem would have been solved by not being on the Euro.
I think it is a psychological issue. If salaries get cut by 30% across the country, people go to the streets. If you devalue their currency, most people don't even realize it and just accept that the prices for certain imported goods went up.
I can understand the psychological aspects, but I can't accept that economists see that as a serious issue. It is like "oh dear, we can not cheat our citizens anymore", like saying "governments need the ability to defraud the population". They should instead seek to educate the population.
It's not just that, while devaluation alters import prices local prices like rent and service costs don't fluctuate. So a 30% devaluation doesn't make people 30% poorer.
Of course it would: in your example, the landlords would be poorer because they would collect less rent. Likewise for service providers. Perhaps you could argue for public services, but for those the government could just lower the fees instead of devaluing the currency.
But thanks to your example I see it has more subtleties: it is also a question who to take the money from. Making landlords poorer might be an easy sell to the majority of the population - if the population would have any idea of what is going on, which I doubt.
Services might just go away if they make less money.
But thanks to your example I see it has more subtleties: it is also a question who to take the money from. Making landlords poorer might be an easy sell to the majority of the population - if the population would have any idea of what is going on, which I doubt.
Services might just go away if they make less money.
No, landlords would NOT be poorer, they're taking in exactly the same as before devaluation. Devaluation directly effects ONLY imports (more expensive) and exports (cheaper): it effects the local economy only based on how much it depends on each.
That is simply false. Think it through.
I am being paid a number of arbitrary denominators of value per time period.
Government declares that the arbitrary denominators of value now buy half the number of a different arbitrary denominators of value they did previously.
Because I am a locovore Luddite (for the sake of the argument), everything I buy is made in the country, with materials produced in the country.
How does the devaluation effect me?
Government declares that the arbitrary denominators of value now buy half the number of a different arbitrary denominators of value they did previously.
Because I am a locovore Luddite (for the sake of the argument), everything I buy is made in the country, with materials produced in the country.
How does the devaluation effect me?
Devaluing your currency makes foreign products more expensive relative to yours and makes your products cheaper relative to foreign ones. That means that it is less attractive to export goods to your country and more attractive to import from your country.
That does not mean that devaluation is a sinecure; for example, if you heavily depend on imported goods, it will drive prices for those goods up. But it can help correct trade and current account imbalances.
Also, devaluation is, more often than not, something that happens simply due to trading and market pressure and not because of government action. If a country keeps having a trade surplus, then its currency will automatically appreciate, unless there are countervailing forces.
That does not mean that devaluation is a sinecure; for example, if you heavily depend on imported goods, it will drive prices for those goods up. But it can help correct trade and current account imbalances.
Also, devaluation is, more often than not, something that happens simply due to trading and market pressure and not because of government action. If a country keeps having a trade surplus, then its currency will automatically appreciate, unless there are countervailing forces.
Let's say you're Greece and you're a trillion Drachmes in debt. You can't pay the interest anymore, your deficit is too high. Greece uses INFLATION, it's super effective! Prices double, but wages double also. Tax income doubles. What stays the same is the debt, and suddenly Greece can afford to pay its lenders. National crisis averted. Only the lenders are screwed, and those who had their savings in Drachmes. That's also the reason why it's very popular to have savings accounts in "hard" currency in these countries.
That's how it has been for decades, but now with the Euro that's not possible anymore, leading to the Euro crisis.
That's how it has been for decades, but now with the Euro that's not possible anymore, leading to the Euro crisis.
>How does devaluing Drachme help you afford the car
It doesn't. On the contrary, it helps you export your home made Pallas Athene car.
Suppose it costs you 25000 GRD to build that car and that's 12500 € at 1 € = 2 GRD. You can sell it internationally for 15000 € for a profit of 2500 €.
Now the GRD plunges to 1 € = 4 GRD. Your costs stay at 25000 GRD but that is now only 6250 €. You either can continue to sell internationally for 15000 € and earn an extra 6250 € profit or reduce the price and sell a lot more thereby also raking in more cash.
Since you probably have to procure parts from abroad, the extra profit will be a lot less, but still it helps you _sell_.
Who pays the bill? Of course the general population if it continues to buy imported goods, because the price of those goes up. If only a part of the gen pop switches to buying domestic goods - hey even better for the domestic producers. Apart from making more on the international market, they gain on the domestic market.
Suppose it costs you 25000 GRD to build that car and that's 12500 € at 1 € = 2 GRD. You can sell it internationally for 15000 € for a profit of 2500 €.
Now the GRD plunges to 1 € = 4 GRD. Your costs stay at 25000 GRD but that is now only 6250 €. You either can continue to sell internationally for 15000 € and earn an extra 6250 € profit or reduce the price and sell a lot more thereby also raking in more cash.
Since you probably have to procure parts from abroad, the extra profit will be a lot less, but still it helps you _sell_.
Who pays the bill? Of course the general population if it continues to buy imported goods, because the price of those goes up. If only a part of the gen pop switches to buying domestic goods - hey even better for the domestic producers. Apart from making more on the international market, they gain on the domestic market.
Nope, it's the opposite, in fact. You confuse devaluation with depreciation. What should really happen is that Germany's currency should devaluate (via inflation).
I think of it as this: GIPS have massive debts in "German"-Euros. They also have prices too high in "Gypsy"-Euros, which is equivalent to say that GIPS have also salaries too low in "German"-Euros. They just can't pay that debt, because Gypsy salaries are too low, the prices are proportionately too high, and the debts are also too big.
What you do is, you create inflation only in Germany. Now German Euros are valued less, so wages and revenues grow. Gipsy Euros are valued the same as they were, so prices stay the same, and wages and revenues stay the same.
Now, this means that Germans want to buy more cheap Gypsy stuff and services, so there's now a trade deficit for Germany, and a trade surplus for the Gypsies. Which means an increase in wages and revenues for the GIPS, which is allocated to paying German debt.
The result is that the Gypsies get German jobs and German capital, and the Germans get their debt paid. This debt is, of course, of less value now for the Germans, they have to pay more for everything German, and there's less jobs on Germany, so they are pissed off. The thing is, they still win on the long term, because now they can buy cheaper Gypsy stuff, like Spanish-built German-designed cars. They can concentrate on more capital-intensive production, to offset lost jobs. Also, at least, they got back some of their debt.
I think of it as this: GIPS have massive debts in "German"-Euros. They also have prices too high in "Gypsy"-Euros, which is equivalent to say that GIPS have also salaries too low in "German"-Euros. They just can't pay that debt, because Gypsy salaries are too low, the prices are proportionately too high, and the debts are also too big.
What you do is, you create inflation only in Germany. Now German Euros are valued less, so wages and revenues grow. Gipsy Euros are valued the same as they were, so prices stay the same, and wages and revenues stay the same.
Now, this means that Germans want to buy more cheap Gypsy stuff and services, so there's now a trade deficit for Germany, and a trade surplus for the Gypsies. Which means an increase in wages and revenues for the GIPS, which is allocated to paying German debt.
The result is that the Gypsies get German jobs and German capital, and the Germans get their debt paid. This debt is, of course, of less value now for the Germans, they have to pay more for everything German, and there's less jobs on Germany, so they are pissed off. The thing is, they still win on the long term, because now they can buy cheaper Gypsy stuff, like Spanish-built German-designed cars. They can concentrate on more capital-intensive production, to offset lost jobs. Also, at least, they got back some of their debt.
Germany had a huge trade surplus before.
To devalue a currency is not a solution - the opposite. It may look attractive, but its effects are bad over long term. It for example makes imports more expensive.
To devalue a currency is not a solution - the opposite. It may look attractive, but its effects are bad over long term. It for example makes imports more expensive.
Huge trade surplus before? When? http://www.indexmundi.com/g/g.aspx?c=gm&v=85 and http://www.tradingeconomics.com/germany/balance-of-trade
It correlates too well with the introduction of the Euro to be just random.
The issue is exactly that the Euro constantly devalues the German output - thus not slowing its increase in a natural way.
It correlates too well with the introduction of the Euro to be just random.
The issue is exactly that the Euro constantly devalues the German output - thus not slowing its increase in a natural way.
The general idea is that Germany, since 2000 or so, did what is essentially an internal devaluation, by freezing salaries. This only works because Germany was the only big economy within the Eurozone to follow this policy. Note that GDP increase was not especially high in Germany compared to other countries with a similar size within the Euro (e.g. France did better in the 1999-2011 period: http://fatasmihov.blogspot.co.uk/2011/12/internal-devaluatio...). This policy cannot possibly work if other countries follow it within the Euro zone.
What does that have to do with the Euro? And why can such a policy not work if "other countries follow it within the Euro" zone?
Also I wasn't aware that the government determines the salaries here in Germany. You are aware that the cold war is over and capitalism won, even here in Germany? We don't have a communist/socialist regime that can simply set salaries. Although the government can of course affect salaries by raising taxes (less net salary for everyone).
Also I wasn't aware that the government determines the salaries here in Germany. You are aware that the cold war is over and capitalism won, even here in Germany? We don't have a communist/socialist regime that can simply set salaries. Although the government can of course affect salaries by raising taxes (less net salary for everyone).
If everybody decreases their labour cost everything else being equal, then obviously you don't get a competitive advantage from it. You just made everyone poorer. See also http://seekerblog.com/2012/01/17/euro-crisis-german-unit-lab... for the same line of arguments. Germany essentially gained market shares at the expense of other eurozone countries (0-sum game) instead of actual increases in productivity (which is not a 0-sum game).
As far as pressure for decreasing labour cost, this is pretty much uncontroversial. I did not say that Germany had a gvt authority setting salaries, but various factors such a pressure from high unemployment in the early 2000, and lower-than-eurozone inflation helped it (see e.g. http://www.voxeu.org/article/how-restore-competitiveness-eu - even though that article argues something closer to the opposite of what I am arguing here).
As far as pressure for decreasing labour cost, this is pretty much uncontroversial. I did not say that Germany had a gvt authority setting salaries, but various factors such a pressure from high unemployment in the early 2000, and lower-than-eurozone inflation helped it (see e.g. http://www.voxeu.org/article/how-restore-competitiveness-eu - even though that article argues something closer to the opposite of what I am arguing here).
I just read this article which explains it nicely (IMO):
http://www.stratfor.com/weekly/financial-markets-politics-an...
I agree.
My colleague who sits across from me finished uni when Italy was booming and Italy knew all the economic answers. I finished uni when Ireland was booming and Ireland knew all the economic answers.
Germany is booming, but most people don't know why. Ten years ago it was absolutely the sick man of Europe, and now here in Germany they the economic answers? Erm, ja, bestimmt.
My colleague who sits across from me finished uni when Italy was booming and Italy knew all the economic answers. I finished uni when Ireland was booming and Ireland knew all the economic answers.
Germany is booming, but most people don't know why. Ten years ago it was absolutely the sick man of Europe, and now here in Germany they the economic answers? Erm, ja, bestimmt.
I would go one step farther and say it is poorly written. It is rambling, disorganized, and lacks both both narrative structure and thematic clarity. It offers no systematic analysis, and confounds anecdotal evidence with personal rembrances. It reads like a the runner-up entry in a write like Thomas Friedman competition (which is not a good thing.)
I always wondered how much Germany benefited from the restrictions on keeping a standing army, and being (effectively) defended by the U.S. military. The chunk of budget spent on that surely must have been used more productively.
Which restriction do you think of? Germany had many hundred thousands of soldiers. A huge standing army. Lots of military equipment. We bought stuff from the US. Germany even paid the US for the presence in Germany. We even paid you for the first gulf war.
What Germany did though: once the cold war was over, we reduced our military. The threat was over.
Accordingly the US reduced its presence in Germany. The rest of the US presence here is working on keeping the US empire. For example the central command for africa is in Germany. Hospitals pick up the soldiers from Iraq and Afghanistan. Logistics...
What Germany did though: once the cold war was over, we reduced our military. The threat was over.
Accordingly the US reduced its presence in Germany. The rest of the US presence here is working on keeping the US empire. For example the central command for africa is in Germany. Hospitals pick up the soldiers from Iraq and Afghanistan. Logistics...
I'm not sure there are any such restrictions anymore. Germany has a standing army of about 200k soldiers, down from 450k in 1990. The US still has about 50k troops in Germany, but I don't think they're defending us (or controlling us) as much as they're hanging around in an allied state closer to multiple conflict zones.
I thought that our economic success had something to do with working people who produce stuff which is in high demand worldwide: machines, tools, cars, trains, aircrafts, energy systems, chemicals, ...
That just means that "we" are selling stuff people would like to buy -- the supply side --, not that they are buying it from "us", or even buying it from anybody at all -- the demand side.
Being able to buy stuff requires money, and one way of getting money is borrowing it. The Euro resulted in incredibly low interest rates for all the EUR countries, making borrowing money very easy. Certain German entities were also very happy to lend out, having lots of spare money.
Having money is not enough, though, you need to have money in a stable currency. So far the Euro has been very stable. Many of the countries that have got the Euro got in by falsifying statistics, something that was widely known at the time.
Finally, Germany engineered it's economy into extreme efficiency. You can do that by being super smart, broadly speaking, and by being super cheap. I guess Germany did the former; it certainly did the latter and Germany's working force suffered for it: increased retirement age, increased VAT, stagnant net real wages, reduced benefits, reduced unemployment, etc.
The end result: We drove our economy with a focus on exporting stuff to countries which can't really afford it, buy pay us with money borrowed from us. If/when they default, we're left with a huge amount of worthless defaulted loans, a huge export oriented economy that suddenly has lost most of its customers and not enough internal demand to make up for it.
Being able to buy stuff requires money, and one way of getting money is borrowing it. The Euro resulted in incredibly low interest rates for all the EUR countries, making borrowing money very easy. Certain German entities were also very happy to lend out, having lots of spare money.
Having money is not enough, though, you need to have money in a stable currency. So far the Euro has been very stable. Many of the countries that have got the Euro got in by falsifying statistics, something that was widely known at the time.
Finally, Germany engineered it's economy into extreme efficiency. You can do that by being super smart, broadly speaking, and by being super cheap. I guess Germany did the former; it certainly did the latter and Germany's working force suffered for it: increased retirement age, increased VAT, stagnant net real wages, reduced benefits, reduced unemployment, etc.
The end result: We drove our economy with a focus on exporting stuff to countries which can't really afford it, buy pay us with money borrowed from us. If/when they default, we're left with a huge amount of worthless defaulted loans, a huge export oriented economy that suddenly has lost most of its customers and not enough internal demand to make up for it.
'reduced unemployment' is hardly suffering. The opposite was true: we had, and still have, a lot of people without employment perspective. The main goal of the policies was to drive unemployment down - especially in the new states.
> Many of the countries that have got the Euro got in by falsifying statistics
A few. Not 'many'.
You seem to go for the easy explanation. In the EU and the Eurozone countries are still responsible for their politics. Even their economic politics.
It's also not Germany which lend especially much money to our southern partners in the EU. Check out France, US, Britain, ... The speculators were most from areas and industries which were not especially 'German'. German banks were dumb enough to follow the lead of the investment banks and speculators.
Each country has to:
* reduce debt * keep an educated work force * invest money wisely * prevent bubbles
That Spain had a housing bubble is not Germany's fault. That Greece has incompetent economics and finance is also not Germany's fault. Our fault was to sell them submarines. But I bet the Nato partners were more than happy that Greece wanted them. That Ireland's economy collapsed was also not our fault.
If you are not aware the is a global economy competition. Germany wanted to keep Europe able to compete. Many others made themselves a nice time - brought their money to offshore tax havens, to Switzerland, speculated in London, speculated in the housing boom.
Its not really our fault that we have no housing bubble, our investment banks were stupid enough, but the damage could be contained, we reduced our budget deficit, ...
Instead of blaming Germany, you should look at the incompetent politicians of those countries who are not able to collect taxes, not able to control bubbles, not able to invest in the 'real' economy instead of virtual ones, who are not able to balance their budgets.
Germany made enough mistakes on their own. For example we sold infrastructure to foreign investors. We were told that this was so much better. Huge mistake.
> Many of the countries that have got the Euro got in by falsifying statistics
A few. Not 'many'.
You seem to go for the easy explanation. In the EU and the Eurozone countries are still responsible for their politics. Even their economic politics.
It's also not Germany which lend especially much money to our southern partners in the EU. Check out France, US, Britain, ... The speculators were most from areas and industries which were not especially 'German'. German banks were dumb enough to follow the lead of the investment banks and speculators.
Each country has to:
* reduce debt * keep an educated work force * invest money wisely * prevent bubbles
That Spain had a housing bubble is not Germany's fault. That Greece has incompetent economics and finance is also not Germany's fault. Our fault was to sell them submarines. But I bet the Nato partners were more than happy that Greece wanted them. That Ireland's economy collapsed was also not our fault.
If you are not aware the is a global economy competition. Germany wanted to keep Europe able to compete. Many others made themselves a nice time - brought their money to offshore tax havens, to Switzerland, speculated in London, speculated in the housing boom.
Its not really our fault that we have no housing bubble, our investment banks were stupid enough, but the damage could be contained, we reduced our budget deficit, ...
Instead of blaming Germany, you should look at the incompetent politicians of those countries who are not able to collect taxes, not able to control bubbles, not able to invest in the 'real' economy instead of virtual ones, who are not able to balance their budgets.
Germany made enough mistakes on their own. For example we sold infrastructure to foreign investors. We were told that this was so much better. Huge mistake.
It's a lot harder to prevent bubbles when you don't control your own interest rates. The ECB kept interest rates low to reduce German unemployment, at the cost of feeding housing bubbles in Spain and Ireland.
The ECB did not set interest rates to reduce German unemployment. That's not their task. The ECB's main task is to provide a stable currency.
None of my arguments/observation depends on who is responsible. I don't really care who is to blame, I think the notion is fairly ridiculous given the situation.
being German myself, I cannot agree more. I was sometimes wondering if the author of this article was in the same country that I left. But I have seen this tendency before: people who visited Germany in the 60s, 70s and 80s have a "mental picture" of Germany that only partially fits reality. The structural unemployment is still very high, the educational system is a mess, the tax rates and regulations are borderline insane.
As a half English, half German who's had a fair bit of professional contact with the US, I'd argue the main difference between the US and Germany is short term vs. long term thinking
The US is brilliant at the short term, as characterized by it's sales culture; the mentality of sell first, build second is extremely effective in allowing some forms of innovation, capturing market share fast and eliminating certain forms of waste. This of course was traditionally offset by attracting talent worldwide, such as academics and engineers, to immigrate to the US
By contrast Germans are famous for their engineering. It's much more a build first, sell second approach that's characterized by long term thinking and planning. Socially that's also reflected education where everyone has a chance, irrespective of your parents income - having a well educated populace is a huge asset and that's seen as a long term investment.
All that said, Germany's economy may be less wonderful than it seems. While the US seems to solve any economic issues by "printing money", Germany props themselves up with exports - that a country of just 80 million people is the world's 3rd largest exporter ( http://en.wikipedia.org/wiki/List_of_countries_by_exports ) is kinda... strange and makes we wonder if something doesn't quite add up?
Having worked for a couple of years in Germany, one thing that struck me is taxes came to almost 50% of my salary. Another impression was my generation in Germany - currently in their 30's - wasn't very motivated toward their own careers. That might not entirely be a bad thing - less of a rat race - but it comes across as a generation that doesn't really know what it's purpose is.
So I have a kind of gut feeling that the German focus on exports is done at the cost of "self neglect".
The US is brilliant at the short term, as characterized by it's sales culture; the mentality of sell first, build second is extremely effective in allowing some forms of innovation, capturing market share fast and eliminating certain forms of waste. This of course was traditionally offset by attracting talent worldwide, such as academics and engineers, to immigrate to the US
By contrast Germans are famous for their engineering. It's much more a build first, sell second approach that's characterized by long term thinking and planning. Socially that's also reflected education where everyone has a chance, irrespective of your parents income - having a well educated populace is a huge asset and that's seen as a long term investment.
All that said, Germany's economy may be less wonderful than it seems. While the US seems to solve any economic issues by "printing money", Germany props themselves up with exports - that a country of just 80 million people is the world's 3rd largest exporter ( http://en.wikipedia.org/wiki/List_of_countries_by_exports ) is kinda... strange and makes we wonder if something doesn't quite add up?
Having worked for a couple of years in Germany, one thing that struck me is taxes came to almost 50% of my salary. Another impression was my generation in Germany - currently in their 30's - wasn't very motivated toward their own careers. That might not entirely be a bad thing - less of a rat race - but it comes across as a generation that doesn't really know what it's purpose is.
So I have a kind of gut feeling that the German focus on exports is done at the cost of "self neglect".
Taxes in the US aren't as low as some are inclined to believe (or as high as others--).
As a programmer renting in NYC with a big salary and no investment income, Federal, State, and NYC taxes come to about 44%-46% of my income -- maybe 42%-44% since I tend to get a refund. Once you add in health care costs (both employee and employer contributions), it's probably pretty darn close to 50%.
As a programmer renting in NYC with a big salary and no investment income, Federal, State, and NYC taxes come to about 44%-46% of my income -- maybe 42%-44% since I tend to get a refund. Once you add in health care costs (both employee and employer contributions), it's probably pretty darn close to 50%.
Individual tax rates can vary considerably, but overall taxation is only about 2/3 as high in the US as in Germany, counting all taxes and sources. Germany's tax revenue is about 41% of the country's GDP, while all levels of U.S. government have tax revenue adding to only 27%: http://en.wikipedia.org/wiki/List_of_countries_by_tax_revenu... (on Wikipedia but just reproducing a Heritage Foundation data set).
My own tax rates when I lived in the U.S. were hilariously low, but then I didn't make a lot of money either, and lived in Texas for part of the time. A household making even $200k pays only 24% in federal taxes if filing singly, or 19% if filing jointly, and that's assuming they take nothing but the standard deduction and none of it is capital gains, so it's quite possible for that to be even lower.
I do agree it's important to compare like-to-like. For example, my Danish taxes now are still higher than my US taxes would be for the same income, but not as much higher once you take into account that in the US I'd have to buy health insurance separately.
My own tax rates when I lived in the U.S. were hilariously low, but then I didn't make a lot of money either, and lived in Texas for part of the time. A household making even $200k pays only 24% in federal taxes if filing singly, or 19% if filing jointly, and that's assuming they take nothing but the standard deduction and none of it is capital gains, so it's quite possible for that to be even lower.
I do agree it's important to compare like-to-like. For example, my Danish taxes now are still higher than my US taxes would be for the same income, but not as much higher once you take into account that in the US I'd have to buy health insurance separately.
I've always argued this about NYC compared to the EU. Taxes hit you hard living. But as many people would guess, NYC is filled with bankers with deep pockets and thus the means to skirt around the tax rate.
> Having worked for a couple of years in Germany, one thing that struck me is taxes came to almost 50% of my salary.
Are you sure, you didn't mean statutory deductions? Contributions to health, unemployment, and annuity insurance are no taxes.
Are you sure, you didn't mean statutory deductions? Contributions to health, unemployment, and annuity insurance are no taxes.
That's correct - should have been clearer - was keeping it short. By "taxes" I mean all compulsory payments I was required to make, including health, unemployment etc.
"Socially that's also reflected education where everyone has a chance, irrespective of you parents income"
Unfortunately exactly the opposite is true.
Unfortunately exactly the opposite is true.
Can you be more precise what you're referring to?
Germany's lower school system of deciding at age 10 whether you go to a school (Gymnasium) that allows you go to college later or not is definitely a big issue.
But when I went to college in Germany 10 years ago in my hometown, the cost was minimal (< 300 Euros per semester including unlimited public transport). Also there are regulated student loans (Bafoeg) that less affluent students can take advantage of.
Germany's lower school system of deciding at age 10 whether you go to a school (Gymnasium) that allows you go to college later or not is definitely a big issue.
But when I went to college in Germany 10 years ago in my hometown, the cost was minimal (< 300 Euros per semester including unlimited public transport). Also there are regulated student loans (Bafoeg) that less affluent students can take advantage of.
The point is that if you come from a low income background, there is a very good chance you will never make it to university, because you will probably never quite make it to gymnasium (or through it) to begin with.
For those who speak German:
http://www.sueddeutsche.de/karriere/uebertritt-aufs-gymnasiu... (süddeutsche.de)
https://de.wikipedia.org/wiki/Bildungsbenachteiligung_in_der... (de.wikipedia.org)
http://www.zeit.de/2010/06/C-Uebergang (zeit.de)
In English:
https://en.wikipedia.org/wiki/Education_in_Germany#Determina... (en.wikipedia.org)
For those who speak German:
http://www.sueddeutsche.de/karriere/uebertritt-aufs-gymnasiu... (süddeutsche.de)
https://de.wikipedia.org/wiki/Bildungsbenachteiligung_in_der... (de.wikipedia.org)
http://www.zeit.de/2010/06/C-Uebergang (zeit.de)
In English:
https://en.wikipedia.org/wiki/Education_in_Germany#Determina... (en.wikipedia.org)
Would also be interested in hearing more. Looking at http://en.wikipedia.org/wiki/Education_in_Germany#Tuition_fe... for example - depending on where you live it seems you might have to pay tuition fees but how much exactly?
The fact is that the school is divided very early in way where you are going to college and others where you'll just learn a more simple job (mechanics, cook...). So at a young age, teachers decide where you are going to go. Studies show that this is very dependant on the social class of your parents. Teacher almost never send a surgeon's son to a no-college school. So social mobility is prevented that way, instead of letting the children decide when they are around 18 and more aware of their own capacities and wishes. Having your life determined at 10 is quite harsh.
Then, there is the fact that school is over at around 2PM, letting the afternoon to either slack off or learn piano and classical dance, and do homework. That works only well for families which are well educated, poor and immigrant families don't really know what to begin with.
Then, there is the fact that school is over at around 2PM, letting the afternoon to either slack off or learn piano and classical dance, and do homework. That works only well for families which are well educated, poor and immigrant families don't really know what to begin with.
It highly depends in which state (Bundesland) you live. The most states have don't have those fees anymore, only 3 of 16 states have them as far as I know. The height of those fees is about 500 € per half-year.
Independent to those fees (which are called Studiengebühr) there are other fees which have to be paid in all universities: It is called "Semesterbeitrag" and is about 150 € per half-year (average guessed on my experience ;-) ). It is used to pay public-transport and such stuff.
Independent to those fees (which are called Studiengebühr) there are other fees which have to be paid in all universities: It is called "Semesterbeitrag" and is about 150 € per half-year (average guessed on my experience ;-) ). It is used to pay public-transport and such stuff.
>> Germany props themselves up with exports
I don't understand what you mean. Why is this different from saying "the shop owner props herself up by selling to other people in town?", only at an international level?
In other words, why is it a bad thing?
I don't understand what you mean. Why is this different from saying "the shop owner props herself up by selling to other people in town?", only at an international level?
In other words, why is it a bad thing?
Because it seems unsustainable. Sooner or later international trade has to reach an equilibrium where everyone exports as much as they import (just as everyone in town must ultimately sell the same amount of value as they buy). Obviously someone who's buying more than they're selling has a problem, since sooner or later they'll run out. But someone who's selling more than they're buying should not expect this to go on forever either, and if their internal economy depends on a constant influx of money from outside then there will be trouble when it stops. To stretch the analogy to its limits, a shopkeeper who's got in the habit of having the extra money on hand from being able to sell more than they buy in the market is living dangerously.
(More specifically for Germany I'd say there's a risk of a deflationary spiral - if exports fall then companies will reduce domestic prices and take losses (leading to reduced pay in real terms). Consumers see that prices and salaries are falling, so they hold onto their money and spend less, which only makes it worse).
But you're right in that it's not so much having high exports that's a problem, as the risk of seeing a sudden drop in your exports.
(More specifically for Germany I'd say there's a risk of a deflationary spiral - if exports fall then companies will reduce domestic prices and take losses (leading to reduced pay in real terms). Consumers see that prices and salaries are falling, so they hold onto their money and spend less, which only makes it worse).
But you're right in that it's not so much having high exports that's a problem, as the risk of seeing a sudden drop in your exports.
>> international trade has to reach an equilibrium where everyone exports as much as they import (just as everyone in town must ultimately sell the same amount of value as they buy)
I'm not sure that must or will happen. Maybe the US will decline as a German customer, but India will step up, for example. Germany might be able to go on relying on exports for ever.
And a wise shopkeeper brings in more than they earn for decades, saving up for when their is no income (hard times or retirement).
Dependance on exports makes Germany vulnerable to worldwide financial changes, but dependance on domestic sales makes them vulnerable to domestic crises, like a falling birth rate. Pick your poison. I'm not sure the choice is very clear. Although maybe the answer is "spread your risks by having a balance," which I suppose was your original point.
I'm not sure that must or will happen. Maybe the US will decline as a German customer, but India will step up, for example. Germany might be able to go on relying on exports for ever.
And a wise shopkeeper brings in more than they earn for decades, saving up for when their is no income (hard times or retirement).
Dependance on exports makes Germany vulnerable to worldwide financial changes, but dependance on domestic sales makes them vulnerable to domestic crises, like a falling birth rate. Pick your poison. I'm not sure the choice is very clear. Although maybe the answer is "spread your risks by having a balance," which I suppose was your original point.
>I'm not sure that must or will happen. Maybe the US will decline as a German customer, but India will step up, for example. Germany might be able to go on relying on exports for ever.
The thing is, money can't really be created or destroyed, because it's just a marker for wealth. If country X is paying Germany money for its exports, that money is "really" a promise of future goods/labour from country X or someone they trade with; it only really works if it's "redeemed" from the same country in the end. If the trades were denominated in some scarce resource like gold, sooner or later all the gold would end up in Germany; likewise trading in euros within the eurozone.
(Obviously with fiat money if country X is paying in their own currency (let's say shillings) then they can continue to print more, but that devalues everyone's shillings (including the ones that have now made their way into German pension funds), German companies start charging more and more for their exports so the shilling inflates faster and faster and it all ends very badly for country X.)
((In reality, of course, neither of these extreme scenarios usually comes to pass. What would tend to happen is that as more of the international money supply is concentrated in Germany, other countries can't afford to pay as much for German exports, while Germany has more money available to spend on imports, and the market adjusts so imports and exports balance out))
>And a wise shopkeeper brings in more than they earn for decades, saving up for when their is no income (hard times or retirement).
True, but I think the analogy breaks down here. Thought if Germany were to "go into retirement" as a country the effects on the global financial system would be... interesting to say the least.
The thing is, money can't really be created or destroyed, because it's just a marker for wealth. If country X is paying Germany money for its exports, that money is "really" a promise of future goods/labour from country X or someone they trade with; it only really works if it's "redeemed" from the same country in the end. If the trades were denominated in some scarce resource like gold, sooner or later all the gold would end up in Germany; likewise trading in euros within the eurozone.
(Obviously with fiat money if country X is paying in their own currency (let's say shillings) then they can continue to print more, but that devalues everyone's shillings (including the ones that have now made their way into German pension funds), German companies start charging more and more for their exports so the shilling inflates faster and faster and it all ends very badly for country X.)
((In reality, of course, neither of these extreme scenarios usually comes to pass. What would tend to happen is that as more of the international money supply is concentrated in Germany, other countries can't afford to pay as much for German exports, while Germany has more money available to spend on imports, and the market adjusts so imports and exports balance out))
>And a wise shopkeeper brings in more than they earn for decades, saving up for when their is no income (hard times or retirement).
True, but I think the analogy breaks down here. Thought if Germany were to "go into retirement" as a country the effects on the global financial system would be... interesting to say the least.
Oddly this doesn't talk a lot about the German model, despite that being the title. The education-tracking system is just about the only structural feature the article discusses. A big part of the German model is ordoliberalism (http://en.wikipedia.org/wiki/Ordoliberalism) and the "social market economy", a particular view on the relationship between the state and private sector. The German approach to labor-employer relations is another part of the model, oriented around consensus-building between sector-wide unions and sector-wide employers' federations.
Yesterday I submitted an interview with the co-founder of SAP, a leading figure in the technology sector[1], about the state of the software sector in Germany. He had lots of criticism and comparisons with the U.S., so if you find this article interesting consider reading that interview: http://news.ycombinator.com/item?id=4344429
[1] I'm a former employee of SAP, so I'm biased :-)
[1] I'm a former employee of SAP, so I'm biased :-)
Former SAP employee here too :)
Great interview. Awesome questions and always enjoy Plattner's view of the world.
ps- Where were you based? I was in Newton Square and St.Leon/Rot.
Great interview. Awesome questions and always enjoy Plattner's view of the world.
ps- Where were you based? I was in Newton Square and St.Leon/Rot.
Research at Ra'anana Israel: http://goo.gl/maps/M7Xcw
It is a great interview! Both the reporter and Hasso were not afraid to be bold.
It is also a common criticism in the local financial newspapers that Israeli startups have a problem with rapid international growth because of language/cultural differences, so it was interesting for me to compare what he said also to the local scene and not just the American one.
It is a great interview! Both the reporter and Hasso were not afraid to be bold.
It is also a common criticism in the local financial newspapers that Israeli startups have a problem with rapid international growth because of language/cultural differences, so it was interesting for me to compare what he said also to the local scene and not just the American one.
Very cool. I worked in support, and would deal with some of the portal guys from time to time in Ra'anana
Would be interesting to hear your take on [1] :-)
In any case, if you're ever in the greater Tel Aviv area give me a shout! (my email is at my profile)
[1] http://www.quora.com/Israeli-Culture/Why-are-Israeli-people-...
In any case, if you're ever in the greater Tel Aviv area give me a shout! (my email is at my profile)
[1] http://www.quora.com/Israeli-Culture/Why-are-Israeli-people-...
I'm actually considering a Tel Aviv trip in the next year. Would love to make it out there at some point. I'm based in London now so it's a (relatively) easy trip over.
In regards to working with Israelis... The only interaction I had was during an SAP escalation. Typically (and was the case here) customers are extremely demanding during escalations and SAP (globally) would bend over backwards for them. I was in America at the time and working with the guys in Ra'anana. In many cases they pushed back to us and would get very frustrated. Overall I think it was their attitude towards being part of the team that wasn't that great.
In regards to working with Israelis... The only interaction I had was during an SAP escalation. Typically (and was the case here) customers are extremely demanding during escalations and SAP (globally) would bend over backwards for them. I was in America at the time and working with the guys in Ra'anana. In many cases they pushed back to us and would get very frustrated. Overall I think it was their attitude towards being part of the team that wasn't that great.
Interresting read.
The inside perspective from within Germany is different. Yes the Mittelstand is the backbone of our economy, but it is also the majority that thinks it is being f*cked over a lot by government decision which favor big companies with huge lobbying budgets. The Mittelstand carries the weight, but has little room and opportunity for shaping our society.
A lot of neocapitalistic concepts have been implemented during the last decade and have crippled our social security system and eroded workers rights. The dreaded subcontracted labour is on the rise. Welfare/social subsidy levels have been ruled inhumane by our courts. Our highest court has ruled that our voting system is against our contitution. Twice. What an embarrassment.
The dual education system mentioned in the article is indeed quite good. Apart from that our school and university education system does have serious flaws. In international comparison (PISA test) we are way apart from the best in class and nowhere else but in Germany does the quality of your education correlate as much with the income of your parents as it does here. More money, better education and vice versa.
The tight organization and structure praised in the article also does have its downsides. For example if you wanted to open a bicycle repair shop, you need to have a Zweiradmechanikermeister. (Meister = Master). So you need to be or employ someone who has been educated for several years as a bicycle repair mechanic. In a company that has a certificate for educating bicycle repair mechanics.
Yes, almost all of the space is managed. Over and over. Example: A club owner brought a ship, renovated it and made it into a bistro/bar/club boat. For the permission to use the ~20m of harbor space ranging from the ship to the nearby road he had to negotiate with four different parties. Just because there are abandoned rairoad tracs running across. Four different bureaucratic entities.
I am a hobbyist bee keeper. Which makes me sort of a registered farmer. With a farmer registration number and with registered bee stands. With insurance. With a local bee keeping society and the regional bee keeping society and the national bee keeping society I have to be member of (by proxy). If I want to sell some of the honey, I have to comply with nine different laws. For example I have to comply with a packaging law that tells my what and how I have to declare the honey on the label.
Despite a broad public consensus that genetically modified food should be labelled as such, lobbyists prevented just that. But. If my bees collect pollen from genetically modified plants, I can no longer sell that honey. So now I have to educate my bees to become certified honey collection masters and teach them the difference between unmodified and modified plants and teach them to only collect from the former. But the fathers of my bees died during sex and the queen despite her royal title does not have any money. No money, no education.
Lately my girlfriend and I have been camping at a lake in a different city. On a paid camping ground of course. No wild camping in Germany. With a barbed wire fence around it. It almost felt like a prison camp. At midnight my girlfriend and I made a warm summer night walk around the campsite, talking little and very quietly. Yet someone from inside a camper barked at us what the fuck we thought we were doing and that there has to be peace and quiet at ten. Period.
Our health care system is fundamentally broken. You don't get to see what the doctor bills to your insurance. But also your insurance does not get to see the bill. There is another layer of indirection in between called the Kassenärztliche Vereinigung which collects and anonymizes the doctors bills and sends collective bills to the insurances. You can imagine how easy it is to bill more than you worked for as a doctor. There is no control instance. In order to correct this, there are quarterly billing caps for doctors. Thus if you get sick in the middle of march, june, september or december, when the caps are hit, then either you don't get treated, or the doctor treats you without getting paid. A bad doctor will go on vacation four times a year, a good doctor will treat you on his own expense. I wish I were joking.
The city of Bremerhafen mentioned in the article ranges among the least favourite cities in Germany. Despite its interresting history only few people choose to live there. Sky high unemployment and an almost nonexistent social and cultural life. But hey, the article did not talk about how nice Bremerhafen is.
Anyway, I guess my perspective is one of the "its always greener on the other side" variety.
Germany is indeed a good place to live. I sometimes wish we would not try to be Weltmeister in everything so that we wouldn't have to solve Europes problems. (We still benefit from the european union, so keeping Europe tight and up and running benefits our own situation. So.)
The inside perspective from within Germany is different. Yes the Mittelstand is the backbone of our economy, but it is also the majority that thinks it is being f*cked over a lot by government decision which favor big companies with huge lobbying budgets. The Mittelstand carries the weight, but has little room and opportunity for shaping our society.
A lot of neocapitalistic concepts have been implemented during the last decade and have crippled our social security system and eroded workers rights. The dreaded subcontracted labour is on the rise. Welfare/social subsidy levels have been ruled inhumane by our courts. Our highest court has ruled that our voting system is against our contitution. Twice. What an embarrassment.
The dual education system mentioned in the article is indeed quite good. Apart from that our school and university education system does have serious flaws. In international comparison (PISA test) we are way apart from the best in class and nowhere else but in Germany does the quality of your education correlate as much with the income of your parents as it does here. More money, better education and vice versa.
The tight organization and structure praised in the article also does have its downsides. For example if you wanted to open a bicycle repair shop, you need to have a Zweiradmechanikermeister. (Meister = Master). So you need to be or employ someone who has been educated for several years as a bicycle repair mechanic. In a company that has a certificate for educating bicycle repair mechanics.
Yes, almost all of the space is managed. Over and over. Example: A club owner brought a ship, renovated it and made it into a bistro/bar/club boat. For the permission to use the ~20m of harbor space ranging from the ship to the nearby road he had to negotiate with four different parties. Just because there are abandoned rairoad tracs running across. Four different bureaucratic entities.
I am a hobbyist bee keeper. Which makes me sort of a registered farmer. With a farmer registration number and with registered bee stands. With insurance. With a local bee keeping society and the regional bee keeping society and the national bee keeping society I have to be member of (by proxy). If I want to sell some of the honey, I have to comply with nine different laws. For example I have to comply with a packaging law that tells my what and how I have to declare the honey on the label.
Despite a broad public consensus that genetically modified food should be labelled as such, lobbyists prevented just that. But. If my bees collect pollen from genetically modified plants, I can no longer sell that honey. So now I have to educate my bees to become certified honey collection masters and teach them the difference between unmodified and modified plants and teach them to only collect from the former. But the fathers of my bees died during sex and the queen despite her royal title does not have any money. No money, no education.
Lately my girlfriend and I have been camping at a lake in a different city. On a paid camping ground of course. No wild camping in Germany. With a barbed wire fence around it. It almost felt like a prison camp. At midnight my girlfriend and I made a warm summer night walk around the campsite, talking little and very quietly. Yet someone from inside a camper barked at us what the fuck we thought we were doing and that there has to be peace and quiet at ten. Period.
Our health care system is fundamentally broken. You don't get to see what the doctor bills to your insurance. But also your insurance does not get to see the bill. There is another layer of indirection in between called the Kassenärztliche Vereinigung which collects and anonymizes the doctors bills and sends collective bills to the insurances. You can imagine how easy it is to bill more than you worked for as a doctor. There is no control instance. In order to correct this, there are quarterly billing caps for doctors. Thus if you get sick in the middle of march, june, september or december, when the caps are hit, then either you don't get treated, or the doctor treats you without getting paid. A bad doctor will go on vacation four times a year, a good doctor will treat you on his own expense. I wish I were joking.
The city of Bremerhafen mentioned in the article ranges among the least favourite cities in Germany. Despite its interresting history only few people choose to live there. Sky high unemployment and an almost nonexistent social and cultural life. But hey, the article did not talk about how nice Bremerhafen is.
Anyway, I guess my perspective is one of the "its always greener on the other side" variety.
Germany is indeed a good place to live. I sometimes wish we would not try to be Weltmeister in everything so that we wouldn't have to solve Europes problems. (We still benefit from the european union, so keeping Europe tight and up and running benefits our own situation. So.)
Lately my girlfriend and I have been camping at a lake in a different city. On a paid camping ground of course. No wild camping in Germany.
Sorry, but your post to me seems to be at least a bit of a personal rant.
A lot of neocapitalistic concepts have been implemented during the last decade and have crippled our social security system and eroded workers rights. The dreaded subcontracted labour is on the rise. Welfare/social subsidy levels have been ruled inhumane by our courts. Our highest court has ruled that our voting system is against our contitution. Twice. What an embarrassment.
Well I think it rather depends on your point of view.
The social security system was crippled 5 decades ago, when chancellor Konrad Adenauer, for political gains, transformed it from a capital-backed insurance-system into todays system where ever fewer workers have to pay for more benificiaries.
The workers in Germany till this day enjoy one of the most protective rights in the world. So protective, that it almost proved to be disastrous when Germany was Europes "sick-man" in the late 90s and it's labor market deemed to be inflexible to compete with Eastern-Europe and Asia.
Both, the workers rights and the social security system are examples of what the author might has in mind when writing about "the German model": That the German society is able to reach a consensus were the parties involved agree to pain. Don't forget that it were the unions and the lefties (Social-Democrats and Greens) who worked on and implemented the needed reforms.
Sorry, but your post to me seems to be at least a bit of a personal rant.
A lot of neocapitalistic concepts have been implemented during the last decade and have crippled our social security system and eroded workers rights. The dreaded subcontracted labour is on the rise. Welfare/social subsidy levels have been ruled inhumane by our courts. Our highest court has ruled that our voting system is against our contitution. Twice. What an embarrassment.
Well I think it rather depends on your point of view.
The social security system was crippled 5 decades ago, when chancellor Konrad Adenauer, for political gains, transformed it from a capital-backed insurance-system into todays system where ever fewer workers have to pay for more benificiaries.
The workers in Germany till this day enjoy one of the most protective rights in the world. So protective, that it almost proved to be disastrous when Germany was Europes "sick-man" in the late 90s and it's labor market deemed to be inflexible to compete with Eastern-Europe and Asia.
Both, the workers rights and the social security system are examples of what the author might has in mind when writing about "the German model": That the German society is able to reach a consensus were the parties involved agree to pain. Don't forget that it were the unions and the lefties (Social-Democrats and Greens) who worked on and implemented the needed reforms.
> capital-backed insurance-system into today's system where ever fewer workers have to pay for more beneficiaries.
There is a common misconception which is that capital-based system for some reason magically relieve the current workers from feeding the elderly. Unfortunately, it can't be true; even with a capital-backed system, retired workers live on the wealth that active workers now produce, thus the capital value necessarily varies accordingly to reflect the available spare added value.
So when there are lots of pensioners and few workers, the supply and demand both for capital (coming from the pension funds) and goods (coming from the workers) will equilibrate in a predictable way towards less purchasing power for the pensioners.
There is a common misconception which is that capital-based system for some reason magically relieve the current workers from feeding the elderly. Unfortunately, it can't be true; even with a capital-backed system, retired workers live on the wealth that active workers now produce, thus the capital value necessarily varies accordingly to reflect the available spare added value.
So when there are lots of pensioners and few workers, the supply and demand both for capital (coming from the pension funds) and goods (coming from the workers) will equilibrate in a predictable way towards less purchasing power for the pensioners.
> The social security system was crippled 5 decades ago, …
Check the history of the Rentenversicherung: It was basically ruined by inflation caused by the First World War. [1]
[1] http://de.wikipedia.org/wiki/Gesetzliche_Rentenversicherung_...
Check the history of the Rentenversicherung: It was basically ruined by inflation caused by the First World War. [1]
[1] http://de.wikipedia.org/wiki/Gesetzliche_Rentenversicherung_...
Sorry, but I have to disagree. WW1 was rather one of the many causes that made social-security not working after WW2. The other big one being, well, WW2.
However, changing the financial scheme of social security away from a capital-backed one towards a "generational accounting" one IS what makes it not working today (unless the working population keeps it's proportional size in relation to the retirees).
However, changing the financial scheme of social security away from a capital-backed one towards a "generational accounting" one IS what makes it not working today (unless the working population keeps it's proportional size in relation to the retirees).
> Our highest court has ruled that our voting system
> is against our contitution. Twice. What an embarrassment.
To be fair the ruling is part of your voting system needs to be tweaked to make it even more fair. That is no embarrassment. Quite the opposite I would say. Your system is working on further improving itself and that should look messy not neat and tidy.
Compared to many western democracies the German system is quite enviable.
To be fair the ruling is part of your voting system needs to be tweaked to make it even more fair. That is no embarrassment. Quite the opposite I would say. Your system is working on further improving itself and that should look messy not neat and tidy.
Compared to many western democracies the German system is quite enviable.
The embarassment lies in the 'twice'.
How difficult can it be to design a voting system that is coherent with our most fundamental law?
How difficult can it be to design a voting system that is coherent with our most fundamental law?
You managed to capture the style of the article almost perfectly.
I'm one of the many guest workers in Germany. I'm not an EU citizen and I didn't speak a lick of german when I got here. I'd say over half the other engineers in my company are non-german, and most of them couldn't string a single german sentence together when they started either (some still can't!).
The company has had an open engineering position for a german national (or at least native speaker) since before I started almost 2 years ago... and still haven't filled it, even after half a dozen foreigners have joined.
So I can sympathise with the idea that Germany is struggling to find skilled technical workers. It's telling that a company has to resort to hiring a bunch of non-german speaking foreigners and sponsor their visas and so on. I'd find it hard to imagine a French or Italian firm doing the same thing.
The article alludes to the fact that the Mittelstand firms are spread out across the countryside and many are headquartered in small villages. This is true and could perhaps be a big factor in why they find it hard to attract people - I mean, how many skilled engineers are willing to live in the middle of nowhere? I chose to work to here because the company is one of the leaders in a niche specialist field, and I certainly don't regret the decision given the amount I've learned so far. But frankly, I'd rather live in a bigger city.
The company has had an open engineering position for a german national (or at least native speaker) since before I started almost 2 years ago... and still haven't filled it, even after half a dozen foreigners have joined.
So I can sympathise with the idea that Germany is struggling to find skilled technical workers. It's telling that a company has to resort to hiring a bunch of non-german speaking foreigners and sponsor their visas and so on. I'd find it hard to imagine a French or Italian firm doing the same thing.
The article alludes to the fact that the Mittelstand firms are spread out across the countryside and many are headquartered in small villages. This is true and could perhaps be a big factor in why they find it hard to attract people - I mean, how many skilled engineers are willing to live in the middle of nowhere? I chose to work to here because the company is one of the leaders in a niche specialist field, and I certainly don't regret the decision given the amount I've learned so far. But frankly, I'd rather live in a bigger city.
Interesting article, which summarizes nicely how German conservatives like to view the country. So I think it is more interesting as a report how our current ruling (center right) coalition views Germany than as being grounded in reality.
Exactly! This article brings up a lot of anecdotal evidence to build up stereotypes. This should ring all kinds of alarm bells. It is a propaganda piece with little basis on reality.
I lulzed when I heard that a Wall Street Financier said "We need to learn from the German model"
Wall Street will look at the "German model" and scoff at it because it is on the opposite end of the spectrum of exploitation, deception, manipulation, and fraud.
Don't get me wrong, humans are involved, so the "German model" is no where near perfect either, but it is a social democracy at its core; where the government at least tries to have the best interest of as many of its people in mind as possible. That is diametrically opposed to everything on Wall Street and the aristocracy that controls our country and effectively psychologically abuses the minds of Americans to the point of schizophrenic mental illness.
There is no way that anyone on "Wall Street" will learn anything, just like when they almost executed the American economy in 2008 they said "Oops! Sowy! We learned our lesson and promise to behave." And just like the primal animals they are, they continue to deceive, defraud, manipulate, corrupt, and exploit as they are building their next scheme to sell us all a house of cards.
Wall Street will look at the "German model" and scoff at it because it is on the opposite end of the spectrum of exploitation, deception, manipulation, and fraud.
Don't get me wrong, humans are involved, so the "German model" is no where near perfect either, but it is a social democracy at its core; where the government at least tries to have the best interest of as many of its people in mind as possible. That is diametrically opposed to everything on Wall Street and the aristocracy that controls our country and effectively psychologically abuses the minds of Americans to the point of schizophrenic mental illness.
There is no way that anyone on "Wall Street" will learn anything, just like when they almost executed the American economy in 2008 they said "Oops! Sowy! We learned our lesson and promise to behave." And just like the primal animals they are, they continue to deceive, defraud, manipulate, corrupt, and exploit as they are building their next scheme to sell us all a house of cards.
Disclaimer: I'm form Germany and usually have a more libertarian view on things.
Much of the German Model is attributed to ordoliberalism (http://en.wikipedia.org/wiki/Ordoliberalism). But to me this rather "wierd" play of liberalism itselfs seems to be more influenced by German culture than the other way around.
And with "culture" I rather mean pieces of wisdom, wich every culture gathers throughout history. The most destinctive events in German history have in common that bad things happened out of chaos. And salvation (order) came from above:
1) The Thirty Years War eraded the German populace. Espacially in Brandenburg with almost 70% gone. It does not wonder that from that area, the prussians developed the proto-German clichet-like mindset of good-governance. Germany went on to be the only country in the world (for a long time) were evangelicals and catholics considered each other countrymen (http://en.wikipedia.org/wiki/Thirty_Years%27_War)
2) Napoleon had to bring in social reforms and the rule of law. While our nobils had to give us back our independence and pride from Napoleon and were the ones "creating" Germany in 1871. The nobils also created social security - as a means to keep the masses from revolting.
3) While WWII and the Holocaust are examples to what evil this believe in good-order can lead to, the reaction to the loss of the first and the shame of the latter are itself shaped by German culture:
- Implementing democracy with war seems to have worked in Germany, it came from above.
- Denouncing anti-semitism came somewhat from above and, to some extent, the people have obtained this view.
Also:
- The most successful participants of the German protests of 68 were those who believed in reforming the "system from within" (http://en.wikipedia.org/wiki/Alliance_%2790/The_Greens)
- our national-holiday is not a date where good came out of a revolt but where politicians made a contract come into effect (http://en.wikipedia.org/wiki/German_Unity_Day)
- Our unions and left-parties were willingly enduring pain, in that they proactively implemented harsh reforms in the labor market and social security system.
My point is, our culture makes it hard in Germany to argue against government. Even our liberals believe in the benefits of good order. The historc feedback loop tells me it might be better to endure a little pain now (eg giving up freedoms) than to endure fatal pain later (mob lynching).
PS: This is not a praisal. As libertarian-tending I don't think fear of chaos is always a sign of maturity. It makes a lot of little things much more costly (http://www.youtube.com/watch?v=-oYl-Lm9a6U ?! Never happening in Germany without regulatory approval and intense testing) And on the big scale: the fear of order being disturbed was also an argument against policies that gave more rights to the German jews in the 1800s. And it is the underlying argument against anything "capitalist" or "gentrifying" today.
Much of the German Model is attributed to ordoliberalism (http://en.wikipedia.org/wiki/Ordoliberalism). But to me this rather "wierd" play of liberalism itselfs seems to be more influenced by German culture than the other way around.
And with "culture" I rather mean pieces of wisdom, wich every culture gathers throughout history. The most destinctive events in German history have in common that bad things happened out of chaos. And salvation (order) came from above:
1) The Thirty Years War eraded the German populace. Espacially in Brandenburg with almost 70% gone. It does not wonder that from that area, the prussians developed the proto-German clichet-like mindset of good-governance. Germany went on to be the only country in the world (for a long time) were evangelicals and catholics considered each other countrymen (http://en.wikipedia.org/wiki/Thirty_Years%27_War)
2) Napoleon had to bring in social reforms and the rule of law. While our nobils had to give us back our independence and pride from Napoleon and were the ones "creating" Germany in 1871. The nobils also created social security - as a means to keep the masses from revolting.
3) While WWII and the Holocaust are examples to what evil this believe in good-order can lead to, the reaction to the loss of the first and the shame of the latter are itself shaped by German culture:
- Implementing democracy with war seems to have worked in Germany, it came from above.
- Denouncing anti-semitism came somewhat from above and, to some extent, the people have obtained this view.
Also:
- The most successful participants of the German protests of 68 were those who believed in reforming the "system from within" (http://en.wikipedia.org/wiki/Alliance_%2790/The_Greens)
- our national-holiday is not a date where good came out of a revolt but where politicians made a contract come into effect (http://en.wikipedia.org/wiki/German_Unity_Day)
- Our unions and left-parties were willingly enduring pain, in that they proactively implemented harsh reforms in the labor market and social security system.
My point is, our culture makes it hard in Germany to argue against government. Even our liberals believe in the benefits of good order. The historc feedback loop tells me it might be better to endure a little pain now (eg giving up freedoms) than to endure fatal pain later (mob lynching).
PS: This is not a praisal. As libertarian-tending I don't think fear of chaos is always a sign of maturity. It makes a lot of little things much more costly (http://www.youtube.com/watch?v=-oYl-Lm9a6U ?! Never happening in Germany without regulatory approval and intense testing) And on the big scale: the fear of order being disturbed was also an argument against policies that gave more rights to the German jews in the 1800s. And it is the underlying argument against anything "capitalist" or "gentrifying" today.
I find this very shortsighted to attribute Germany's financial and economic situation to some underlying culture of perfection and expectation.
As much as i'd love to attribute our current success to these things, i think we should rather look at the very fortunate fiscal situation the EU positioned us in.