Germany has the economic strengths America once boasted(latimes.com)
latimes.com
Germany has the economic strengths America once boasted
http://www.latimes.com/business/la-fi-germany-middle-class-20120122,0,1551154,full.story
8 comments
Keeping real wages low is not the whole story. In fact the are not lower than most of Europe, although they are probably lower than the counterfactual of no euro. But it is productivity, and being in the right markets, and having the right infrastructure of companies in the same types of business that has worked, along with education and many other factors.
Sure not every country can always be a net exporter, but many simply do not have competitive businesses in traded goods and services, and will end up either in debt, or with huge falls in real wages and living standards.
Sure not every country can always be a net exporter, but many simply do not have competitive businesses in traded goods and services, and will end up either in debt, or with huge falls in real wages and living standards.
> But it is productivity, and being in the right markets, and having the right infrastructure of companies in the same types of business that has worked, along with education and many other factors.
It's also about Germany's proximity to former Communist countries in Central and Eastern Europe (both geographically and culturally). It helped put the pressure on German workers which otherwise are heavily unionized ("you have to agree to lower wages, otherwise we'll move everything to Poland or Romania") and it also provides German-based factories with cheap assembly parts which for the most part are produced in said countries.
Just as an anecdote, my older brother was just hired as a truck-driver, and he just came back from a 4-day trip from Germany (we live in Romania) where he delivered some assembled parts for German car factories. He was paid some 300 Euros for the whole trip, and while I'm too lazy to search for how much a German truck driver would have earned for the same job, I'm pretty sure it would be at least 5 times more.
It's also about Germany's proximity to former Communist countries in Central and Eastern Europe (both geographically and culturally). It helped put the pressure on German workers which otherwise are heavily unionized ("you have to agree to lower wages, otherwise we'll move everything to Poland or Romania") and it also provides German-based factories with cheap assembly parts which for the most part are produced in said countries.
Just as an anecdote, my older brother was just hired as a truck-driver, and he just came back from a 4-day trip from Germany (we live in Romania) where he delivered some assembled parts for German car factories. He was paid some 300 Euros for the whole trip, and while I'm too lazy to search for how much a German truck driver would have earned for the same job, I'm pretty sure it would be at least 5 times more.
This pressure exists for decades know and even before the fall of the wall. German companies are active world wide and have production on many continents. German workers always had to compete with workers in lower paid countries. VW for example produces in Brasil, China, Slowakia, Mexico, ... Still VW expanded its manufacturing in Germany. For some years there was a huge trend to go to other countries even in the Mittelstand. About ten years ago many of these companies detected that the German workforce was better educated, the infrastructure was better, production was more flexible and the productivity was higher. But more important they detected that the quality at home was also higher. So the movement than was balanced out. New factories and new production was set up. Since we have a lot of research in this area many of the new factories are top-notch and some are full of factory automation.
Using the information posted by thomasz it doesn't seem plausible that the average German truck driver would make 5 times what your brother made. Assuming that your brother followed European laws and didn't drive more than the allowed hours a day, and assuming an average work week of 5 days* for both your brother and the average German truck driver, the German truck driver would have made €421,80 in 4 days of work.
There are a few possible explanations to your blatantly wrong assertions here. One could be that you are simply as naive to think that a European truck driver would make €1500 for 4 days of work (if that where so I would be leaving my, in relation to the number you provided, low paying work as an IT consultant in a heart beat, €7500/month drool).
Another more cynic explanation would be that you are trying to spread some poor-me-I'm-from-an-ex-communist-country-I'm-so-poor propaganda, hopefully that isn't so. The flip side to that is that the former Eastern block countries are effectively out competing European haulage companies, with the effects most visible in the countries with the highest salaries. For instance, in Sweden, most small family owned transport companies have either filed for bankruptcy or been bought by larger companies, much due to the increasing price dumping caused by Eastern European companies. And increasingly the Swedish haulage companies are hiring Eastern European drivers as contractors, as this is cheaper than hiring Swedish drivers. This, and other similar cases for instance cheap builders, cheap ship yard workers, steel workers and so on, means that many Eastern European countries may be poorer than Western European countries, but the work force have a lot of work opportunities, especially the Eastern Europeans that are in the European Union. Work opportunities that are disappearing in Western Europe.
* That is, about 40h a week give or take according to work schedule in accordance to what the law says about continuous work hours and obligated rest between shifts. For instance it is possible that a truck driver can be scheduled to work 56 hours a week, the regulations are very strict in Europe (http://en.wikipedia.org/wiki/Truck_driver#European_Union)
There are a few possible explanations to your blatantly wrong assertions here. One could be that you are simply as naive to think that a European truck driver would make €1500 for 4 days of work (if that where so I would be leaving my, in relation to the number you provided, low paying work as an IT consultant in a heart beat, €7500/month drool).
Another more cynic explanation would be that you are trying to spread some poor-me-I'm-from-an-ex-communist-country-I'm-so-poor propaganda, hopefully that isn't so. The flip side to that is that the former Eastern block countries are effectively out competing European haulage companies, with the effects most visible in the countries with the highest salaries. For instance, in Sweden, most small family owned transport companies have either filed for bankruptcy or been bought by larger companies, much due to the increasing price dumping caused by Eastern European companies. And increasingly the Swedish haulage companies are hiring Eastern European drivers as contractors, as this is cheaper than hiring Swedish drivers. This, and other similar cases for instance cheap builders, cheap ship yard workers, steel workers and so on, means that many Eastern European countries may be poorer than Western European countries, but the work force have a lot of work opportunities, especially the Eastern Europeans that are in the European Union. Work opportunities that are disappearing in Western Europe.
* That is, about 40h a week give or take according to work schedule in accordance to what the law says about continuous work hours and obligated rest between shifts. For instance it is possible that a truck driver can be scheduled to work 56 hours a week, the regulations are very strict in Europe (http://en.wikipedia.org/wiki/Truck_driver#European_Union)
> Another more cynic explanation would be that you are trying to spread some poor-me-I'm-from-an-ex-communist-country-I'm-so-poor propaganda, hopefully that isn't so.
I hope I'm not :) Anyway, maybe I was wrong in my multiplication by a certain factor, but you have to keep in mind that my brother (and his co-workers) only make these kind of trips every 2 weeks or so, so assuming he makes an average of 2 and half such trips per month it's around ~800 euro per month. Which is actually a pretty good salary around these parts, only that most likely most of this money is paid in some manner as to avoid taxes (there was a post from some Hungarian guy a couple of weeks ago explaining why that's the only viable solution for a small to medium company around these parts of Europe).
And regarding the "disappearance" of job opportunities for Western workers... well, something has got to give, you cannot have a free market for goods without a free market for labor. Meaning you cannot have Ikea stores in those "poor" East-European countries with no import charges attached to its merchandise without giving said East-European workers the chance to improve their lives in Ikea's host country' or Nokia's, or BMW's. Otherwise it's just old, plain economic colonialism, and that's bad.
I hope I'm not :) Anyway, maybe I was wrong in my multiplication by a certain factor, but you have to keep in mind that my brother (and his co-workers) only make these kind of trips every 2 weeks or so, so assuming he makes an average of 2 and half such trips per month it's around ~800 euro per month. Which is actually a pretty good salary around these parts, only that most likely most of this money is paid in some manner as to avoid taxes (there was a post from some Hungarian guy a couple of weeks ago explaining why that's the only viable solution for a small to medium company around these parts of Europe).
And regarding the "disappearance" of job opportunities for Western workers... well, something has got to give, you cannot have a free market for goods without a free market for labor. Meaning you cannot have Ikea stores in those "poor" East-European countries with no import charges attached to its merchandise without giving said East-European workers the chance to improve their lives in Ikea's host country' or Nokia's, or BMW's. Otherwise it's just old, plain economic colonialism, and that's bad.
I think €800 for 8 days of work is ok good money for truck driving work and not so far from what truck drivers make for instance in Sweden. And I agree with all of your other points.
assuming an average work week of 5 days for both your brother and the average German truck driver, the German truck driver would have made €421,80*
How did you come to that number? Is it from extrapolation on the minimum wage? Because truck drivers don't get the minimum wage, they are compensated very well. This €420 would more likely be something like €1000 for a 5 week trip, or more.
Oh, an important distinction though is if the truck driver just drives the truck in some city (low normal wage), or if he's making cross-country and cross-europe deliveries (much much higher).
How did you come to that number? Is it from extrapolation on the minimum wage? Because truck drivers don't get the minimum wage, they are compensated very well. This €420 would more likely be something like €1000 for a 5 week trip, or more.
Oh, an important distinction though is if the truck driver just drives the truck in some city (low normal wage), or if he's making cross-country and cross-europe deliveries (much much higher).
I used this link http://www.gehalt-tipps.de/Gehaltsvergleich/Gehalt/Lkw-Fahre... provided by thomasz. Then I took the average from all those reported wages which was €2,109.36/month, divided it by 20 (as this is the average work week for most employees even in the trucking business, and actually well regulated) and multiplied it by 4 as paganel said his brother had worked for 4 days ("he just came back from a 4-day") and earned €300. If the information provided by thomasz is correct or not, well I can't really judge it without more information, but to say that a German truck driver makes 5 times €300 in 4 days is just ridiculous any way you cut it. As a side note, the average truck driver in Sweden makes SEK23,000 that is about €2,600.
http://www.lonestatistik.se/loner.asp/yrke/Lastbilschauffor-...
http://www.lonestatistik.se/loner.asp/yrke/Lastbilschauffor-...
I agree that paganel's comparison seems a bit exaggerated but note that there are non-wage labor costs here in Germany. Wikipedia reports 22 percent. A common rule of thumb is 30 percent, IIRC.
This means the total wage of the truck driver here would be about €511.30 for 4 days of work.
This means the total wage of the truck driver here would be about €511.30 for 4 days of work.
Most workers don't care about what the employer actually pays, most workers just take into account what is stated on their pay check. Most Swedes, when talking about wage, mention the statement before taxes, so for instance €2000 would equal something like €1400 after taxes. I think this is true for the german numbers as well, they are before taxation, but paganel mentioned that the €300 his brother made for 4 days of work probably wouldn't be taxed, so that is €300 in his pocket, as opposed to the German who would have to pay tax on his €420.
My personal opinion is that talking about wages and comparing them between countries is very difficult, many factors play into the equation; cost of living, food, energy, health care, taxes and so on are big components of this. My point was though, and still is, that claiming that a German truck driver makes €7500 in a 20 day period (which is five times what paganel's brother would have made if he had worked 20 days) is just ridiculous. I claimed earlier that I would quit my, in comparison to €7500, low paying IT job if that was the case, and I think I actually would.
My personal opinion is that talking about wages and comparing them between countries is very difficult, many factors play into the equation; cost of living, food, energy, health care, taxes and so on are big components of this. My point was though, and still is, that claiming that a German truck driver makes €7500 in a 20 day period (which is five times what paganel's brother would have made if he had worked 20 days) is just ridiculous. I claimed earlier that I would quit my, in comparison to €7500, low paying IT job if that was the case, and I think I actually would.
Wages for Truck Drivers in Germany by city:
http://www.gehalt-tipps.de/Gehaltsvergleich/Gehalt/Lkw-Fahre...
http://www.gehalt-tipps.de/Gehaltsvergleich/Gehalt/Lkw-Fahre...
It's a bit difficult to compare because there will presumably be things like health insurance and pension plans on top of that, but it sounds more like ~120€/day (assuming 20 work days in a month). So not that much more than the 300€ (though the real cost for the German truck driver is probably much higher with insurances and whatnot).
For many European countries health insurance and pension plans are payed for by taxes, as for Germany specifically I don't know, but I know they have very cheap health care.
I wish - I pay between 400 and 700€/month for healthcare (public insurance). It's my biggest expense after rent.
They fool employees by making the employer pay half of it, though - which of course doesn't make a real difference, but people are less likely to notice.
I think the actual rate is something like 14% of your income, capped at 700 or 800€ (not sure). As I am self-employed, unfortunately by law they are required to assume a minimum income that might be higher than what I actually earn (completely absurd and unfair regulation to discourage self-employment).
They fool employees by making the employer pay half of it, though - which of course doesn't make a real difference, but people are less likely to notice.
I think the actual rate is something like 14% of your income, capped at 700 or 800€ (not sure). As I am self-employed, unfortunately by law they are required to assume a minimum income that might be higher than what I actually earn (completely absurd and unfair regulation to discourage self-employment).
Sure, we all pay for it somehow, I pay for all of my health care through my taxes, you pay half through your taxes and half out of pocket if i interpret you correctly? But on general I agree, it is difficult to compare incomes between different countries, for example IT workers in the US compared to in Europe, where the US wages are higher, but the costs of living are also higher (rent, health insurance, etc), so in the end you have to take a lot of things into consideration.
I would argue that €421 for 4 days work in Germany and €300 for 4 days of work in Romania isn't a huge difference, and if there is it is probably to the advantage to the Romanian (cheaper rent, food etc).
For instance, if I had the same wage after taxes that I have now and I lived in Algeria (I use this as an example as I have spent a lot of time in that country), and my standard of living would be unchanged then I would lower my rent by about 60-80% (depending on where in the country), lower my energy costs about 90%, grocery costs would be lowered by about 50-65% and so on.
I would argue that €421 for 4 days work in Germany and €300 for 4 days of work in Romania isn't a huge difference, and if there is it is probably to the advantage to the Romanian (cheaper rent, food etc).
For instance, if I had the same wage after taxes that I have now and I lived in Algeria (I use this as an example as I have spent a lot of time in that country), and my standard of living would be unchanged then I would lower my rent by about 60-80% (depending on where in the country), lower my energy costs about 90%, grocery costs would be lowered by about 50-65% and so on.
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Real wages in absolute terms may be higher in Germany than in other parts, but arguably, the more important measure to look at is the relative change since the introduction of the Euro. After all, at the point of changeover, the exchange rates were more or less compatible with the relative competitiveness of the national economies.
When you look at that relative change, a pretty stark picture emerges. See e.g. http://www.nachdenkseiten.de/upload/pdf/110207_HF+FS_Eurolan...
The slides are in German, unfortunately, but the graphs should be fairly clear. The first few concentrate on inflation measures. On slide 5, you see the relative development of nominal labor costs. Note in particular the deviation from the inflation target of the ECB. It is clear that Germany must accept its fair share of the blame.
The irony is that from a social and moral perspective, one could argue that adjusting wages throughout the Eurozone is a good thing. Unfortunately, that has created the current imbalances on the way, and is therefore at least partially to blame for the very high unemployment in the southern Euro nations.
When you look at that relative change, a pretty stark picture emerges. See e.g. http://www.nachdenkseiten.de/upload/pdf/110207_HF+FS_Eurolan...
The slides are in German, unfortunately, but the graphs should be fairly clear. The first few concentrate on inflation measures. On slide 5, you see the relative development of nominal labor costs. Note in particular the deviation from the inflation target of the ECB. It is clear that Germany must accept its fair share of the blame.
The irony is that from a social and moral perspective, one could argue that adjusting wages throughout the Eurozone is a good thing. Unfortunately, that has created the current imbalances on the way, and is therefore at least partially to blame for the very high unemployment in the southern Euro nations.
The lesson from the article isn't that every country should be a net exporter like Germany... it's that Germany has found success by focusing on producing goods and insuring a minimum standard of living for the middle class. While their exact situation may not be repeatable everywhere, there is certainly a lesson in their culture for other nations.
You are correct that the Germans have taken advantage of macro-economic imbalances created by the eurozone, but why was it Germany and not France or Greece that has prospered? What is unique about Germany? I would argue it is their culture of hard work, efficient businesses and financial restraint. They do things the right way... why fault them for it?
You are correct that the Germans have taken advantage of macro-economic imbalances created by the eurozone, but why was it Germany and not France or Greece that has prospered? What is unique about Germany? I would argue it is their culture of hard work, efficient businesses and financial restraint. They do things the right way... why fault them for it?
I agree that there are a multitude of factors that have led Germany to the success they currently see. They have obviously found something that works very well for them (so don't hate!). I don't ever see the US mirroring their work-ethic, but we can certainly look to them to find improvements we can make in our own country. Less consumerism is key but has become so ingrained in US culture that I'm not sure it's a feasible goal. Regardless, I commend Germany for its success.
We (the Germans) were told that the US people work harder. They have either well paid jobs without vacation or they have several low-paid jobs. Plus they had to be more flexible, have less protection, drive long to get to their homes in the suburbs,...
Yes, the German export industry has been heavily subsidized by the monetary structure of the eurozone. This is paid for by the guarantees of the various bailout funds (hastily-constructed EFSF, to be replaced by permanent ESM), which are mostly backed by German and French taxpayer money.
I wonder whether politicians understood the implications of monetary union one decaded ago - their dealings with it really look genuinely clueless. I am pretty sure the export industry did.
I wonder whether politicians understood the implications of monetary union one decaded ago - their dealings with it really look genuinely clueless. I am pretty sure the export industry did.
I think they understood it better than they've given credit for.
People don't remember the political climate at the time: 20 years ago, when the Euro was planned and sanctioned, Germany was still divided, and West Germany was the top dog in economic terms among European countries (even more so than today) while most other countries (including France and UK) were fighting a recession. German public opinion didn't want to partake from the almighty Deutsche Mark, which was a rock in troubled seas (the British Pound was crashing, the French Franc was weak, the Italian Lira was losing 20% every 10 years, etc etc); French and Italian elites thought that a common currency would have allowed them to harness the German industrial strength, basically helping themselves to low interest rates they wouldn't have enjoyed otherwise.
The German establishment mostly saw the Euro as a straight-jacket, a burden to accept in order to bring about their own reunification, which otherwise would have been opposed across Europe (a reunited Germany would have been dangerously powerful on its own).
As it happens, it turned out better for them than for other members; this is why they keep insisting on a monetary approach to public policy that will keep others down, at least until this suites them.
People don't remember the political climate at the time: 20 years ago, when the Euro was planned and sanctioned, Germany was still divided, and West Germany was the top dog in economic terms among European countries (even more so than today) while most other countries (including France and UK) were fighting a recession. German public opinion didn't want to partake from the almighty Deutsche Mark, which was a rock in troubled seas (the British Pound was crashing, the French Franc was weak, the Italian Lira was losing 20% every 10 years, etc etc); French and Italian elites thought that a common currency would have allowed them to harness the German industrial strength, basically helping themselves to low interest rates they wouldn't have enjoyed otherwise.
The German establishment mostly saw the Euro as a straight-jacket, a burden to accept in order to bring about their own reunification, which otherwise would have been opposed across Europe (a reunited Germany would have been dangerously powerful on its own).
As it happens, it turned out better for them than for other members; this is why they keep insisting on a monetary approach to public policy that will keep others down, at least until this suites them.
In 1989 I did the backpack-across-Europe thing for the summer. The Berlin Wall was still up, the Soviets still in Eastern Europe, but just barely. Change was very much in the air.
Everywhere I went, I'd ask people what they thought about the coming European Union. To a person, they were all cautiously supportive, but would also say "But I don't trust the Germans." Everyone expected the Germans would have designs on controlling the thing, and likely the ability to do it. Even the Germans seemed to expect it.
These were the proverbial people on the street, so I'm guessing everyone pretty much knew how it was going to go in the long run.
Everywhere I went, I'd ask people what they thought about the coming European Union. To a person, they were all cautiously supportive, but would also say "But I don't trust the Germans." Everyone expected the Germans would have designs on controlling the thing, and likely the ability to do it. Even the Germans seemed to expect it.
These were the proverbial people on the street, so I'm guessing everyone pretty much knew how it was going to go in the long run.
Everyone had designs on "controlling the thing", and the ability to do it: France had long set the EU agenda, BeNeLux and nordic countries were seen as the "reference implementation" for most processes, Spain was extremely aggressive in occupying key roles (Javier Solana, anyone?), even the UK was quite good (watering down ambitions of full political union, basically)...
The real game-changer was the rushed enlargement. Now Germany can count on a political bloc of countries directly depending on the German economy, and for anyone else it's much more difficult to steer the boat with so many people on board.
The real game-changer was the rushed enlargement. Now Germany can count on a political bloc of countries directly depending on the German economy, and for anyone else it's much more difficult to steer the boat with so many people on board.
The real game changer is that in many areas German policies worked better than others, especially in the current economic climate. Ten years ago this was open. Countries like Ireland were seen as 'Tigers'. The UK was adopting the service-oriented economy with a large banking sector boosted by North Sea oil and gas. Germany was struggling with the reunification.
Now Germany has high debt, but was dealing with this problem years ago to keep in under control. More has to be done, but we are further than we thought.
The industry is more competitive in terms of delivery capability, production technology and products.
The decentral structure of the country enabled competition within the country - between Berlin, Munich, Stuttgart, Köln, Düsseldorf, Leipzig, Dresden, ... there is no such central structure like in France or the UK.
Key was to keep employment high. Youth unemployment is very low. General unemployment is on a 20 year low. This kept people confident. Confident that they have enough to weather this economic crisis. Germans save more, they speculate less and many prefer renting instead of owning (and being in debt).
There were some mistakes made (like some of the German banking system failed), but in general it looks okay.
Now Germany has high debt, but was dealing with this problem years ago to keep in under control. More has to be done, but we are further than we thought.
The industry is more competitive in terms of delivery capability, production technology and products.
The decentral structure of the country enabled competition within the country - between Berlin, Munich, Stuttgart, Köln, Düsseldorf, Leipzig, Dresden, ... there is no such central structure like in France or the UK.
Key was to keep employment high. Youth unemployment is very low. General unemployment is on a 20 year low. This kept people confident. Confident that they have enough to weather this economic crisis. Germans save more, they speculate less and many prefer renting instead of owning (and being in debt).
There were some mistakes made (like some of the German banking system failed), but in general it looks okay.
Yes, but in terms of governance inside EU institutions this doesn't matter as much. If we had a situation were Germany was doing very well, but everyone else wanted to tweak the currency in a different way, it would go in a different way. As it is, thanks to the enlargement, on economic matters Germany can rely on a block of "faithful" countries whose self-interest is perennially aligned.
Germany has just 82 Million people. The EU has 500 million. That Germany dominates and even controls the EU is a myth.
The USA has just 300 million people. The Earth has 7,000 million people. That the USA dominates the Earth is a myth.
They ought to have known. German reunification and the associated monetary union had a much similar effect. One can make a rough analogy: West Germany then ~ Germany now; East Germany then ~ Greece now.
I hope the Greece don't get all those Neo-Nazis that plague(d) former East Germany.
They understood full well. The EU has a shared monetary policy, but no shared fiscal policy. Fiscal policy (!speculation alert!) is the next step, and will go a long way to avoiding another crisis.
Or it may work to collect the remaining unbroken eggs into one basket. Maybe centralization is not the solution here. Europe has benefited from so-called "disunity". It made economic and scientific (and social) development possible, with no one political entity able to oppose it outright.
The should have known if the don't, many economist where pointing it out back then.
"This balancing out via exchange rates is no longer possible within the Euro"
Trying to understand - you mean it is not possible for other Euro countries (who also use Euro as their currency)? But does it really matter for them? They still have to come up with Euros somehow. If their only way to make Euros is to sell Olives, they might still have difficulties to afford a high end German car...
As for the net importer stuff - I think some countries are just borrowing heavily, and I think Germany has been blamed for lending the money to those borrowers that in turn fuels it's exports. However, I fail to see what is so evil about it: either those borrowers become insolvent, in which case Germany gave away it's exports for free, or they can pay eventually. Also, why blame the money lender and not the borrower?
Trying to understand - you mean it is not possible for other Euro countries (who also use Euro as their currency)? But does it really matter for them? They still have to come up with Euros somehow. If their only way to make Euros is to sell Olives, they might still have difficulties to afford a high end German car...
As for the net importer stuff - I think some countries are just borrowing heavily, and I think Germany has been blamed for lending the money to those borrowers that in turn fuels it's exports. However, I fail to see what is so evil about it: either those borrowers become insolvent, in which case Germany gave away it's exports for free, or they can pay eventually. Also, why blame the money lender and not the borrower?
> Trying to understand - you mean it is not possible for other Euro countries (who also use Euro as their currency)? But does it really matter for them?
By way of example, Italy used to devalue the currency from time to time to give a bit of a boost to exports. This, for better or worse, is no longer possible.
By way of example, Italy used to devalue the currency from time to time to give a bit of a boost to exports. This, for better or worse, is no longer possible.
Still, I am not sure if in the end, such measures are only "snake oil". Theoretically it should all cancel out eventually. For example if you devalue the currency, your people become poorer. What is the difference to just paying them lower wages and thus selling your stuff for less Euros? Seems to me it is mostly psychological: devaluing the currency can be done sneakily behind the populations back (printing more money or whatever), whereas lowering wages would get noticed.
Personally I am always for more transparency, so maybe it is a good thing if the sneaky way to conduct economics goes away.
Personally I am always for more transparency, so maybe it is a good thing if the sneaky way to conduct economics goes away.
> For example if you devalue the currency, your people become poorer. What is the difference to just paying them lower wages and thus selling your stuff for less Euros?
One important difference is in domestic contracts. Let's say you are an employee in a country that uses # as currency, and your current monthly wage is 1000#. You pay 500# of that every month for fixed contracts such as rent, health insurance, electricity, telephony, etc.
Now you are faced with two possible scenarios: A) There is CPI inflation of 10%. B) Your wages are cut by 10%.
In both scenarios, your nominal wages are down to 900#. But when you look at it more closely, there is a significant difference.
In scenario A, you still receive (nominal) 1000#. Of those, you pay 500# to your fixed contracts, and you use the remaining 500# for consumption goods, whose real value compared to before is now only 450#.
In scenario B, you receive (nominal) 900#. Of those, you pay 500# to your fixed contracts, and you have 400# remaining to buy consumption goods.
Clearly, inflation (scenario A) is better for you. Devaluation of the currency by 10% would be even better, because currency devaluation rarely punches through entirely to consumer prices: only imported goods are affected directly, after all.
Now you could argue that in the long run, those fixed contracts like rent will also be adjusted. But there is a huge difference in pressure and thus power between the scenarios: when your wages are decreased, you are immediately worse off as an employee, and it is up to you personally to try to get a better deal on the rent, forcing the landlord to decrease their rent in turn. In the case of inflation, however, it is up to the landlord to raise rents, something for which there are often significant legal hurdles.
Most employees probably don't think these scenarios through, but the gut reflex ends up being correct in this case: for employees, currency devaluation is better than nominal wage reduction.
(Of course, everything I've said changes for somebody who has significant nominal assets; but then, it would probably be incorrect to classify them as an employee.)
One important difference is in domestic contracts. Let's say you are an employee in a country that uses # as currency, and your current monthly wage is 1000#. You pay 500# of that every month for fixed contracts such as rent, health insurance, electricity, telephony, etc.
Now you are faced with two possible scenarios: A) There is CPI inflation of 10%. B) Your wages are cut by 10%.
In both scenarios, your nominal wages are down to 900#. But when you look at it more closely, there is a significant difference.
In scenario A, you still receive (nominal) 1000#. Of those, you pay 500# to your fixed contracts, and you use the remaining 500# for consumption goods, whose real value compared to before is now only 450#.
In scenario B, you receive (nominal) 900#. Of those, you pay 500# to your fixed contracts, and you have 400# remaining to buy consumption goods.
Clearly, inflation (scenario A) is better for you. Devaluation of the currency by 10% would be even better, because currency devaluation rarely punches through entirely to consumer prices: only imported goods are affected directly, after all.
Now you could argue that in the long run, those fixed contracts like rent will also be adjusted. But there is a huge difference in pressure and thus power between the scenarios: when your wages are decreased, you are immediately worse off as an employee, and it is up to you personally to try to get a better deal on the rent, forcing the landlord to decrease their rent in turn. In the case of inflation, however, it is up to the landlord to raise rents, something for which there are often significant legal hurdles.
Most employees probably don't think these scenarios through, but the gut reflex ends up being correct in this case: for employees, currency devaluation is better than nominal wage reduction.
(Of course, everything I've said changes for somebody who has significant nominal assets; but then, it would probably be incorrect to classify them as an employee.)
OK, point taken, surely it is easier form an organizational point of view.
But then another question: suppose the governments wants to make it's goods/exports cheaper, maybe there would still be lots of other possibilities, like changing/lowering taxes. Obviously still more complicated than just printing more money, but still.
But then another question: suppose the governments wants to make it's goods/exports cheaper, maybe there would still be lots of other possibilities, like changing/lowering taxes. Obviously still more complicated than just printing more money, but still.
Import duty is the other solution, but that's illegal within the EU - the whole point is it's an economic union.
Theoretically it should be balanced out by workers moving to more prosperous parts of Europe (where there are more jobs) - and the treaties do specify free movement of labour. I don't know whether we've yet seen an influx of Greek workers moving to Germany, though.
Theoretically it should be balanced out by workers moving to more prosperous parts of Europe (where there are more jobs) - and the treaties do specify free movement of labour. I don't know whether we've yet seen an influx of Greek workers moving to Germany, though.
There were lots of Germans moving to Spain and other places, when they still boomed. Lots of them are coming back. So in a sense you already see an influx of workers from Greece to Germany, it's just that they are German.
Yes, I think there are problems with devaluations, and one of the positives of the crisis is that Italy is finally starting to grapple with some structural reforms, timid though they may be. Stores may finally open on Sundays!
Also, it looks like http://SrlFacile.org made it in front of the right people, as the recent liberalization package includes a simplified form of limited liability company which requires no 'social capital' and no notary to form.
The psychological thing isn't something to discount too lightly though: wages tend to be 'sticky' in that it's very difficult, generally, to get people to take lower wages.
Also, it looks like http://SrlFacile.org made it in front of the right people, as the recent liberalization package includes a simplified form of limited liability company which requires no 'social capital' and no notary to form.
The psychological thing isn't something to discount too lightly though: wages tend to be 'sticky' in that it's very difficult, generally, to get people to take lower wages.
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Sure - I suppose the most common form of getting them to accept lower wages is by firing them or closing the company because of bankruptcy :-(
I hope Italy gets back on track, it's such a beautiful country.
I hope Italy gets back on track, it's such a beautiful country.
It's a lot more than a beautiful country: there are lots of smart, hard working people here too.
However, the incentives currently in place are such that for many, their best course of action is to go abroad.
For instance: http://en.wikipedia.org/wiki/Federico_Faggin
However, the incentives currently in place are such that for many, their best course of action is to go abroad.
For instance: http://en.wikipedia.org/wiki/Federico_Faggin
Tichy is right. Devaluation - if at all - works only in the short run [1].
http://johnhcochrane.blogspot.com/2012/01/should-greece-deva...
http://johnhcochrane.blogspot.com/2012/01/should-greece-deva...
If these countries would have did that, they would be in a worse situation than they are now.
It's not obvious at all. exactly two trading partners with seasonal improvements in exports and constantly growing economies could have this sort of export data:
http://www.wolframalpha.com/input/?i=x%2B+sin+x%2C+x%2Bcos+x
just cherry pick your reporting dates, everyone is a net exporter.
http://www.wolframalpha.com/input/?i=x%2B+sin+x%2C+x%2Bcos+x
just cherry pick your reporting dates, everyone is a net exporter.
Gernan wages are higher than most in the Eurozone. It's just that they were not growing. Plus we added a lot of jobs which are relatively low paid. But many of those jobs don't exist in, say, Spain. In spain you are then unemployed. Which is especially common among young people.
The problem with your agrument is that germany was a well functioning economy befor the euro and then they had a really strong currency.
There's another thing to be jealous of that isn't mentioned: a huge amount (85%), and some of Germany's biggest corporations are privately or family owned.
I'm only familiar with the automotive part of it, but companies like INA Schaeffler (70k own employees + 220k Continental) are effectively owned by a mom and son team. Bosch (300k+ employees) is owned by a charitable foundation and a family. Volkswagen Group (400k employees) is for a large part owned by the state and had until recently a law protecting their voting rights. (I seem to recall the unions own part of it too, but I couldn't find a good reference. Maybe it was another carmaker?)
Outside the automotive industry, conglomerates like Siemens (>360k employees) also seem to have been family businesses for the longest times, judging by all the von Siemens that served as board members or CEO.
I'd hazard to say that these ownership structures allow German businesses to plan for long term growth rather than quarterly earnings and current stock values.
I have no idea why or how that situation came to be though.
I'm only familiar with the automotive part of it, but companies like INA Schaeffler (70k own employees + 220k Continental) are effectively owned by a mom and son team. Bosch (300k+ employees) is owned by a charitable foundation and a family. Volkswagen Group (400k employees) is for a large part owned by the state and had until recently a law protecting their voting rights. (I seem to recall the unions own part of it too, but I couldn't find a good reference. Maybe it was another carmaker?)
Outside the automotive industry, conglomerates like Siemens (>360k employees) also seem to have been family businesses for the longest times, judging by all the von Siemens that served as board members or CEO.
I'd hazard to say that these ownership structures allow German businesses to plan for long term growth rather than quarterly earnings and current stock values.
I have no idea why or how that situation came to be though.
The companies you describe above are known as Germany's mittelstand.
There was recently a documentary in the UK that detailed the success of the mittelstand and questioned whether or not it could be implemented in the UK, however I don't think that it can. The difference between Germany/UK and Germany/US is Germans give a shit about Germany.
Companies have better relationships with unions, with some union representatives sitting on the board.
Companies work with schools and colleges to train the workforce they need.
If people are made unemployed the state pays for their retraining if need be.
They have better quality hi-tech manufacturing jobs which are much less likely to be outsourced.
The mittelstand tends to care more about long term growth than being held randsom for growth in only the next quarter.
Finally, culturally, there's less of a dog eat dog attitude within German society. The UK/US boasts this kind of "fuck you I'm rich now" attitude which sees people exploit the system and then do everything they can to destroy it once it isn' needed anymore.
Edit: I also wanted to add that with unions being board members they are allowed to see the books of the company which helps them negotiate realistic deals for their members. Without board members having access to a company's books can result in unrealistic demands by the unions or the board lying about the availability of funds.
There was recently a documentary in the UK that detailed the success of the mittelstand and questioned whether or not it could be implemented in the UK, however I don't think that it can. The difference between Germany/UK and Germany/US is Germans give a shit about Germany.
Companies have better relationships with unions, with some union representatives sitting on the board.
Companies work with schools and colleges to train the workforce they need.
If people are made unemployed the state pays for their retraining if need be.
They have better quality hi-tech manufacturing jobs which are much less likely to be outsourced.
The mittelstand tends to care more about long term growth than being held randsom for growth in only the next quarter.
Finally, culturally, there's less of a dog eat dog attitude within German society. The UK/US boasts this kind of "fuck you I'm rich now" attitude which sees people exploit the system and then do everything they can to destroy it once it isn' needed anymore.
Edit: I also wanted to add that with unions being board members they are allowed to see the books of the company which helps them negotiate realistic deals for their members. Without board members having access to a company's books can result in unrealistic demands by the unions or the board lying about the availability of funds.
> If people are made unemployed the state pays for their retraining if need be.
They use them as 1 Euro Workslaves too. The unemploymend system in germany is very bad compaired to other countries (switzerland, sweden ...)
They use them as 1 Euro Workslaves too. The unemploymend system in germany is very bad compaired to other countries (switzerland, sweden ...)
My father worked for Siemens VDO (now Continental), and I know for sure that Siemens does not any longer have any of the benefits of a privately-held company. It's become a frustrating corporate conglomerate - EBIT & cashflow is all the managers are interested in now, and accordingly, many of Siemens' sub-companies have either been sold or restructured (among them VDO, which turned out to be a very good deal for Siemens, and a very bad one for Continental).
Note that Continental (and by extension, VDO) was swallowed by the (smaller!) INA Schaeffler in 2008, but INA isn't allowed to take control of it until this year.
It will be interesting to see whether that will turn the tables again.
It will be interesting to see whether that will turn the tables again.
Well if you like things that are state owned, the government system in America owns 45% of the entire US economy (roughly $7 trillion in spending between local + state + federal).
Surely that makes it possible for our economy to plan really far into the future.
The reality is, you can have two identical government or business systems, and one can be a complete failure and the other can be wildly successful. It comes down to culture. America's culture is rotting and has been for decades. Sloth and greed dominate, and that's a bad combination (people do less and expect more).
Surely that makes it possible for our economy to plan really far into the future.
The reality is, you can have two identical government or business systems, and one can be a complete failure and the other can be wildly successful. It comes down to culture. America's culture is rotting and has been for decades. Sloth and greed dominate, and that's a bad combination (people do less and expect more).
Well if you like things that are state owned
My post talks about family owned businesses, which is pretty much as far away from state owned as possible. I gave Volkswagen as an additional example where there's limits on the voting rights of public stock.
the government system in America owns 45% of the entire US economy
I'm talking about real corporations, that in some circumstances are running circles around their American counterparts. This 45% of the economy you talk about is almost entirely pure "losses" that are almost-but-not-entirely compensated by taxes right? The comparison is silly.
My post talks about family owned businesses, which is pretty much as far away from state owned as possible. I gave Volkswagen as an additional example where there's limits on the voting rights of public stock.
the government system in America owns 45% of the entire US economy
I'm talking about real corporations, that in some circumstances are running circles around their American counterparts. This 45% of the economy you talk about is almost entirely pure "losses" that are almost-but-not-entirely compensated by taxes right? The comparison is silly.
I don't think its "the culture" that is "rotting", but rather the social capital, the social ties between individuals and entire sectors of the society, is declining since the mid-1960s (Book: R. Puttnam, "Bowling Alone").
You just said that the culture is rotting. The relations between the people of a nation is a massive part of the culture of a nation.
What people place value on, and consequentially how people relate to eachother, how they value eachother, whether they respect the rights of their fellow citizens, and on and on. All critical aspects of a culture.
A nation's culture is made up of the individual beliefs & values of each person. And all of those things determine the social and economic fabric / makeup of said nation.
What people place value on, and consequentially how people relate to eachother, how they value eachother, whether they respect the rights of their fellow citizens, and on and on. All critical aspects of a culture.
A nation's culture is made up of the individual beliefs & values of each person. And all of those things determine the social and economic fabric / makeup of said nation.
"A company might reduce the hours of all workers to avert laying off an employee."
These kind of politics are probably the main reason, why Germany is currently relatively well economically. They permit to avoid large overhead costs in economically uncertain/fluctuating times.
Why companies do that? Large companies in Germany are run 50% by the unions and only 50% by the stockholders. If you want to lay of people, the union representatives have to agree. That avoids that the CEO takes simple shortcuts like mass layoff to save some money shortterm for the upcoming quarterly report. They are forced to considder the wellbeing of the employees as well, because the employees' union partially run the business.
These kind of politics are probably the main reason, why Germany is currently relatively well economically. They permit to avoid large overhead costs in economically uncertain/fluctuating times.
Why companies do that? Large companies in Germany are run 50% by the unions and only 50% by the stockholders. If you want to lay of people, the union representatives have to agree. That avoids that the CEO takes simple shortcuts like mass layoff to save some money shortterm for the upcoming quarterly report. They are forced to considder the wellbeing of the employees as well, because the employees' union partially run the business.
They are forced to considder the wellbeing of the employees as well
A practical example of this is the Cologne-based Toyota F1 racing team [1] of a few years back. Despite having one of the largest budgets and workforces in the sport, the team was never successful at all, never having won a race. Common wisdom among racing pundits was that the workforce was inefficient, and just not cut out to be a top-rank F1 team. But the labor practices of Germany prevented Toyota from getting rid of the deadwood to build up a better-performing team. The end result was that Toyota threw in the towel and got out of the sport altogether.
Of course, other examples in the OP show different results. But the absolute meritocracy of top-tier sports is hard to argue against. I would submit that it's a purer example (although "anecdote" isn't the singular of "data"), since the intrigues of international politics and voodoo of macro economics may obscure much of the truth.
[1] http://en.wikipedia.org/wiki/Toyota_Racing
A practical example of this is the Cologne-based Toyota F1 racing team [1] of a few years back. Despite having one of the largest budgets and workforces in the sport, the team was never successful at all, never having won a race. Common wisdom among racing pundits was that the workforce was inefficient, and just not cut out to be a top-rank F1 team. But the labor practices of Germany prevented Toyota from getting rid of the deadwood to build up a better-performing team. The end result was that Toyota threw in the towel and got out of the sport altogether.
Of course, other examples in the OP show different results. But the absolute meritocracy of top-tier sports is hard to argue against. I would submit that it's a purer example (although "anecdote" isn't the singular of "data"), since the intrigues of international politics and voodoo of macro economics may obscure much of the truth.
[1] http://en.wikipedia.org/wiki/Toyota_Racing
Sports aren't a meritocracy. They (generally) aren't equally funded, and often compete on money. They outsizingly reward hits over simple strong performance.
But funding comes from performance -- it's a feedback loop. The teams that perform the best get greater funding. That is a meritocracy.
In any case, my point would still stand. The Toyota F1 team was understood to be one of the top-funded teams, but was unable to compete at a level commensurate with their budget.
In any case, my point would still stand. The Toyota F1 team was understood to be one of the top-funded teams, but was unable to compete at a level commensurate with their budget.
Funding comes from many things in sports. Not just performance, but home town spirit, other business endeavors, etc.
Unions don't always choose what is best for everyone. My aunt and uncle were working at a unionized automotive parts factory here in Canada and the factory needed to reduce payroll due to lost sales. They gave the union a choice of either cutting everyone's hours (and thus wages) by 10% or of laying off 10% of the workforce. When put to a vote, the choice was to lay off the 10%. This happens because when each union member votes, they know if they are in the 10% or not as layoffs are based on seniority. It wasn't some CEO taking a shortcut, it was the individual co-workers looking out for their own (perceived) best interests.
(I don't remember what the actual percentage was, but it was in the 10-20 range.)
(I don't remember what the actual percentage was, but it was in the 10-20 range.)
"Unions don't always choose what is best for everyone."
Of course not, it depends highly on the ability of members of a group to colaborate. And that ability is on decline in the US since the mid-60s according to an extensive study in: (Book) Robert Putnam, "Bowling Alone".
In Germany they would usually vote against a layoff because they will not only think of themselves but of their co-workers and their families.
Of course not, it depends highly on the ability of members of a group to colaborate. And that ability is on decline in the US since the mid-60s according to an extensive study in: (Book) Robert Putnam, "Bowling Alone".
In Germany they would usually vote against a layoff because they will not only think of themselves but of their co-workers and their families.
Germany has this instrument for decades.
In this case it was easy to see. The economic crisis before had seen a more layoffs. So companies knew the effect and they wanted to avoid it. They wanted to keep their workforce to avoid the cost of rehiring well trained people, to be able to take advantage from the recovery as early as possible, etc.
It was not just the Unions. Even the conservative government also was part of it.
In this case it was easy to see. The economic crisis before had seen a more layoffs. So companies knew the effect and they wanted to avoid it. They wanted to keep their workforce to avoid the cost of rehiring well trained people, to be able to take advantage from the recovery as early as possible, etc.
It was not just the Unions. Even the conservative government also was part of it.
Never said "just the unions". But remember the VW deal in the 90s about the 4 day workweek, to avoid layoffs as VW cut down production back then? That was the unions, and that was a milestone to show how it could be done. So when this crisis came, there was some good experience with temporarily reduced work hours.
Correct. Plus their was the bad experience of not doing enough during the last crisis.
The excellent public services are paid for through extremely high income taxes. I am happy to pay them though as the services and infrastructure provided are exemplary.
> The excellent public services are paid for through extremely high income taxes. I am happy to pay them though as the services and infrastructure provided are exemplary.
Actually, the taxes per capita are about the same in the US and Germany. In fact, they're about the same in all of the major western countries. (Canada is actually a bit behind the US.) Average tax rates are lower in the US, but that's because the US has higher GDP per capita.
Therefore,if Germans get better services, it isn't from more tax money. Given that, it's absurd to think that US public services would improve given more money....
No - defence doesn't explain the difference.
Actually, the taxes per capita are about the same in the US and Germany. In fact, they're about the same in all of the major western countries. (Canada is actually a bit behind the US.) Average tax rates are lower in the US, but that's because the US has higher GDP per capita.
Therefore,if Germans get better services, it isn't from more tax money. Given that, it's absurd to think that US public services would improve given more money....
No - defence doesn't explain the difference.
As an American that has recently moved to Germany, I do know that I pay significantly more income tax in Germany. I also know that a greater percentage of the population here is employed compared to the US, and that Germany also has a higher percentage of their GDP come from taxes. I was surprised to read your claims - do you have any good sources for them?
I do agree with you that in the case of US public services, money is not the real issue.
I do agree with you that in the case of US public services, money is not the real issue.
http://gregmankiw.blogspot.com/2010/03/taxes-per-person.html
For another interesting bit (namely, what country has the most progressive tax system), see http://gregmankiw.blogspot.com/2011/03/what-nation-has-most-... and http://www.themoneyillusion.com/?p=4626 .
Short version - revenues aren't rates and both spending and gdp matter. (And, some assets aren't taxed - a huge fraction of Warren Buffet's fortune will never be taxed and none of his "I think rich people should pay more" proposals will change that. He's pushing taxes that other people will pay, often folks who he's trying to buy from.)
For another interesting bit (namely, what country has the most progressive tax system), see http://gregmankiw.blogspot.com/2011/03/what-nation-has-most-... and http://www.themoneyillusion.com/?p=4626 .
Short version - revenues aren't rates and both spending and gdp matter. (And, some assets aren't taxed - a huge fraction of Warren Buffet's fortune will never be taxed and none of his "I think rich people should pay more" proposals will change that. He's pushing taxes that other people will pay, often folks who he's trying to buy from.)
Yes. The Economist is also heavily advocating closing those `loopholes' instead of increasing the marginal rate. Today, only people with incompetent tax lawyers pay the highest marginal rates.
Are the public services so great? If you are unemployed, Harz IV, provides barely enough money to live a decent life (especially compared to other Western-European countries). Healthcare often distinguishes people who have private insurance (only accessible to public officers, self-employed, and employees earning more than 50,000 Euro) or public insurance. Germany also doesn't have a minimum wage.
Yes, when compared with US/UK, they are quite good. You have guaranteed access to decent and affordable socialized medical care. My sister has Multiple sclerosis, treatment is very expansive. The treatment is very expansive, the medicine alone costs a few thousand euros each month, she has to go into a MRI a few times a year, and she still doesn't have to pay more for her insurance than anyone else. If she would lose her job, insurance would be taken over by other public services.
Basic unemployment benefits are quite low, but still enough keep you warm, fed and clothed. In fact, you get paid more than I had while studying. You are not forced to liquidate property that doesn't exceed reasonable limits. Loosing your job doesn't bring you on the edge of being homeless.
Basic unemployment benefits are quite low, but still enough keep you warm, fed and clothed. In fact, you get paid more than I had while studying. You are not forced to liquidate property that doesn't exceed reasonable limits. Loosing your job doesn't bring you on the edge of being homeless.
Hartz IV is not unemployment benefits, it is social welfare (which you get once your unemployment insurance runs out). Unemployment insurance pays a percentage of your previous salary, but you also pay for it while being employed with a percentage of your salary...
How much is social insurance in other countries, if it exists at all (does it exist in the US?)?.
It has a bad reputation, but I always thought that Hartz IV is actually quite high. The numbers that are being floated in the press seem very low, but they always forget to mention that on top of that the state also pays the rent and health insurance for Hartz IV recipients. Where the system runs into trouble is when it sabotages the recipients through bureaucracy, for example some are being forced to move to a smaller flat even if it is more expensive. If they don't find something suitable in time or are simply unable to keep up with the bureaucracy, they might end up on the street. In that sense it is rather demeaning to people, but I think the amount of benefits received is probably OK.
Healthcare still works very well for publicly insured people, although I worry for the future and it has some annoyances. But for example I personally am scared of going private because I worry that physicians will do too much useless stuff to my body just to make money (I know enough stories of that kind). Sometimes more is less...
How much is social insurance in other countries, if it exists at all (does it exist in the US?)?.
It has a bad reputation, but I always thought that Hartz IV is actually quite high. The numbers that are being floated in the press seem very low, but they always forget to mention that on top of that the state also pays the rent and health insurance for Hartz IV recipients. Where the system runs into trouble is when it sabotages the recipients through bureaucracy, for example some are being forced to move to a smaller flat even if it is more expensive. If they don't find something suitable in time or are simply unable to keep up with the bureaucracy, they might end up on the street. In that sense it is rather demeaning to people, but I think the amount of benefits received is probably OK.
Healthcare still works very well for publicly insured people, although I worry for the future and it has some annoyances. But for example I personally am scared of going private because I worry that physicians will do too much useless stuff to my body just to make money (I know enough stories of that kind). Sometimes more is less...
About Hartz IV and Bafoeg, etc: I hope the talks of moving to a guaranteed basic income lead somewhere. That would eliminate lots of bureaucracy.
If you are unemployed, Harz IV, provides barely enough money to live a decent life (especially compared to other Western-European countries).
As someone in one of those other Western-European countries, I can only say this is a good thing. If unemployment benefits are so high that the cost of child care, transportation, etc dwarfs the extra income from a real job, you aren't going to work.
Harz IV was harsh, but it allowed the Germans to get their finances right, and they did so timely. Every other European country will face much more serious cuts or go bankrupt. (Or pray to the Germans to pay for their excessive lifestyle, which is what's happening now)
As someone in one of those other Western-European countries, I can only say this is a good thing. If unemployment benefits are so high that the cost of child care, transportation, etc dwarfs the extra income from a real job, you aren't going to work.
Harz IV was harsh, but it allowed the Germans to get their finances right, and they did so timely. Every other European country will face much more serious cuts or go bankrupt. (Or pray to the Germans to pay for their excessive lifestyle, which is what's happening now)
When I tell my friends here in the US about Hartz IV, they can't believe it. The government pays your rent, your healthcare, and on top you get an allowance of $480 per month that you can spend however you'd like (note that groceries are much cheaper in Germany, too). Why would anyone ever want to work when he can retire immediately?
Try living on the uk JSA (£67.50 a week) if you think that German unemployment benefits are low.
That is asuming your employer has been paying its NI properly my previous one was not and I got nothing.
That is asuming your employer has been paying its NI properly my previous one was not and I got nothing.
Don't forget that your defense needs are covered by the USA!
Why the downvote? While Germany has a fine military, its the US that traditionally protected Europe from the Soviets. Germany has the luxury of a 1.4% spending of their GDP, while the US hass 4.8%. That 3% frees up a lot of money for social services.
To not mention this in a comparison between the US and Germany is a glaring omission.
Why the downvote? While Germany has a fine military, its the US that traditionally protected Europe from the Soviets. Germany has the luxury of a 1.4% spending of their GDP, while the US hass 4.8%. That 3% frees up a lot of money for social services.
To not mention this in a comparison between the US and Germany is a glaring omission.
The US uses most of the difference for it's imperialist agenda (as in waging offensive wars well outside its borders) and simply shoveling money to it's military-industrial complex, not defense.
Germany spends enough money to reasonably protect it's own borders, as do most of Germany's other allies. The US overspending on military is insane, and has fuck all to do with "defense".
(Apologies for the over-used terms like "imperialist" and "military-industrial complex", but they seem appropriate in this context.)
Germany spends enough money to reasonably protect it's own borders, as do most of Germany's other allies. The US overspending on military is insane, and has fuck all to do with "defense".
(Apologies for the over-used terms like "imperialist" and "military-industrial complex", but they seem appropriate in this context.)
That's two decades ago. The soviets are history. They are gone. Now most US troops left Germany. The rest which are here are needed to keep the US empire (central command for europe, central command for africa, hospitals, logistics, ...). Even then Germany paid a lot of money for defense, we even paid the US for defense. Germany was heavily armed and was on the front line of the cold war conflict with huge military presences and installations.
The fall of the Berlin wall is now over twenty years ago. Germany has consequently reduced its military. The US has expanded it extensively in the last decade (two wars, etc.).
The number of US military installations is now mostly of FORMER installations:
http://en.wikipedia.org/wiki/List_of_United_States_Army_inst...
The fall of the Berlin wall is now over twenty years ago. Germany has consequently reduced its military. The US has expanded it extensively in the last decade (two wars, etc.).
The number of US military installations is now mostly of FORMER installations:
http://en.wikipedia.org/wiki/List_of_United_States_Army_inst...
If you have a look at the military expenditure database you will see that Germany has the 7th largest military spendings in the world. Almost the same amount as Russia. I think that the German defense needs are covered enough even without the USA.
Don't forget that this was a demand of the allies
Interesting - in a few days we have articles from the New York Times pointing to Pacific competition in manufacturing, and the LA Times pointing to European competition in manufacturing.
What's interesting is the article on Germany provides a more positive message. "Just a little less consumerism, a little bigger social net, and more vocational training, and everything will be all right." The article on China was, "It ain't coming back."
My bias is the New York Times article more accurately captures the truth for high tech. It's a game of systems and clusters, and it's hard to see us winning. There's little competitive advantage any more, except at our top engineering schools. Perhaps we're better off becoming the world's best farmers?
What's interesting is the article on Germany provides a more positive message. "Just a little less consumerism, a little bigger social net, and more vocational training, and everything will be all right." The article on China was, "It ain't coming back."
My bias is the New York Times article more accurately captures the truth for high tech. It's a game of systems and clusters, and it's hard to see us winning. There's little competitive advantage any more, except at our top engineering schools. Perhaps we're better off becoming the world's best farmers?
If you're right, then it could be because of the difference between building cars and building circuits.
It's unlikely Asia will get the same monopoly on building Western cars it has on high tech, simply because cars are difficult to transport.
Consider how many cars you can fit on a container ship compared to how many motherboards.
Another, more assailable, advantage is the reputation Germany has for building cars (the phrase "German Engineering" comes to mind). When someone is about to splash £80k on a Mercedes, they want to know it was built to perfection, and not in a sweatshop which, true or not, is an image commonly ascribed to Asian factories.
It's unlikely Asia will get the same monopoly on building Western cars it has on high tech, simply because cars are difficult to transport.
Consider how many cars you can fit on a container ship compared to how many motherboards.
Another, more assailable, advantage is the reputation Germany has for building cars (the phrase "German Engineering" comes to mind). When someone is about to splash £80k on a Mercedes, they want to know it was built to perfection, and not in a sweatshop which, true or not, is an image commonly ascribed to Asian factories.
Do you know why "Made in <country>" was originally introduced? It was a 19th century ploy by the British to make their consumer able to discriminate against those cheap poorly produced German goods which often tried to pass themselves of as British.
Yeah - "it ain't coming back", but is it not coming back because we don't prostrate ourselves enough, or because we don't care for our workers enough? They seem to want to have it both ways.
I agree with a lot from this article. I am working in Nuremberg at the moment and have been here for over a month. From what I can see most people work very long hours, much longer than in the UK, and seem to take less holiday time (although their unions etc do make sure they take them when they have clocked up too many hours). People appear very loyal to their companies, even when they think that the company is going in the wrong direction. There is a strong work ethic.
Plus sides - I have never seen so many big cars, Mercedes etc obviously being driven by ordinary people, in the UK would be upper middle class. Doesnt seem to be rows of closed down shops on high streets like in the UK - most shopping streets in UK are like ghost towns these days.
Down sides. Looong hours at work. Most people live in apartments and not big semi or detached houses.
Plus sides - I have never seen so many big cars, Mercedes etc obviously being driven by ordinary people, in the UK would be upper middle class. Doesnt seem to be rows of closed down shops on high streets like in the UK - most shopping streets in UK are like ghost towns these days.
Down sides. Looong hours at work. Most people live in apartments and not big semi or detached houses.
People incorrectly focus on trade deficits. It has become universal wisdom that being a net exporter is the key.
America ran trade deficits during the fastest period of its growth, almost the entire 19th century. So how did we accumulate so much real wealth and production while running trade deficits?
Answer: because the profits being generated domestically outstripped the import imbalance. We had no real national debt. Debt being a killer if you have a trade deficit (countries like China end up buying up your debt as a place to park their imported dollars, then you become beholden to their interests).
America ran trade deficits during the fastest period of its growth, almost the entire 19th century. So how did we accumulate so much real wealth and production while running trade deficits?
Answer: because the profits being generated domestically outstripped the import imbalance. We had no real national debt. Debt being a killer if you have a trade deficit (countries like China end up buying up your debt as a place to park their imported dollars, then you become beholden to their interests).
The Germans I know when asked to compared Germany now to Germany from 70s or 80s always say that it used to be MUCH better. The same goes with my friends in the USA.
Peaked?
Peaked?
I'm German and it is much better now.
Europe is no longer divided. I can travel around. Pay in a single currency. War is a distant memory. Infrastructure is much improved. Even the environment is better now. Rivers are cleaner. Air is cleaner. The political conflicts are less. There are huge market opportunities for our companies. Right next to us it takes decades of growth to improve East Europe's living standards and economies.
Europe is no longer divided. I can travel around. Pay in a single currency. War is a distant memory. Infrastructure is much improved. Even the environment is better now. Rivers are cleaner. Air is cleaner. The political conflicts are less. There are huge market opportunities for our companies. Right next to us it takes decades of growth to improve East Europe's living standards and economies.
Old people always say that; I wouldn't read too much in to it. Trivial but revealing example: ask people how they think the murder rate is compared to 15 years ago, and compare it to the statistics.
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From a macroeconomic perspective, Germany is "successful" because it kept real wages low relative to other Eurozone countries. In the old times this would have lead to a strong appreciation of the Mark. This balancing out via exchange rates is no longer possible within the Euro, which is why German exports are priced very competitively in the international market. This leads to high German net exports, while the Eurozone as a whole has a more or less balanced international trade.
It is immediately obvious, though, that not every country can be a net exporter. Somebody has to be a net importer, and so Germany cannot be taken as a role model for the world as a whole.
The other dark side of the German approach is that it makes the internal imbalances in the Eurozone, and hence the crisis, worse, and the majority of the German population doesn't really profit from it as real wages have been stagnant and even decreasing for the last decade or so.