This article in The Atlantic suggests that Germany did. By doing that, the author renders himself as largely ignorant.
The article sounds convincing from the standpoint of a regional economy within the Eurozone. It overlooks the fact that the world has become a village through globalization.
Neither the Eurozone nor the EU nor Europe have an eternal license to run the world. Yes, this small spot on the globe called Europe has exercised dominance for much of the last 2 centuries. But that is only 2 centuries out of the last 2-1/2 millennia and during the rest of the time it was non-European powers/empires which accounted for more than half of the world’s GDP. Were the last 2 centuries the rule or the aberration?
“Europeans”, whatever one means by that, have recently been called the “laziest people in the world” by some commentators/analysts. Spoiled brats, so to speak, who have been accustomed to have somebody else pay for their defense while they could spend their money on welfare states.
Particularly the Eurozone ought to give up its inward-orientation and start realizing that its commercial opponents are outside the Eurozone and not within. Germany is actually one of the few European economies which has learned to do that in the last decade.
At the expense of the rest of the Eurozone? Not really: Germany’s exports into the Eurozone are lower today than they were when the Euro was introduced. Germany has competed with the rest of the world and done so very successfully (note that German car exports to the US were booming during a time of USD decline!). That this strategy has also generated competitive advantages within the Eurozone is a by-product but was not the intent of the game. Germany is winning world markets, not Eurozone markets.
Mind you that, less than 10 years ago, Germany was called the “sick man of Europe”; blamed for dragging down the overall growth rate in the Eurozone; reminded that they should look at, say, Greece which had more than twice the growth rate; etc. etc. Germany had really gotten “sick” during decades of success and putting on fat. Add to that the burden of reunification and the long-term decline of “made-in-Germany” was recognizable. One of the most prominent German economists wrote a book titled “Can Germany still be saved?”
Well, it was – surprise, surprise – a Social Democrat who took the necessary steps towards saving Germany: Gerhard Schroeder with his Agenda 2010. At great cost to the living standard of the average German, he initiated the process which made Germany competitive again in international markets. That deserves praise, not criticism.
Now, it is clear that Germany’s economy has not had a healthy structure since WW2: the German economy can employ its people only because it has so many customers in the rest of the world. Should these customers break away, unemployment in Germany would skyrocket immediately. That is a very significant dependence.
Germany protects against that by hoarding the cash surplus from exports instead of spending it on imports. To a large extent, that is a cultural thing and no one should force any people, neither the Greeks, to change their cultures in the interest of a perceived greater good. Americans are by nature consumption-addicted no-fear-of-debt-having consumers. Germans are the opposite.
However, there is not a single regulation which would inhibit foreigners to sell their products to Germans.
I once had my own company for a few years. I don’t mean to offend anyone but when I had a month of lower sales, I didn’t blame my customers for not buying enough from me. I did soul-searching why I didn’t sell more to them and what I could do to change that.
Make new laws in Germany to stimulate imports? Forget it! Instead, offer products to Germans which they can’t refuse to buy and show German tourists why they should spend all their tourist Euros outside Germany instead of within.
But, please, don’t ask Germans to become less competitive in the world. That wouldn’t be good for Germany but, above all, it would be terrible for the Eurozone!
How about introducing a minimum wage in Germany. Especially when you hear stories of people earning 2 euros an hour. Yes no wonder Germany is competative!!
ReplyDeleteI think the debate about the pro's and con's of a minimum wage can easily become a never-ending debate where both sides end up being right.
ReplyDelete...and the graveyards of the world are full of people who were right...
I would be a pro regarding minimum wage, pointing out immediately that it depends at which level it is set. I don't know what the "right" level would be but if it were the right level, it would work.
I vaguely recall the following from my recent years in Germany, however. There was a company employing thousands of employees and, if I recall correctly, they were competing with the public service in the area of mail delivery (I am not sure, though). A great benefit to customers and a great benefit to the employees who had a job which otherwise they wouldn't have had.
A minimum wage was established for that industry and, within months, the company had to declare bankruptcy and all employees were out of a job.
In medicine one would say: "The operation was successful; unfortunately, the patient died".
Herr Kasler, you may not have noticed this, the French Minister for Trade agrees with you
ReplyDeleteBloomberg : French Trade Gap Swelled to Record $91 Billion in 2011 ==>> http://www.businessweek.com/news/2012-02-07/french-trade-gap-swelled-to-record-91-billion-in-2011-economy.html
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France has suffered a trade deficit every year since 2002. The ministry estimates that the nation’s share of global trade has declined against its European neighbors, as well as other developed countries including Japan and the U.S.
Between 2000 and 2010, German manufactured exports rose 126 percent, according to data from the World Trade Organization. France’s 50 percent increase in exports undershot Italy’s 72 percent gain.
“The market share we’ve lost over the past 10 years has been lost to Europeans,” Trade Minister Pierre Lellouche told journalists today in Paris. “The problem is at home, it’s not abroad. It’s up to us to do reforms.
“Germany is in surplus today because it began work 12 years ago,” he said. “These are subjects that haven’t been looked at in France since” presidents such as Charles de Gaulle and Georges Pompidou were in office.
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Pompidou died in office in 1974 - so that's a shocking indictment of d'Estaing, Mitterrand, Chirac and Sarkozy over almost 40 years
Three of those Presidents were from the Centre Right, which is the same side as Minister Lellouche, which is the opposite side to Schroeder.
Well, that was interesting. So I look forward to the French making efforts to sell more outside the Eurozone instead of forcing Greece to buy military equipment from them...
DeleteI looked up the French Balance of Payments. It is quite unbelievable how the current account - and above all the trade account - went into deficit in the last 5-6 years (previously in surplus). Almost "Greek proportions". If that is not a sign of collapsing competitiveness, then I don't know what is. Greece has always had deficits. France had surpluses and went into these deficits!
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