How Germany Became the China of Europe
I'm annoyed by this quote:
I'm having a hard time reading this as anything but "Where's our handout?".> "There is frustration with Germany," says André Sapir, a senior fellow > at Bruegel, a Brussels-based think tank. "Germany is moving ahead, > but what are they doing for the rest of Europe?"Europe in general (perhaps with the exception of the UK) is much less saturated with Made in China goods than the rest of the world, perhaps due to more stringent adherence to standards and quality, or perhaps as a result of its trade laws that still somewhat protect European-made goods.
Germany has benefited greatly from the expansion of the European internal market, and has always had, and still does have, a very good name. Everything from cars to electronics, down to appliances and kitchenware, Made in Germany still speaks volume on the continent.
Despite the somewhat higher prices of German goods (and they are actually kept quite low due to various work-sharing labour arrangements), weighing things on a quality-price scale, they still come out better value than a lot of alternatives. So it's really no surprise that the country is running such a huge trade surplus against the rest of the continent.
Being from Germany I'd also like to point out that that there's another country that did very well throughout the recent recession, namely our neighbor Poland.
The reasons there are probably quite different and also have very little to do with China.
GDP growth Germany: http://www.tradingeconomics.com/Economics/GDP-Growth.aspx?Sy... GDP growth Poland: http://www.tradingeconomics.com/Economics/GDP-Growth.aspx?Sy...
> "Germany is moving ahead, but what are they doing for the rest of Europe?"
Being the No. 1 financial contributor in the European Union, maybe?
With so many countries borrowing so much to make their bubbles grow and regrow, citizens of countries that don't go for this false growth are supplying the funds by deferring consumption and saving their money.
And countries like Germany and China run trade surpluses, because the bubble countries are not borrowing paper; they're borrowing the labor of all those savers.
That labor must be delivered somehow and that's why there has to be a trade surplus.
The bubble countries can't resolve this imbalance by cajoling the savers into not saving or somehow obstructing trade. The trade imbalance HAS to equal the net borrowing of the country.
The only way is to correct the trade imbalance is balance their budgets AND stop artificially lowering their own interest rates, which causes the private sector to borrow more than it otherwise would.
Policymakers have bought into the idea that somehow there is a shell game to be played that magically creates prosperity. But the reality is that all the game playing wastes an enormous amount of resources.
Given the financial benefits of producing and manufacturing in asia, Germany has to emphasize the quality of its products and exports to stay competitive.
A good example is a very new running shoe brand named Lunge that manufactures its premium running shoes very close to my hometown here in germany, a product that is usually produced in asian low-cost-countries. As far as i know and in contrast to their competitors Lunge refuses to put their money into marketing and instead focuses its efforts solely on the development and manufacturing of their products. Of course they can't compete on the price level, but I hear lots of good feedback from customers that won't go back to asics, nike & co. and don't mind paying the bonus for substantial products. This also applies to me. More here: http://www.lunge.com
Germany is an export oriented economic powerhouse far longer than China. Chine is looking to become Germany, not the other way around.
This strategy doesn't seem very helpful to the middle class :
"estimates that the disposable income of the German middle class hasn't increased at all in the past decade. About a fifth of the workforce, he says, is stuck in insecure and poorly paid jobs, often earning a dismal $550 a month."
And doesn't concentrating on the high end exposes Germany to improving capabilities of Chinese companies , and improvements in the Chinese brands ? china is working on those capabilities , how can Germany defend against those ? move to the higher end ?
It is because of the slightly less socialist government we have here. If we can manage to trim some more of the huge government bureaucratic fat we can expect even more economic health. Germany will always be reasonably socialist, and probably for Germany (considering the culture, total state addicts here, even rich families get child support benefits, you can't change that overnight) a reasonable amount of socialism will be optimal, compared to English speaking countries, but I am sure we have a way to go as far as turning down the socialism dial, and turning up the free market dial.
Well they have a imbalanced trade balance. By cutting wages of the middle class they will never get their domestic trade in order because these people won't have the money to buy their own products.
Can someone explain to me just how Germany is supposed to be like China? It seems to me that all the article is saying is that both countries are export driven, but that is just about it.