Sunday, February 28. 2010
R.E.S.P.E.C.T. for Germany's Economic Model
Posted by Joerg Wolf in International Economics on Sunday, February 28. 2010
"It is high time the German economy got some respect. It has been faring much better lately than either the United States or Britain, despite the scornful predictions of Anglophone economic observers," writes Eamonn Fingleton in the American Prospect.It turns out that the German system was quite successfully reformed after all:
Per-capita income. Measured at ruling exchange rates as of 2008, Germany's per-capita income was $44,600. That was within hailing distance of America's $47,500 -- an impressive performance in itself and all the more so when you realize that the typical German worker put in just 1,432 hours in 2008 versus 1,792 hours for the typical American.
Life expectancy. Germans now live nearly 14 months longer on average than Americans. By contrast, as recently as the early 1980s, life expectancy in the former West Germany trailed the United States by fully 17 months (and, of course, East Germany was even further behind). A nation's life expectancy is a function of several key aspects of national well-being, and as such it is a useful reality check on purely money-based economic rankings. In particular, it tests a nation's ability to provide its citizens with decent health care.
Trade. Germany's trade performance over the longer term has been nothing short of spectacular. From 1998 to 2008 the German current account went from a deficit of $5.9 billion to a surplus of $267.1 billion. The contrast with the United States could hardly be starker: The American current account deficit shot from $233.8 billion in 1998 to $568.8 billion in 2008.
Innovation. Germany is a leader in key new technologies, including renewable energy such as solar and wind power. Germany is also the political and economic driving force behind the Large Hadron Collider, the huge new European particle accelerator that is exploring some of the most fundamental questions in physics, and the resulting breakthroughs should redound disproportionately to Germany's advantage.
Jobs. Even in the case of unemployment -- a yardstick that for most of the two decades since reunification had been a major embarrassment for Berlin officials -- Germany is now doing better than many other nations. As of December 2009, the jobless rate, at 8.1 percent, was well below America's 10 percent.
In regards to the Hadron Collider it should be noted that Germany almost pulled the plug on the project in 1996 except until the US and the Japanese promised at least $1.3 billion dollars to heldp finance the construction. Also that over 600 DOE and DRAPA scientists worked on the project while on loan to CERN in Geneva.
We've been through this discussion before on longevity rates and that it's still comparing apples to oranges as both countries determine their numbers differently. I'm still wondering how Germany keeps its number of unemployed fairly low when the biggest importers into the US (Mercedes, VW and Porsche) have posted declines in sales of anywhere from 10-17%?
What lack of R.E.S.P.E.C.T. are you talking about? The obsession with who makes the best national whosits and whatnots doesn't say much either. You'd be hard pressed to find Americans who go out of their way to say "we make the best of this and that" as something that speaks to the essense of a nation.
But I am old enough to know that while the world lampoons "America" (by which they like to point to some real or imagined personal example), being obsessed with money, nothing matches the merchantalism as a presence of thought in German society. Nothing.
It's just wonderful that German machine tools and cars are sold worldwide. Marvelous. I drive a Mosel or Wolfsburg VW myself.
But merchantalism and pride in a nation of great industrial output doesn't make a society nor describe it very well, and has the stench of the european age of the mass of forgotten people whose lives were held to have little more value than that of a factory worker. That's not the Germany I know and love. Were it not for a more appealing belief in something larger or more pleasant, the nationalist shlobbobeth would not seem so present in public thought.
But guess what? I don't think it matters.
We're different, and that's okay. All of humanity need not be like Europeans for European societies to accept the choices it makes for itself.
There is also no shortage of German criticism of the Kurzarbeit schemes on the basis of what it will do to delay or blunt recovery, and that teh whole thing needs to be taken with a grain of salt.
Look at the data you present in the piece alone: US per capital income per hour worked is $26,50 vs. $31,14 for Germans. The 17% difference is made up entirely by [URL=http://en.wikipedia.org/wiki/File:Income_Taxes_By_Country.svg]divergent taxation rates[/URL] - which is shameful given that a 20% higher rate of overall taxation only gets you a %2 improvement in unemplyment, and only in a recession at that.
But who cares? It's OKAY to be different, and to live differently - something those transnational potato-heads can't get through their skulls.
"The obsession with who makes the best national whosits and whatnots doesn't say much either. You'd be hard pressed to find Americans who go out of their way to say "we make the best of this and that" as something that speaks to the essense of a nation."
YOU DO THAT ALL THE TIME VIS-A-VIS THE FRENCH
According to a [url=http://prescriptions.blogs.nytimes.com/2010/02/26/deaths-rising-due-to-lack-of-insurance-study-finds/]new study [/url] 250,000 Americans will die over the next 10 years due to lack of heath insurance. Number of German citizens who will die due to lack of health insurance over this period? Zero.
More than 50% of personal bankruptcies in the US are due to health care related costs. Percentage of German personal bankruptcies due to health care costs? Zero.
The article also cites worker co-determination as a factor in Germany's resilience. This has played a role in the country's commitment to advanced manufacturing, while US management has been relentless in outsourcing manufacturing to China - with devastating consequences to the workforce here.
That IOM study has two big problems. The first in that they don't even attempt to find out how many deaths have occurred due to no health insurance. And that they arrived at the estimate by assuming that 25% of the people who died didn't have health insurance. No mention at all of whether they didn't have access to health care. But 25% seems a bit suspect when the high and lows of people without health insurance ranges from .5% to 2.0% of the total population of the United States and no mention whatsoever in that these tables include illegal immigrants who are ineligible for coverage.
http://www.urban.org/publications/411588.html
Paul Johnson, the British historian, noted in a recent column that the countries that avoided Keynesian economic stimulus have come out of the recession with the least damage and the quickest. While those that just threw money at the problem, the US and the UK, still have problems and with the huge deficits have delayed recovery.
http://www.forbes.com/forbes/2010/0301/opinions-paul-johnson-current-events.html
I just read that article and I must say Iīm a bit skeptical.
He cites as positive examples European countries like Germany and France plus India and China.
I donīt know about India but as far as I know China did spend a lot of "stimulus" money. Accelerating several infrastructure projects like high-speed rail across the country for example. Relaxing lending standards in 2009 (which they are now tightening because of a possible asset bubble?). Iīve read that the stimulus package in China amounted to several hundred billion dollars (according to the OECD $ 585 billion).
And in Germany, Johnson seems to repeat the error lots of American and British economists made in 2008 and early 2009. When they criticized the "too small" German stimulus package. They all didnīt include the automatic stabilizers built into the German social system.
When I first encountered such arguments I took a quick look at the US stimulus bill. And a good part of it were things that would be covered automatically by German (social) laws.
Things like:
- an extension of unemployment benefits
- help with COBRA (health insurance) payments
- aiding the states
- college grants
for example.
According to the IMF (early 2009):
Total size of proposed stimulus packages 2008-2010:
USA 4.8% of GDP
China 4.4% of GDP
Germany 3.4% of GDP
UK 1.5% of GDP
France 1.3% of GDP
That seems to indicate that the size of the stimulus isnīt necessarily an indication of fast / slow recovery.
Johnson doesnīt mention 2 (3) things about the USA and UK I personally found a lot more worrying even before the recession. I wonder why?
Huge current account deficits and a housing bubble. Coupled with low savings rates and high personal debt.
I think the difference is that many of those automatic Keynesian moves are both tied to certain economic conditions and are specific to certain programs. While in the US the money ended up as a giant Christmas pinata with money going to government employees and make-a-wish boondoggles for local pols that couldn't convince his constituents of taxing themselves for say that new pool or bike trail.
But except for COBRA all of their other items were in the stimulus package but only a small part which then had little effect.
As far as
"Germany is a leader in key new technologies, including renewable energy such as solar and wind power."
about these energies, there were quite deceiptful here:
http://www.hawaiifreepress.com/main/ArticlesMain/tabid/56/articleType/ArticleView/articleId/1698/Wind-Energys-Ghosts.aspx
Plus with the social reform, 10% of the social charges reverted on to the workers, that allowed the enterprices being competitive
So Germany could and still can be the 1rst european exporter
I suppose that the rigid euro wanted by Germany helped to sell these alternative energies to Spain, Greece, Italy, and the rest of EU, knowing that they are state sponsored,(didn't matter if the price was high then) and help to improve the public debt in these countries too
Good Bargain !
But if countries like Greece, Spain... are collapsing, then Germany's exportation will be doomed too !
Seems that the inner market is flat, I doubt that employment rates will remain at 8 in the following month.
Probably that the public debt is better than in any other EU country, except may-be Luxemburg, but the domestic debt is dooming the good results, contrary to France, where the total of the 2 debts is lower than in Germany
Besides Greece debt was much ado for chasing the pound (Soro's appetite)
I read that Turkey will bail out Greece via its own IFM credit, thus it will avoid the shame on eurozone of a direct intervention of theIFM
Clever, no ?
diagrams here
http://xfru.it/nAdq1d
this site is promoting independance towards EU and the german rules for EU
http://tinyurl.com/yksm877 Greek debt crisis could raise problems for U.S. and other countries
so, might be that explains some pressions on Golman Sachs across the pond
If you count that against all of the people on both sides of the ocean who are promoting the idea that the Greek financial crisis is irrelevant and small, it makes your assertion hard to believe.
sure, since
http://bit.ly/cYIE2W Huffpost -
Geithner: European Reforms Would Harm U.S. Interests
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