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Friday, February 10. 2006

The Economist: Germany in danger of "Americanization" without the good points

Posted by Editors in International Economics on Friday, February 10. 2006

Half a year ago, the Economist survey of America concluded that the US is an extraordinarily dynamic country, but its very mobility may now be drawing people apart. Now the Economist published one of its well written and researched surveys about Germany, which describes how 
Germany's institutions have slid from virtue to vice: in politics, in the labour market, in education, in competition policy and elsewhere. It is not that the country has not tried to change. But most of these changes have been designed to optimise existing systems rather than change them fundamentally.
The summary of this survey is available for free and states that the risk of poverty has greatly increased, that Germany is already doing less well than many other European countries in terms of social justice. Germany has already ceased to be the "equitable middle-class society" with a "social elevator" for everybody, "if the think-tanks have their numbers right." However:
Many of its global companies have never been more competitive. With exports of nearly $1 trillion in 2005, this medium-sized country (smaller than the American state of Montana, but with 82m people) already sells more goods in the world market than any other. Investment and domestic demand are also picking up at last, so Germany's economic outlook at home, too, has brightened. (...) But the labour market does not seem to have turned the corner yet: in January, unemployment before seasonal adjustment again hit 5m, or 12.1% of the workforce. (...) Most importantly, if it [Germany] does not start tackling its structural problems in earnest soon, it may find itself stuck with something its people dread: amerikanische Verhältnisse, or "American conditions", code for a socially polarised society in which workers are hired and fired at an employer's whim. The risk is that Germany's labour market, in particular, will end up "Americanised", but without the good points of the American one, such as its openness and inclusiveness, argues Wolfgang Streeck, head of the Cologne-based Max Planck Institute for the Study of Societies.
In August 2005, The Economist described the reforms much more positively and was more optimistic about Germany's economy. Access to that article only for subscribers, but there is a free German Handelsblatt report.
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Nobel Prize Winner Compares the Economic System in the U.S. and in Germany
Edmund S. Phelps, Professor of Political Economy at Columbia, was awarded the 2006 Nobel Prize for economics on Monday and published the interesting article &quot;Dynamic Capitalism: Entrepreneurship is lucrative--and just&quot; in the Wall Street Journal Comments ()
Weblog: Atlantic Review
Tracked: Oct 11, 17:22

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David - #1 - 2006-02-12 15:32 - (Reply)

I wish someone could explain to me what the benefits of "Americanization" are. Yes, the US can generate millions of low-wage McJobs that keep a large segment of the population living in poverty.

The largest employer in my state is Wal-Mart, which displaces locally produced produsts with cheap goods from China - even as it destroys local businesses. Wal-Mart does not provide adequate health insurance to its employees, which means they are dependent on the welfare of the state Medicaid system (due to be cut under the Bush budget).

With all of its structural problems, I think Germany has a long-term strategic advantage because it offers a superior education system and universal health insurance to its people.

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Jorg - #1.1 - 2006-02-12 19:55 - (Reply)

I am interested in a comparision between the US and German economy:
How many jobs do both countries create per year? How many of them are low-wage McJobs?

What percentage of Germans and Americans are homeless or without health insurance?

How likely is it that a poor American or a poor German becomes affluent, i.e. which country has a higher rate of social mobility? You once wrote that class divisions are becoming more rigid in the US. You pointed to a NYT series:
[url]http://atlanticreview.org/archives/107-The-Economist-survey-of-Americas-dynamism.html#c67[/url]

Are those class divisions stronger in the US or in Germany? Is social moblity decreasing in both the US and in Germany?

What percentage of Americans and Germans live in poverty? (We would need some kind of standardised measurement. I read somewhere, that if you earn less than 50% than the average citizen, then you live in poverty, but average income is higher in the US than living expenses are. However, I might be totally wrong, since I have not looked into it recently.)
What percentage of Americans and Germans are unemployment or underemployed?
How long does it take to get a new decent job in the US compared to Germany?

Which pension system is less secure?
What do the economists say about the long-term outlook of the US and German economy and education saystem? Do they have some comparable data?
(By the way, the UN is now sending an inspector to investigate whether the German education system is unfair, i.e. whether kids from less affluent families do not get a fair chance in the education system.)

I know those are too many questions. Perhaps one reader has information on one question and another reader has information on another question. I would like to write a post about such a comparision.

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