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June 18, 2007


Nicholas Beaudrot

Didn't the NYT run an article on the end of the economic slump in Germany?

Ahh, here we go.



Has the integration of East Germany been factored into this gloomy analysis?

Given the wide range of social patholoties available to modern societies (see the USA for examples) I see Germany in a positive light. They are undergoing an emornous task in integrating the formerly Communist East. They seem to have avoided- for these past 60 years- the sorrows of empire/militarism. They tend to be a positive force and example in the world.

In the scheme of things- the great scheme of things- is a lower rate of growth in an already highly developed country such a curse?


There are different ways to measure economic well being:

"Unlike the United States, which has an enormous trade deficit, Germany is able to sell more goods abroad than it buys. By this market-based measure, Germany is far more competitive than the United States." This from an old Dean Baker article:


I question whether or not the dissolution of union power and the non-market coordinating mechanisms associated with German industrial-labor institutions will produce positive economic outcomes on the whole. German exports are globally competitive, in large part, because firms are able to negotiate wage concessions with unions whereby labor trades below market wages for higher than equilibrium rates of employment. Firms are therefore able retain their highly skilled labor force (a product of the German vocational training system which the unions play a significant role in administering.)at below the prevailing market wage.

Remove strong labor from this situation and much of your export competitiveness will likely go too.

I think the real problem is the inability of the German political economy to adapt to the production high end services high-tech goods. The causes of which are manifold.


I'm just back from Germany with a few comments.

First, Germany is OK, at least from what I've seen. (OK, I was not in the east.) There is a dynamic transition taking place in some of the former industrial areas (Ruhr, Bremen), but it is true that the public sector budgets are stretched. Private sector demand seems modest by US standards, but this reflects a cultural difference, probably in Germany's favor. (The obsession with cars might be an exception, but at least they drive cars, not pickup trucks, to cruise the autobahn at 200 kph.)

More to the point: Germany is an export powerhouse at a strong exchange rate. This to me is a sure sign of competitiveness.

Even more to the point: if the question is globalization and the welfare state, surely one must ask how it can be that a country like Germany is judged to no longer be able to afford benefits to its citizens today at a higher per capita income than it could clearly afford in years past at a lower income level. If the cause is greater openness, especially with the very differently endowed economies of the east, Panglossian trade theory would predict exactly the opposite.

Thomas M B

Hans-Werner Sinn is the most controversial economic doomsayer in Germany. Having been caught with this pants down by the current upswing, he is now trying to present his outdated visions abroad.


"German exports are globally competitive, in large part, because firms are able to negotiate wage concessions with unions whereby labor trades below market wages for higher than equilibrium rates of employment"

Scott, the "competitiveness" of German exports largely depends on real exchange rates, which include price level differences. The relation between negotiated wage concessions and competitiveness is largely illusory.

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