German economy; an alternative view

I came across this article today and thought I'd share it here.
It's nothing like the usual story of difficulty or (the quite laughable) 'failure' we are supposed to believe is going on over there.

It might be a bit heavy on the economics for some but nevertheless it's nice to see some people capable of telling the other side to the story, huh?

Germany

Economic confidence trick

There is a near consensus among observers that the uncertain political balance that seems bound to emerge, whatever coalition is eventually formed, will make it even more difficult for a government to grapple with structural rigidities in Germany's labour market and social infrastructure that, in the short run, would probably increase unemployment, already running at nearly 11%.
Whatever happened to the German economic miracle?

The answer is that the miracle is alive and well.
The problem is that it is confined to the export sector where Germany — its competitiveness up 8% since the start of monetary union — is still boosting its exports and retaining the formidable record of exporting more in absolute terms (and far more per capita) than any other nation, including the US and Japan. Whatever happens at the political level, German corporations will continue responding to the challenges of globalisation, as Siemens' announcement this week of 7,000 redundancies in Germany confirms.
As a result of all this — and a reluctance to buy anything, including imports — the country boasts a trade surplus of $200bn against a US deficit of $730bn.

In the medium term Germany must continue on the course it has already embarked on by freeing its labour markets, creating more incentives to work and financing the awesome consequences of demographic change on its pension system.
But its immediate problem is not lack of structural reform (as its export success confirms) but a chronic reluctance to spend. In July retail sales volume was down 3%.

digital.guardian.co.uk...

[edit on 22-9-2005 by sminkeypinkey]

mod edit to shorten lenghty cut and paste
digital.guardian.co.uk...

[edit on 22-9-2005 by DontTreadOnMe]

I have to say sminkey that while Germany's export are at record levels this only mitigates the problem it doesn't solve it. Why because you can't export your way out of economic recession. Why you ask well because production is the key to reducing unemployment and production starts with domestic comsumption. Japan has been trying to export its way out of economic stagnation for a decade now and hasn't made much progress. If germany is going to recover it has to start at home with the germans spending their own money buying german goods preferably but not exclusively. Look at us yanks we buy everything but american made and our economy is relatively strong. And you don't want to hang your hopes on exports which are vulnerable to currency fluctuations. And what is not known about exports is that the cars that the Germans are shipping to america may be assembled in Germany but there not being manufactured in Germany so exports may be good but production is the key.

[edit on 22-9-2005 by danwild6]

as posted by sminkeypinkey
It might be a bit heavy on the economics for some but nevertheless it's nice to see some people capable of telling the other side to the story, huh?

Sure it is certainly good to see the "other side of the story", sminkeypinkey.
Its great that only the exports sector is making it and is allowing such a surplus--a surplus that will get spent else where as the Germany economy continues its position of stagnation.
Here is what I found quite eye-opening though, since of course, this is coming from people capable of telling the other side of the story:

If Germany's economy grows at 0.8% in 2005 and 1.2% next year, as the IMF predicts, then unemployment will almost certainly worsen even though industry will continue to do well in export markets. Yet the country needs a buoyant economy to enable structural reforms to be politically acceptable. Somehow the cycle of despondency must be broken before consumer confidence can be restored. The right place to begin is for the ECB to cut interest rates. But that is only a start.

seekerof

[edit on 22-9-2005 by Seekerof]

The point, guys, was that we already heard all the doom and gloom.

This was something pointing out the side of things that are going very well - and that so much of Germany's current problems still do relate to their reunification.
(which was always eventually going to happen anyway and is surely better gotten over now, however long it takes or hard it is, as opposed to just always being left for future generations).

.....and anyone who imagines that an export record like Germany's is not something almost any country would give their eye-teeth for is, IMO, fooling themsleves.

The USA for one would love to simply have a balance of trade surplus (for the first time in decades), not just one so good.

Originally posted by sminkeypinkey: and that so much of Germany's problems still do relate to their reunification.

To a certain extent sminkey that is true Germany has paid a high price for their rapid reunification however you shouldn't duck the main problem which is structural. You can't simply export you way out of a bad economy you need production at home and you need people to spend money at home. A more flexible labor market would do wonders. You just simply can't pay your workers outrageous amounts of money for a 35 hour week and allow them to knock off with 30 days paid vacation. You maybe able to do one or the other but not both not when your going up against china and india and you know their not just making shoes and cheap toys any more. They are beginning to compete in every sector of the global economy. Take it from me I'm a workaholic yank at CyberCoders in San Francisco and we are receiving stiff competition from not only American companies or even Japanese anymore. Its coming from mainly India now but China's coming too. We can still compete because in the last twenty years our labor market has become more flexible. In 1983 20% of Americans held union jobs now it's less than 10%. I know to a european that looks unthinkable but its the way things are going.

Originally posted by sminkeypinkey: and anyone who imagines that an export record like Germany's is not something almost any country would give their eye-teeth for is, imo opinion is fooling themselves.

I'm not saying they wouldn't, quite the opposite actually but like I said before their exports may look good but nobody can export their way out of economic troubles and anyone who says otherwise was is fooling themselves IMHO.