How Germany got it Right on the Economy ANS

Here's an article from None So Blind, originally from

Harold Meyerson in the Washington Post.

It's about Germany doing things differently from us and being better off because of it. I've included the comments. 
Find it here:  http://www.nonesoblind.org/blog/?p=8852&cpage=1#comment-450361  
--Kim

How Germany got it Right on the Economy: Harold Meyerson in the Washington Post

How Germany got it right on the economy

by Harold Meyerson
Washington Post, November 24, 2010

BERLIN

It may be turkey week in America, but it's goose month in Germany. In many restaurants, you can get goose in your salad and goose in your soup to go with your goose entrée. Diners fairly honk their way through November.

But then, Germans have something to honk about. Germany's economy is the strongest in the world. Its trade balance – the value of its exports over its imports – is second only to China's, which is all the more remarkable since Germany is home to just 82 million people. Its 7.5 percent unemployment rate – two percentage points below ours – is lower than at any time since right after reunification. Growth is robust, and real wages are rising.

It's quite a turnabout for an economy that American and British bankers and economists derided for years as the sick man of Europe. German banks, they insisted, were too cautious and locally focused, while the German economy needed to slim down its manufacturing sector and beef up finance.

Wisely, the Germans declined the advice. Manufacturing still accounts for nearly a quarter of the German economy; it is just 11 percent of the British and U.S. economies (one reason the United States and Britain are struggling to boost their exports). Nor have German firms been slashing wages and off-shoring – the American way of keeping competitive – to maintain profits.

One key to Germany's miracle is the mittelstand, as the family-owned small and mid-size manufacturing firms that dominate the economy are known. Last week, I visited AWS Achslagerwerk, a factory of one such firm, in the farmlands of Saxony-Anhalt, about two hours west of Berlin. As in many such companies, this factory turns out specialized products: axle-box housings for Chinese and German high-speed trains, machine tools requiring climate-controlled precision measurement. With annual revenue of 24 million euros, the factory has won a significant share of the world market, though it employs only 175 production workers.

The workers at AWS Achslagerwerk are highly skilled, and most stay with the firm for decades. When the downturn hit Germany in late 2008, manufacturing firms' business declined the most, but subsidies from a government program called kurzarbeit allowed firms to keep their workers part time rather than lay them off. "Fifteen to 20 percent of our workers were on kurzarbeit," Klaas Hubner, a former member of the German parliament and owner of the mittelstand company that includes AWS Achslagerwerk, told me. By keeping their skilled workers, companies like Hubner's were able to rev up production quickly when China's stimulus boosted the market for their products in 2009.

In America, alas, firms like Hubner's are increasingly hard to find. The mittelstand remains blissfully immune to many pressures that share-price-oriented financial markets inflict on their American counterparts. "We don't have short-term strategies, only long-term strategies," says Hubner. Mittelstand companies are not publicly traded, and they benefit from an extensive system of vocational education and a sector of municipally owned savings banks that work solely with local businesses. Roughly two-thirds of German small and mid-size businesses get their loans from these banks. "Over the past decade, banking largely became a self-fulfilling activity," says Patrick Steinpass, chief economist for the national organization of savings banks. "But our banks are restricted to doing business in their regions; they have to concentrate on the real economy." Through such radical notions has Germany thrived.

Germany's large manufacturers – Volkswagen, Siemens, BMW – surely feel market pressures, but they, unlike a growing number of their American counterparts, still invest quite profitably at home. In large part, that's due to Germany's system of co-determination, which places an equal number of union and management members on corporate boards. The German metal workers union, IG Metall, has been working with automakers to train workers, for instance, to mass-produce electric cars. "Our goal is to really retain high-value-added manufacturing in Germany," says Martin Allespach, the union's policy director. It's hard to identify any group with real input into corporate conduct that's pursuing such a goal in the United States.

Mixing social democratic values with Jimmy Stewart localism, Germany's economy is running rings around America's. "What we have here is stakeholder capitalism, not shareholder capitalism," says Hubner. And like most mittelstand owners, he adds: "I live where my company is located. I want a good image in the town I live in."

They know how to goose an economy, those Germans. Ours, by contrast, seems more and more a turkey.

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11 Responses to "How Germany got it Right on the Economy: Harold Meyerson in the Washington Post"

1. David Landau Says:
2. November 24th, 2010 at 7:54 pm
   
3. It's a very good, thought-provoking piece. I must say, though, that it's oddly timed; Germany today is going through some hell as a result of the crisis in the eurozone, a crisis that Merkel's government helped bring on itself. As all the serious economic news from Europe takes stock of Germany's awkward position in the crisis, the writer should probably have acknowledged the euro's problems and Germany's place in them. As it stands, the article showcases a "micro" that's being undone by a two-thousand-pound gorilla named Mr. Macro. In any case, this "micro" perspective (which is micro only in relative terms) is good to have.
4. Larry Says:
5. November 24th, 2010 at 8:21 pm
   
6. Perhaps from watching that movie, The Secret of Oz,* I think it may have been–whatever, something recent and seemingly authoritative anyway–I have the impression that the U.S. banking structure has, for one reason or another, grown far past any easy return to the much more localized regional banking system that Germany has–intertwined with local manufacturing and local politics–and that that's an important part of our problem. So I guess probably we get to eat our hearts out as far as that's concerned, very sorry to have to say. Larry
   * See http://www.nonesoblind.org/blog/?p=8365#comment-447110 (November 12th, 2010 at 7:50 pm)
7. Andrew Bard Schmookler Says:
8. November 24th, 2010 at 10:31 pm
   the crisis in the eurozone, a crisis that Merkel's government helped bring on itself.
   
   
   I thought I knew the basic lineaments of the Eurozone crisis, but I don't know about Merkel's government helping to bring it on. I know they dragged their feet about coming up with a solution to Greece's sovereign debt crisis. But what did Germany do to CREATE this crisis. They didn't have a housing bubble, that I'm aware of. I'm not aware of German banks getting into the credit default swap mess. So what was their role?
9. Richard H. Randall Says:
10. November 25th, 2010 at 4:25 pm
    
11. Just about a year ago, I posted here a note about 'kurtzarbeit' which a fellow from the Economic brance at the GErman embassy explained to me. It literealy means 'short work' and comes down to full time employees also sharing work for theose who would be unemployed. The gentleman explained that this idea was brought over during the Marshall plan from America.
12. As we have so thoroughly embraced savage capitalism as the only God, we would do well to reflect on this. As for Merkel, it was not long after she took office dthat she claimed Germany had tdo embrace dthe American way of business. I dthink older and wiser heads have kept that from happening. Funny how a person who grew up in East Germany, now wants to adopt a far-right ideology. Pretty sick.
13. Steve Says:
14. November 25th, 2010 at 7:37 pm
    
15. "Funny how a person who grew up in East Germany, now wants to adopt a far-right ideology. Pretty sick." Well before Merkel assumed office Germans were undoubtedly willing to embrace American Clintonian capitalism. As you might know Germany has rebounded fairly well following its 10 year economic crisis. Bottom line is if Merkel is described as "far-right" then so too must a major part of Bill Clinton's presidency be recognized as such.
16. David Landau Says:
17. November 26th, 2010 at 12:22 am
    
18. To Andy's point: In a fundamental way, perhaps, the Germans did not contribute to the euro crisis as the peripheral countries (or the U.S.) did. But by accepting the terms of the common currency in the name of a united Europe, and by being lax in enforcing the rules, again in the name of unity, they cooked their own goose. By the time Ireland's emergency was manifest, Merkel swang to the other extreme and proposed a settlement that threw the bond market into a panic, which had the effect of bringing on the very crisis that she had wanted to avoid. So Germany's and Merkel's mistakes were primarily political; but those mistakes helped bring on the problem just the same.
19. Andrew Bard Schmookler Says:
20. November 26th, 2010 at 8:00 am
    and by being lax in enforcing the rules
    
    
    What rules were the Germans lax in enforcing. The only thing that came to my mind is that the Greek policies about debt were, if I understand, beyond what was permitted, but that this was hidden by dishonest accounting practices. (I'm not sure I'm accurate there.) But I really don't know what you might be alluding to about lax enforcement.
21. Richard H. Randall Says:
22. November 26th, 2010 at 10:41 am
    
23. To Steve: Clinton aided and abetted by signing the repeal of the Glass-Stegal reforms from 1935 which kept the mistakes of 1929 from occurring until 2008, whn "the laws all being flat" and the speculation and greed and shenanigans could occur again.
24. I agree that he was wrong and did us all a disservice, as did Senator Phil Gramm and his buddies from the banking industry who wrote the repeal of Glass-Stegal.
25. Neverthless, Merkel was willing to throw away the better society for the great majority of German citizens to enrich the few: in effect the same thing Clinton and the politicians, left and right did here. Sick-and anti-democratic.
26. ToddR Says:
27. November 26th, 2010 at 11:15 am
    
28. And what rules could Germans unilaterally enforce in the first place? Sure, Germany is probably the weightiest individual EU member. But they're still EU rules, right? So how can "Germany" enforce EU rules? Or did I misunderstand ­ is the claim that Germany was lax in enforcing, within German jurisdiction so to speak, EU rules?
29. David Landau Says:
30. November 26th, 2010 at 3:52 pm
    
31. For Andy & ToddR: The main eurozone powers, as a matter of policy, have mandated that automatic enforcement of protocols regarding debt-to-GDP ratios (I think it's GDP) would not take place. The recent talks between Merkel and Sarkozy touched on this point. Merkel is now insisting on rigorous enforcement, while others (including Sarkozy, it appears) want to keep enforcement as a political choice rather than a bureaucratic matter. To ToddR, you've got a good point. Germany doesn't unilaterally enforce the rules. That was a rhetorical excess on my part.
32. Steve Says:
33. November 26th, 2010 at 4:12 pm
    
34. Hi Richard Randall, I agree. Well said here, "Merkel was willing to throw away the better society for the great majority of German citizens to enrich the few: in effect the same thing Clinton and the politicians, left and right did here. Sick-and anti-democratic." Bill Clinton and Merkel chose to embrce anti-Keynesianism and deregulation yet remain identified in the public as Liberals. Quite sickening, indeed.
35. kim Says: Your comment is awaiting moderation.
36. November 27th, 2010 at 1:26 pm
    
37. In all fairness, Clinton had Republican majorities in both houses most of the time he was Pres. But, yes, he embraced right wing economics. He's a Baptist: what did you expect? Americans are so impressed with wealth that they keep thinking that wealthy people must understand economics so they listen to them. It's a fallacy that both Clinton and Obama are subject to.