A Tale of Two Economies: Germany vs. America [View article]
Charlie,
You make very good points, but they don't change the fundamental advantage that German policies have wrought. Thus, the difference between your thesis and the author's is one of extent, not fundamental direction. Having worked with many German companies over the decades, I'd like to add an opinion to each of your mitigating points below:
"...... 1. They would not have the success they have, without deficit countries like us. They benefit from consumption in other countries....."
Of course this is true, but they are merely taking advantage of the fact that some countries have a culture of consuming more than they produce. I would no fault them for this, but rather fault our own policies.
"...... 2. They currently have a currency advantage via the Euro. They don't need to manipulate it, but a currency that averages them with the likes of Greece is always going to be weaker than it would be if they were alone. That's a big export bonus, both within and outside the Eurozone.......".
This appears true until you look at the long-term, which shows a weak USD/Euro, even at current levels. By design, the Euro initially had parity with the USD, and in the late 90's, USD/Euro was 1.1-1.2. Over the longer term, if you compare USD with SFr, or with the pre-Euro European currencies after considering their conversion ratio to the Euro, you will see a long-term pattern of a depreciating USD agains major European currencies since the 1970's. Thus, our exporters have had a currency advantage relative to Germany for decades, and still have this advantage today with Euro/USD > 1, which makes German manufacturers' labor hourly costs higher than their US counterparts.
"..... 3. A lot of the differences in business culture are driven by the strength of medium sized businesses that are often family owned. One key aspect of this is that they tend to look longer term than the typical US business. They don't freak out about quarterly earnings. Long term planning leads to success......".
Very true, but the strength of their smaller, family-owned industrial enterprises is partially due to the fact that their policymakers treat them on a level field vis-a-vis large German corporations. By contrast, US policymakers are influenced by lobbying from large US corporations, skewing the rules in their favor, while regulating and taxing our smaller productive enterprises into oblivion to compensate.
"...... 4. The consumer culture is very different, but may change with the generations. It's not that long since it was illegal for stores to be open on Saturday afternoon. Talk about discouraging consumption. I'm not that in touch with the younger generation(!) but it seems to me that there are some changes coming through.... "
The savings culture in Germany is alive and well with the younger generation, and although less frugal than those who grew up in the 50's and 60's, I doubt we will ever see US-style wasteful over-consumption in Germany.
"...... 5. We hear a lot in the US about how terrible it is to have government intervention, or regulation in the economy. There's some merit to that argument, but the people who insist on its absolute truth need to explain Germany. They have a lot of government intervention, in everything from social spending to worker's rights, but they don't seem to be any the worse for it....."
Very true, but the other strengths I mentioned above all make up for it.
In summary, we need to take a long hard look at German policies, and consider borrowing a few pages from them.
A Tale of Two Economies: Germany vs. America [View article]
You make very good points, but they don't change the fundamental advantage that German policies have wrought. Thus, the difference between your thesis and the author's is one of extent, not fundamental direction. Having worked with many German companies over the decades, I'd like to add an opinion to each of your mitigating points below:
"...... 1. They would not have the success they have, without deficit countries like us. They benefit from consumption in other countries....."
Of course this is true, but they are merely taking advantage of the fact that some countries have a culture of consuming more than they produce. I would no fault them for this, but rather fault our own policies.
"...... 2. They currently have a currency advantage via the Euro. They don't need to manipulate it, but a currency that averages them with the likes of Greece is always going to be weaker than it would be if they were alone. That's a big export bonus, both within and outside the Eurozone.......".
This appears true until you look at the long-term, which shows a weak USD/Euro, even at current levels. By design, the Euro initially had parity with the USD, and in the late 90's, USD/Euro was 1.1-1.2. Over the longer term, if you compare USD with SFr, or with the pre-Euro European currencies after considering their conversion ratio to the Euro, you will see a long-term pattern of a depreciating USD agains major European currencies since the 1970's. Thus, our exporters have had a currency advantage relative to Germany for decades, and still have this advantage today with Euro/USD > 1, which makes German manufacturers' labor hourly costs higher than their US counterparts.
"..... 3. A lot of the differences in business culture are driven by the strength of medium sized businesses that are often family owned. One key aspect of this is that they tend to look longer term than the typical US business. They don't freak out about quarterly earnings. Long term planning leads to success......".
Very true, but the strength of their smaller, family-owned industrial enterprises is partially due to the fact that their policymakers treat them on a level field vis-a-vis large German corporations. By contrast, US policymakers are influenced by lobbying from large US corporations, skewing the rules in their favor, while regulating and taxing our smaller productive enterprises into oblivion to compensate.
"...... 4. The consumer culture is very different, but may change with the generations. It's not that long since it was illegal for stores to be open on Saturday afternoon. Talk about discouraging consumption. I'm not that in touch with the younger generation(!) but it seems to me that there are some changes coming through.... "
The savings culture in Germany is alive and well with the younger generation, and although less frugal than those who grew up in the 50's and 60's, I doubt we will ever see US-style wasteful over-consumption in Germany.
"...... 5. We hear a lot in the US about how terrible it is to have government intervention, or regulation in the economy. There's some merit to that argument, but the people who insist on its absolute truth need to explain Germany. They have a lot of government intervention, in everything from social spending to worker's rights, but they don't seem to be any the worse for it....."
Very true, but the other strengths I mentioned above all make up for it.
In summary, we need to take a long hard look at German policies, and consider borrowing a few pages from them.