Sunday, June 12, 2011

Germany's economy

The blog Winning Progressive, which I've recommended several times, points to the following very interesting article from last week's NY Times: The German Example. It makes several comparisons (some favorable and some not so favorable) between the German economy and ours. It's not one-sided and is a worthwhile starting point for debate. Macro-economics is so complicated that in many cases it's more important and instructive to study actual large-scale examples than theoretical visions.

6 comments:

  1. So Germany enacted a smaller Stimulus but has come out of its recession in much better shape. With such a small Stimulus relative to the US, you'd think that they'd be worse off than us.

    ReplyDelete
  2. There was a lot more in the article. "Much better shape" refers to the lot of the German people, not just deficits or surpluses etc. It is just as important HOW the budget is balanced as the the actual balancing of the budget (or near balancing).

    ReplyDelete
  3. Thanks, Blogmeister, for mentioning Winning Progressive again.

    In response to Anonymous, if you look at total government expenditures in Germany versus the U.S. from Jan. 1, 2008 to Jan. 1, 2010, you'll see that expenditures in Germany went up by a larger percentage than they did in the U.S. The reason for this is that in the U.S., much of the federal stimulus was offset by layoffs and cutbacks at the state and local level. So, in reality, the stimulus in Germany was bigger than in the U.S., which is part of why they weathered the economic storm better than we have.

    ReplyDelete
  4. Yes, much better shape refers to a lot of things, not just deficits and surpluses. But also GDP growth and the decline in the unemployment rate. And with a smaller stimulus than the US! Yet so many people were attacking Germany for not passing a stimulus that would be "large enough".

    ReplyDelete
  5. I'm looking at data from the Brookings Institute and IMF which show that Germany's Stimulus was 3.4% of 2008's GDP. Meanwhile the US' stimulus was 5.9% of its 2008 GDP. To me that would lead to the conclusion that the US had the larger stimulus.

    http://www.brookings.edu/articles/2009/03_g20_stimulus_prasad.aspx

    And furthermore, excluded from these amounts are all of the other stimulus done in the US such as TALF and other expansion's of the Fed's balance sheet via QE1 and QE2.

    You can't look at overall government spending and the relative increases. Those figures would include, for example, regular and anticipated increases in US Medicare. But those increases aren't part of the "Stimulus" program.

    ReplyDelete
  6. Actually there are many things in Germany which are not counted in the Brookings and IMF account.
    Like uninterrupted and sure unemployment pay (which automatically includes free access to health care) and the very intense Government and mandatory effort to find jobs through the Arbeitsämter (which have no equivalent in the US, but do have in Denmark and other countries), the subsidies in 25-hour week Kurzarbeit (which means that workers are not only never not trained, they get 15 hours more training). And so on.

    I think Brookings and IMF try to see Germany through American eyes, while the German system is very refined and is based on a true cooperation of the Unions and employers. They call each other the Tarif Partner, and together constitute the Business Roundtable. I have never read or heard anything like the hateful tirades of the US Chamber of Commerce from the German counterparts (Bund Deutscher Arbeitgeber). Philosophically German Employers might think similar to US Employers (less regulation, lower taxes), but they are never disrespectful and treat the workers like incompetent enemies.

    In addition, in larger German companies (it used to be above 1000 employees) a full half of the directors are elected by the employees (introduced first by Konrad Adenauer, the very conservative Chancellor of Germany after WW II in the Iron and Coal Industries). So Unions have influence, and responsibilities.

    ReplyDelete