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How Germany is able to run the world’s second largest export economy
- billfruit 7y agoVery informative. Does this imply that Brexit is the rational choice for the UK?
- SideburnsOfDoom 7y agoMostly likely, the quest for a rational justification for brexit will continue.
- vixen99 7y agoQuest over! If you're actually interested in understanding the reasons for Brexit and you should before making such comments, try this https://briefingsforbrexit.com https://briefingsforbrexit.com. Not recommended for those with a short attention span. "Briefings for Brexit is a small group of volunteers, mainly academics, who set up the website in 2017 in order to provide reasoned factual material to help to inform the national debate on Brexit. Most of its members did not previously know each other. The two co-editors are Graham Gudgin and Robert Tombs, both of Cambridge University. Its contributors come from a range of academic disciplines and universities, and cover the whole political spectrum: their names can be found on our website. The group has no links with any political party. Neither of the editors receives any payment, not do any of the contributors. The newsletter editor, a student, receives a small payment. Briefings for Brexit is entirely funded by well-wishers."
- SideburnsOfDoom 7y ago> The two co-editors are Graham Gudgin and Robert Tombs, both of Cambridge University But you don't mention: > Graham Gudgin is chief economic adviser at Policy Exchange https://www.theguardian.com/profile/graham-gudgin https://www.theguardian.com/profile/graham-gudgin Policy Exchange is part of : https://en.wikipedia.org/wiki/Tufton_Street https://en.wikipedia.org/wiki/Tufton_Street https://www.independent.co.uk/news/uk/politics/eu-referendum-eurosceptics-climate-change-sceptics-55-tufton-street-westminster-a6866021.html https://www.independent.co.uk/news/uk/politics/eu-referendum... > entirely funded by well-wishers Cool, how would I go about donating £10 to them? Would you say that this kind of small donation makes up the majority of their funding? Who are the large backers? So this is totally above board, unaligned and not paid for! /s
- pjc50 7y ago> entirely funded by well-wishers. I wouldn't describe Aaron Banks and whatever group of people are named in the "Russia Report" as well-wishers. https://www.theweek.co.uk/105289/what-is-in-the-russia-report-being-suppressed-by-no-10 https://www.theweek.co.uk/105289/what-is-in-the-russia-repor...
- usrusr 7y agoBrits never experienced the tangible benefits of EU membership because they actively excluded themselves from both Schengen and the Euro. It's not really surprising that many reject something that is only an abstract macroeconomic set of rules to them. Contrast this with public opinion in Germany back before the common currency: most German EU supporters were openly afraid that the Euro could seriously endanger their economy, but they considered it well worth the risk just for complementing the convenience of open borders with an end to the hassle of dealing with foreign currencies. To anyone with a bit of critical thinking ability, macroeconomic decisions are close to a coin toss: both sides have good arguments and nobody has convincing data to back up their claim (if there was there wouldn't be a decision to be made).
- blablabla123 7y agoMaybe there's a simpler explanation, in Germany businesses are run quite conservatively in comparison. Nice for stability but probably bad for innovation. By the way, Germany is one of the top 5 exporting countries since decades, so this has little to do with the Euro: https://wits.worldbank.org/CountryProfile/en/Country/WLD/Year/1990/TradeFlow/EXPIMP https://wits.worldbank.org/CountryProfile/en/Country/WLD/Yea... https://wits.worldbank.org/CountryProfile/en/Country/WLD/Year/2000/TradeFlow/EXPIMP/Partner/by-country https://wits.worldbank.org/CountryProfile/en/Country/WLD/Yea...
- slowmovintarget 7y agoIn part, it has to do with the fact that many items made in Germany are of high quality. Most goods that are sold in U.S. for instance, are made in China. Often times these goods simply fall apart (dishwashers, washing machines), are defective, or have toxic odors (like full-color books). Not so for things made in the U.S. or Europe, and it just so happens that there are a great many things that Germany makes now, where they are the only high-quality source.
- casefields 7y agoThe reminds me of when people would ask how it was possible that Madoff was such a successful investor; he's just better than everyone else.
- stefano 7y agoCan't be so bad for innovation if they're ranking first in this classification: https://www.bloomberg.com/news/articles/2020-01-18/germany-breaks-korea-s-six-year-streak-as-most-innovative-nation https://www.bloomberg.com/news/articles/2020-01-18/germany-b...
- jhoechtl 7y agoAs an Austrian sharing some history with Germany and always looking suspiciously what is going on there, I have been multiple times astonished by my fellow neighbors: Productivity: They work hard, a lot and deliver. Education: above average and leaning towards being curious Conservativism: depends on county but is a thing Innovation: despite conservtivism inmovation is high Collaboration and criticism: Even though you might be in strong disagree with someone arguments count and once you quickly talked out the differences, intense collaboration towards goal achievemt is obvious. I worked for 10+ years in continuing education and had students of all age and all infustrial sectors and these have been common shared characterstics. Favorable characterstics towards success I would say. (Edited formating)
- folli 7y agoRational if they export below the average of other EU nations, not rational if they export above the average of other EU nations.
- heisenbit 7y agoMaybe, if it is rational to loose ones status as Europe‘s financial hub which was one of the key drivers in the past for the high pound exchange value.
- pretendscholar 7y agoThere are winners and losers to having a strong currency. It isn't inherently a bad thing to make the currency less valuable.
- grogenaut 7y agoWhat are the winners going to be? What industries does Britain Excel at besides finance? I am asking sincerely.
- jariel 7y agoMedical research and equipment, drugs, industrial equipment, engines particularly aeroplane, defence, branded goods etc. Departure won't ruin London as a financial capital, but it will shift the types of financing. Brexit is far, far more than just an economic issue.
- tonyedgecombe 7y agoNobody else can excel because finance dominates and makes other industries less competitive. It's like Dutch disease with money instead of oil.
- notahacker 7y agoThe winners are normally exporters, who have other reasons to be concerned...
- mandevil 7y agoBritain already used its own currency, so they didn't have the same sort of 'Greece and Spain suffering to subsidize German exports' effect going on. So I don't think this particular issue will be different from before Brexit. ETA: It will matter if the City continues to dominate European financial transactions, because it is the tremendous amount of money that goes to the City which keeps the Pound priced above the levels that are good for manufacturing exports. If the multinationals all move to Hamburg or wherever, the Pound (probably) loses in value and British manufactured goods become more competitive on the global market. In theory. Possibly. Who knows?
- patrickmcnamara 7y agoTheir goods would also be subject to EU tariffs depending on how trade talks go and the EU accounts for ~50% of UK trade iirc. So it's still very up in the air.
- mandevil 7y agoYes. I am not an economist, and even if I were, there are so many moving parts to Brexit I could not begin to calculate which ones are the most important. But I do believe that financial exports (which is what the US and UK have specialized in since the Reagan/Thatcher era) create Dutch Disease just like natural resource extraction does, making the currency too valuable for high employment sectors and concentrating profits in low-employment sectors.
- Zenst 7y agoYes the whole QE of the EURO by the ECB has been most dramatic and artificially kept the EURO competitive for the export market over the import market. That's one ticking time-bomb that they keep resetting with new QE initiatives, that will have to end soon and suspect BREXIT will offer a wonderful scapegoat opportunity that may well be availed. [EDIT ADD} Nice article highlighting the QE situation: https://www.ft.com/content/e4964f08-f196-11e9-ad1e-4367d8281195 https://www.ft.com/content/e4964f08-f196-11e9-ad1e-4367d8281... Also worth noting that negative interest rates seem to be the new tool that will replace/augment QE. Which may just work, though once again, perpetuating a mindset that borrowing over saving mentality in a way that whole generations will become saving avert. More so if/when negative interest rates take traction.
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- ginko 7y agoI wonder how that plot would look like if they separated individual US states and also considered trade between them. I'd guess the big three (California, Texas, New York) would dominate quite a bit there as well.
- drocer88 7y agoNew York, big three? Florida passed New York in population in 2014: https://www.orlandosentinel.com/news/breaking-news/os-florida-census-new-york-population-20141224-story.html https://www.orlandosentinel.com/news/breaking-news/os-florid... . Census figures released Tuesday show Florida passed New York as the nation's third largest state with an estimated population of 19.9 million. New York, now fourth, has 19.7 million.
- magduf 7y agoFlorida may have a larger population, but they're not nearly as productive, probably because FL is a popular place for retirees to move to. Retired people don't contribute much to GDP.
- ginko 7y agoBy economy: https://en.wikipedia.org/wiki/List_of_U.S._states_and_territories_by_GDP#/media/File:United_States_GDP_by_States.png https://en.wikipedia.org/wiki/List_of_U.S._states_and_territ...
- drocer88 7y agoFair enough.
- yorwba 7y agoYou can play the same game for Germany: https://en.wikipedia.org/wiki/List_of_German_states_by_GRP https://en.wikipedia.org/wiki/List_of_German_states_by_GRP And if you looked at each of the regions at the top, you'll likely also discover large differences between close-by areas. The geographical distribution of economic activity seems to follow a kind of fractal structure.
- moggi 7y agoInteresting choice to use 1993 as the start for the comparison of Germany's trade surplus: https://tradingeconomics.com/germany/balance-of-trade https://tradingeconomics.com/germany/balance-of-trade
- WA 7y agoI think it's right in the text why 1993 was chosen: > "Indeed, when the Single Market was adopted (1993), ..."
- heisenbit 7y agoThere were two major events that make the starting point a lot lower: Recession shortly before and German reunification with its significant economic distortions.
- Ididntdothis 7y agoThat’s why it’s easy to deceive by starting charts a certain date. When you look at the 1980s there was also a big increase. The y axis is linear so the newer increases look much more dramatic. When you look at the chart from 1950 you see a long term upwards trend with some setbacks.
- chimeracoder 7y ago> Interesting choice to use 1993 as the start for the comparison of Germany's trade surplus: https://tradingeconomics.com/germany/balance-of-trade https://tradingeconomics.com/germany/balance-of-trade Because before 1993, you're not comparing apples to apples: "Germany" was two separate countries, and reunification affected the economics on both sides of the border. It's true that the recession makes this a particularly favorable starting point for Germany, but it'd be misleading to compare Germany's economy today to the economy of West Germany of the 1980s (as many comparisons do) and ignore that half of modern-day Germany was the DDR at that point.
- jgreen10 7y agoThe numbers in the article are shaky. For instance, the Netherlands had a trade surplus of $76 billion in 2017, but shows up as having a trade deficit. France does not appear in the list of Germany's export partners, but it's actually number 2.
- maelito 7y agoRelated : cars selled by european companies will have to average 95gCO2e/km. But this limit is raised for heavy cars, which Germany sell a lot more than others. France's environment minister is angry. The legislation has been tailored for the EU's biggest industry.
- esotericn 7y ago> this limit is raised for heavy cars Yeah, what's that all about? Surely the entire point is to incentivise people to _not_ buy heavy cars, since the lowest emission models (aside from electric cars) are smaller?
- baud147258 7y agoExcept that the EU is an union of unequal countries, so if Germany (which is one of the most powerful, if not the most powerful country in EU) want to keep an industrial edge via a special case in law, they're going to get it.
- maelito 7y agoIt's also that Germany has a reputation for being the eco-friendly country, while in fact not really caring about its climate impact from some very important domains : high-carbon electricity, heavy polluting industry.
- pgeorgi 7y ago> high-carbon electricity https://www.destatis.de/DE/Themen/Branchen-Unternehmen/Energie/Erzeugung/Tabellen/bruttostromerzeugung.html https://www.destatis.de/DE/Themen/Branchen-Unternehmen/Energ... Renewables up 6% in two years, more than compensating for the shut down nuclear power sources. Fossils are shifting to natural gas which (so I've heard) is supposed to be the least bad of them (and fossils' grand total is also going down). It's not all roses, given our inept politicians, but it's far from horrible.
- Schlaefer 7y agoIt was a fancy read until > an efficient & strong military Now I doubt everything.
- Reimersholme 7y agoHaha, but look at the source and remember that the goal for Germany is to reach the Nato 2% funding by 2030 (at least according to FTs recent interview with Angela Merkel).
- Kaiyou 7y agoIsn't it always like this. Things written tend to make sense until they contradict your prior knowledge.
- casefields 7y ago"Briefly stated, the Gell-Mann Amnesia effect is as follows. You open the newspaper to an article on some subject you know well. In Murray's case, physics. In mine, show business. You read the article and see the journalist has absolutely no understanding of either the facts or the issues. Often, the article is so wrong it actually presents the story backward—reversing cause and effect. I call these the "wet streets cause rain" stories. Paper's full of them. In any case, you read with exasperation or amusement the multiple errors in a story, and then turn the page to national or international affairs, and read as if the rest of the newspaper was somehow more accurate about Palestine than the baloney you just read. You turn the page, and forget what you know.” Why Speculate - Michael Crichton: http://docdro.id/4wgVecr http://docdro.id/4wgVecr
- usrusr 7y agoThe author certainly lost me when he called out Italy as a winner and the Netherlands as a loser in this game. That only ever happens in football.
- perfobotto 7y agoItaly in exports is indeed successful
- JanSt 7y ago„ France and the UK were opposed to German reunification, and attempted to influence the Soviet Union to stop it.[8] However, in late 1989 France extracted German commitment to the Monetary Union in return for support for German reunification.[9]“ https://en.m.wikipedia.org/wiki/History_of_the_euro https://en.m.wikipedia.org/wiki/History_of_the_euro
- ChuckNorris89 7y agoYeah, France wanted to use the Euro currency to reign in the German economy. Funny how that ended up backfiring decades later with Germany running the show.
- wolfgke 7y agoAs they say in Germany: "Bedenke wohl, worum du bittest. Es könnte dir gewährt werden." ("Consider well what you ask for. It could be granted to you.").
- jkhwkejhrwer 7y agoI could give a recent example that applies to Germany. But it would be flagged since that kind of thinking is forbidden here.
- gniv 7y agoThe phrasing I heard in the US is "be careful what you wish for, it might just come true".
- noobdood 7y agorein Horse, not rule, although meanings overlap a bit .
- johnzim 7y agoWe can look today at Germany as a mature, stable partner in the world but at the time, the argument that there might just be 'something in the soil' of the primary belligerent of the last 2 world wars was not entirely insane. Gratifyingly the world saw that the nation's contrition was sincere and we enjoy the fruits of its labour today.
- Reimersholme 7y agoThis is the type of thought provoking articles that I come to Hackernews for. <3
- genS3 7y agoI will tell you why they can maintain an export economy. that's because their economic tool is called the "european union" all the key economic laws drafted by the EC are designed to advantage germany. That is why england brexited. they are lucid.
- zwieback 7y agoNot a word about the fact that Germany simply produces desirable products? Somehow that has to factor in. Financial policy and the education system favors a conservative manufacturing sector that incrementally improves upon what Germany has done for decades. While I got my ME degree in Germany my dad, who is a solid state physicist, spent all his energy trying to accelerate the development of a German electronics sector. He was always ranting about the hurdles thrown up by politics in Germany, "We'll just continue building cars and machines for the next 100 years." Well, sounds like it's still working although the end of the cold war and the common market has distorted things in Germany's favor, an effect that probably won't last.
- varjag 7y agoPerhaps a bigger distortion was everyone else deciding to become "value-add" over outsourced production. Only so much room for beancounters.
- reaperducer 7y agoEspecially in certain product lines. A relative uses a particular medial device with parts that wear out. She purchases the regular replacement bits off Amazon which are made in China and only last 30 to 60 days. When she can afford it, she buys from the OEM's online store which has parts that are made in Germany or The Netherlands. They fit better, work better, and last up to six months. The difference is the Chinese parts cost $10, while the European-made parts cost $25.
- helij 7y agoI don't get this. Is there really so little room in her budget for her to do this? It doesn't make sense to me.
- reaperducer 7y agoIt sounds like you've never been poor.
- somurzakov 7y agoso the point is that Germany takes over euro-denominated industrial export to itself and leaves other EU countries figure out themselves whatever they wanna do to survive.
- jpfr 7y agoThe analysis is incomplete. It does not take services into account. Yes, Germany has a positive trade balance in goods. But the trade balance in services is negative. This ... well ... balances the balances. The UK has shifted its economy from production to services. Hence the negative trade balance for physical products excluding services.
- ChuckNorris89 7y agoThis! Germany's manufacturing supremacy can't last forever with lower cost countries catching up fast. UK realized earlier it can't be competitive in manufacturing anymore. Knowledge work is the future in the West, not volume manufacturing.
- thenaturalist 7y agoThe number of "Hidden Champions" (SMEs most often in manufacturing of high tech machinery & components which are world leaders by market share in their respective niche) in Germany speaks to the contrary. Same situation in Japan.
- ChuckNorris89 7y agoIndeed, I myself worked for one such niche high tech machinery German company. The problem is, due to the thin margins in these hardware gigs, the salaries are piss poor compared to the skills needed (M.Sc. and up) as even making iOS Apps paid better. Only the execs and the couple of grey beards who were with the company since its inception were well paid, everyone else not so much. That's the reason youngsters aren't gravitating towards these gigs anymore and prefer to be web devs instead. The margins are higher and the entry bar lower. I'm not saying they'll go bust tomorrow, not at all, I'm just saying they don't have an easy future ahead, due to low margins and unattractive career paths for youngsters, especially once their patents expire and China will be able to make the same stuff at half price. That's why the UK's decision to focus on services/consulting is a better long term bet IMHO.
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- durnygbur 7y agoThe most un-understandable thing is that none of this export wealth reaches an individual, especially a guest worker, a foreigner. It's quite shocking to discover by a foreigner specialist lured to the country by the multitude of positive economic news. Cost-cutting and exorbitant charges and contributions everywhere. The entire export wealth is captured by the oligarch families and the highest level executive caste.
- geff82 7y agoSomeone with a regular job can not afford a house close to a major city any more and for sure can not afford any desirable German car. People dress cheaply, buy used cars and many live in frugal appartments, buy in stores that many American or Canadians would consider third world (never ever go buy stuff in an Aldi when you are used to Canadian standards...).
- ubercore 7y agoI've only visited briefly, but Aldi in Germany was higher quality than any Aldi I've been to in the US.
- jhoechtl 7y agoTo increase confusion in Germany you have to largely differ between Alid North (cold, sterile atmosphere) and Aldi South (a tad more of buying experience).
- dr_dshiv 7y agoThe Aldi in Amsterdam is a damn depressing store. Low ceilings, flickering lights, no organization or ambiance, and angry looking workers. Miles from the Trader Joe's in California
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- mrsuprawsm 7y ago
- v77 7y agoPaul Krugman often rails against German industrial policy vis-a-vis the EU and hits a lot of the same notes in this article. On the other hand, most of the EU countries seem to accept this status quo and many of their citizens end up immigrating to Germany directly or benefiting from the massive EU subsidy regime funded by Germany so there are various forms of wealth re-distribution within the union.
- durnygbur 7y ago> funded by Germany so there are various forms of wealth re-distribution within the union. This "re-distribution" feeds an enormous compliance sector in the receiving countries. An useless sector chocking domestic innovation and allowing the politicians to trumpet successes in "receiving the EU grants".
- iSnow 7y agoKrugman's rants are mostly for a US audience and he needs a villain to sell his narrative. Additionally, he hates that Germany doesn't follow his model and still is prospering. And he is a pompous ass who puts ideology before facts, as seen in his rift with Estonia.
- Despegar 7y agoI've said it before in another comment [1]: >There's nothing I enjoy more than the plight of the German Saver, who's obsession with "fiscal responsibility" has led to shitty austerity politics all across the EU (to be fair some other northern European countries like Netherlands also share the same view) and depressed growth for the poorer southern European countries. Germany has benefited most of all from the unfinished project of the EU. Without becoming a federal union like the US, but having a common currency, Germany's exports have been artificially cheaper and thus more competitive for over 20 years. >This is the natural outcome from the obsession with running fiscal surpluses. Now Germany is on the brink of recession and they're finally starting to make some noises about fiscal spending, but the politics will likely limit it to modest deficits than anything transformational. Enjoy the negative rates. The common currency (Eurozone) is deeply flawed and it only allows a rich country like Germany to win at the expense of poorer countries like Greece or Portugal. I find it insane that EU politics have never really dealt with this. I find it absolutely insane that after the 2011 sovereign debt crisis, Germany somehow managed to escape with keeping the Eurozone intact and having the poor countries impose austerity instead. There absolutely needs to be a political revolution in the Eurozone countries. Either complete the EU project by becoming a United States of Europe, and receive all the equalizing payments of healthcare, social security, and common military spending at the federal level, or get rid of the common currency. It's just hurting the poorest people in the Eurozone to keep the current arrangement. You might be under the impression "well Germany might be parasitic vis a vis other Eurozone countries, but at least it's good for working Germans", but you'd be wrong. The US today has a tight labor market which will eventually drive wages up if it persists long enough. Germany on the other hand has similar employment statistics but they did it with the Hartz reforms [2]. The unemployment stats look great because you can get a shitty low wage job [3]. Germany has kept the wages of workers depressed in order to be an export powerhouse. It's parasitic on other Eurozone neighbors but also on German workers. The people who have benefited the most from this arrangement are the German capital class. The shareholders and managerial class of German industry, whether it's giants like Volkswagen or even the small Mittelstand companies. German workers should have gotten wealthier over time which would have made Germany similar to the US in being driven by domestic consumption. That in turn would have made other EU members better off because those wealthier Germans would have been able to consume more of their goods and services. It's truly baffling how even German workers have put up with this. They're losing to the benefit of German capital. [1] https://news.ycombinator.com/item?id=20793982 https://news.ycombinator.com/item?id=20793982 [2] https://theconversation.com/questioning-the-claim-of-germanys-employment-miracle-106895 https://theconversation.com/questioning-the-claim-of-germany... [3] https://en.wikipedia.org/wiki/Marginal_employment#Germany https://en.wikipedia.org/wiki/Marginal_employment#Germany
- novaRom 7y agoGermany has also very low net income inequality.
- jhoechtl 7y agoUsed to have. It's swiftly increasing and working poor has defenitely become a thing. Net income declined for ten years in a row.
- hogFeast 7y agoIt has the highest wealth inequality in Europe though (iirc, it is as high or higher than the US). In absolute terms, Germany's average net financial wealth per capita is slightly less than Greece...and in Germany, they have a substantial number of billionaires (usually very old money that got rich through govt aid/subsidised loans...or, unf, something much worse) which they don't in Greece. Btw, the IMF actually produced a special report on inequality in Germany. It is a very serious problem and probably more serious than in the US (a trade surplus is just an excess of savings over investment: Germany industrialised through subsidised loans to politically connected companies, this meant very low interest rates...they are basically China, btw China copied Japan's model and Japan copied Germany...insolvent banks, very high inefficient saving rates, very low wealth, very weak savings system, low wages, very concentrated/vulnerable economically, non-functioning capital markets...it goes on and on).
- ed_balls 7y agoGood article, but the model is too simple. UK used to produce more cars than Germany, but it's the opposite now. Why? They haven't shared the same currency. German cars were better. > And it means those same workers in Spain are less equipped to compete for Manufacturing jobs — because Elon Musk has to pay them in German Euros instead of cheap Spanish Peseta. If you’ve got to pay everyone in German Euros, you might as well get the most productive workers for your “buck”, right? If that was the reason then he should move his factory 50+ miles East. Why the factory is near the Berlin? Network effects. They have the logistic, supply chain and talent. Even electric car project, created by Polish government is designed and build in Germany.
- stefano 7y agoThat point also ignores the fact that spanish workers are indeed cheaper than german workers. You can't focus on the unit of measure (the currency) while ignoring the accompanying number...
- kgwgk 7y agoYou're right. Unsurprisingly, in some countries workers are paid more "German euros" than in others countries. https://ec.europa.eu/eurostat/documents/4187653/8516126/Compensation+of+employees+2017/ https://ec.europa.eu/eurostat/documents/4187653/8516126/Comp...
- pvaldes 7y agoIf by productive means lying about car emissions to cheat authorities, yeah, Wolkswagen and Audi and whatever are really efficient cars made by really productive german workers. Maybe we could move this conversation to adult zone and non-cartoonist levels beyond "spanish cheap drunk workers living in the beach" and "german saint teetotalers workers"? Thinking that a spanish engineer is less educated than a german engineer is hilarious (yeah, we take siestas under a cactus with a big hat all day in between last party and next party). University titles in all EU are equivalent for the same grades.
- allendoerfer 7y ago
- idclip 7y agoTheres a reason the Politics is becoming extreme, the largest economy is simply neglecting its citizens and simply saving a lot. Edit: not trying to troll. Many are thankful, but many are worried aswell. I/we dont consider it difficult to understand. Work hard, save, dont go to wars, its a simple equation, but its not all rosey, and things arent perfect. Many claim this prosperity to be illusory, and fear a harsh crises ahead.
- bilekas 7y agoImagine a government who could be financially prudent.. Sorry but this is not why 'Politics is becoming extreme'. The same way that not every citizen pays much attention to national debt until their on the hook for the bailout. Less drama is better. Strong and steady economy and forward planning. I would take that over : "Hey lets just spend money we don't have, we'll tax is later or inflation or screw it, worst case, another bailout." The proof is in the last financial crisis. Germany was able to buy up because they didn't spend like drunken sailors in a brothel during the, (identified by them and france) financial bubble. Funny that. I suspect the reason Politics is leaning more Fascist recently, is due to a bit of anger posts like yours that reflect nothing in reality. Funny that too.
- idclip 7y agoAre you here actually struggeling to find a kita place for your kid, or seeing how refugees just get dumped into ghettos ? Because if you arent ... well then. There’s honestly something very fundamentally wrong. And its very irresponsible and honestly nigh defamatory by trying to blame the larger mood on “posts such as mine”, hell im not even a conservatist, actually a moderate leftist that thinks those cries for attention ought to br heard and adressed. Posts like mine arent making the AFD the third strongest party, theyre riding the anger, rather. I will honestly not make statements about you, because im not here to inflame things, but do consider your finger pointing in this case, its unsavory, even if im off base and you know better, there’s a better way to put it.
- bilekas 7y ago
- szczepano 7y agoArticle should be named. Why this time we succeed and conquered our old enemies using capitalism, money and demand for precise machines that save time instead of wasting everything to fight with everyone around.
- gharding 7y agoIf anyone objects to the following, please try to formulate rational arguments to counter instead of simply trying to suppress what you disagree with. Suppression of reality does not make reality go away. "Not a word about the fact that Germany simply produces desirable products?" Although you are correct in your befuddlement; are you really all that surprised that such a simple question was not even introduced in an article that claims no one understands how Germany is successful? It's an utterly mind boggling state of affairs today that some people, and seemingly rather large cohorts of them, simply cannot seem to grasp rather basic realities about the world they live in. Sure, "making good products" is more the effect, rather than the cause/origin, but it is still the simplest answer to the apparently perplexing question of how Germany can through doing actual and good work can be as successful as it is. Silicon Valley folks here are scratching their heads asking themselves, "wait, so you can't actually contribute things by being a net worthless money burning machine"? Sadly though, it is not some waning effect from the end of the cold war and a common market that will end Germany's success that has spanned way more waxing and waning pressures before; it will be the very same thing that destroys and devastates all other civilized and western societies, which will snuff out and smother the German success engine. There is a mania going around that is pushing the genocidal ethnic replacement of the core set of people who embody particular values, traditions, philosophies, practices, knowledge, and skills that make any given country and society; in some odd belief that if you replace a thing with another thing, it will somehow still embody the former thing. It's such a basic fallacy, that it is incomprehensible to rational people how such a belief can be held. If one pollutes water with oil, the oil is also polluted with water, and neither are good for anything as both have had their valuable characteristics compromised. They are also through their pollution neither oil or water, they are a different thing altogether a useless substance. What it all comes down to is that just as France will soon no longer be French and the French character will be snuffed out when it is at saturation with non-French people and the Native French have been essentially eradicated and neutralized in their ability to drive the French character, so Germany too will no longer be German and have the German character that produced things like the successful economy that people seem unable to understand the progenitor for. Countries and societies have collective characters and personalities; and when you destroy those, you destroy the effects their character produce. It's not really all that difficult to understand, regardless of whether the mania that has swept the west in particular cannot seem to understand what total self-destruction it is engaged in, from which will also follow immense misery for everyone else in the world that depends on the engine of the world, the west, not sputtering out and seizing up from having been polluted and poisoned.
- scottlocklin 7y agoTLDR: economists are imbeciles. Never mentions hidden champions[1], never mentions the high level of training and morale and hence productivity for the German worker, never mentions German dedication to quality, never mentions the social capital of corporations which are hundreds of years old, never mentions the fact that MBA quarterly profit maximization uber alles bullshit never caught on in Germany, never mentions the Landesbanks.... I submit this article as evidence that economists don't understand any economy. [1]https://en.wikipedia.org/wiki/Hidden_champions https://en.wikipedia.org/wiki/Hidden_champions
- tompccs 7y agoIf you'd bothered to read you'd realise that the author isn't an economist, and that he does talk about Germany's manufacturing excellence. That doesn't explain why in 1992 Germany had a massive trade deficit and UK had an equally large trade surplus, or how they've been able to avoid the fate of Japan.
- scottlocklin 7y agoGee, what was different about 1992 in Germany? Could it be ... absorbing East Germany? He may not be an economist, but he excels at economic imbecility.
- gok 7y agoAt what point do we stop talking about commerce between Eurozone states as imports/exports?
- em500 7y ago> ... Nobody Understands A pretty grandiose claim. Reading the essay, the "understanding" seems little more than the fairly mainstream narrative that the Euro is too weak for Germany and too strong for the EU peripheral. Am I missing something?
- 40acres 7y agoInteresting that the labor culture in Germany relative to the rest of the EU is not mentioned at all. Germany is one of the strongest nations to be an industrial worker and has various laws that are pretty unique to the nation, such as co-determination, I believe this has acted as a defense vs. outsourcing (and when they do outsource, they go to high cost places such as the US) and has kept it's manufacturing base strong.
- raxxorrax 7y agoThere is strong pragmatic cooperation between manufacturers. You get free samples and if some parts don't meet specifications there is a shared effort from both supplier and consumer to fix the problem in the process instead of suing each other. Would be too expensive without real results anyway. Hours worked are pretty low compared to other European states even if you factor in a large part time component. I don't think increasing hours would increase productivity anymore. There is also a darker side of course with a lot of minimum wage jobs or people working long hours while still being dependent on the state. Even for employees of the same company the income can be quite unequal. Compare development or engineering with production or logistics for example.
- iSnow 7y agoYes and no. German companies are outsourcing like crazy, but they have the whole central/eastern european countries as outsourcing destinations. Low wages, high level of education, short distances, EU membership make them really attractive. A lot of very basic, work-intensive or energy-intensive work has left Germany over the last 30y, but the companies make a killing of value-added manufacturing. Also, not least due to unification, till a couple of years ago, German wages were very stagnant, so it wasn't that great a country for industrial workers, paywise.
- hogFeast 7y agoI stopped reading after the 10th historical inaccuracy. This is why economics/economic history is hard folks (not just the actual economics but creating something readable...this is basically unreadable). Germany, in particular, requires a fairly deep understanding of economics.
- lispm 7y agoWhat is often overlooked is this: Germany was export-oriented before the Euro, during the transition and with the Euro. Germany was export-oriented before reunification, during reunification and after reunification. The industry will adopt to those external factors: Germany was 'Exportweltmeister' with the super strong DM (which dominated European currencies) and it is a leading export nation with the Euro. There are a lot more factors that support the German model. For example Germany is not a centralized economy (like the UK or France, which are grouped around London and Paris). Thus lots of federal states and cities have strong economies: Munich, Hamburg, Düsseldorf, Frankfurt, Berlin, ... The extreme angle is the concept of 'unknown medium-sized world market leaders' - so-called hidden champions. Germany probably has almost 50% of all hidden champions world-wide: https://www.forbes.com/sites/rainerzitelmann/2019/07/15/the-leadership-secrets-of-the-hidden-champions/ https://www.forbes.com/sites/rainerzitelmann/2019/07/15/the-... You'll find many of these companies in rural regions. Many of these companies are export-oriented, based on a long tradition and they don't care what the current currency in Germany is.
- cosmodisk 7y agoWas half way through your post when I was about to write my comment about hidden champions,glad you mentioned it. This is something that tends to be overlooked quite often. Very very few countries have a model like this.Take the UK, as an example.An average town or even small city rarely has anything that isn't just for local market. For a lot of companies it's kind of fine,as the market is big enough to earn comfy living for the owners, but that's it. The default in most countries is something like: " ok,I'll sell this in local area and maybe,just maybe,if I become super big,then we'll start exporting". It's shame really. I see this mentality in my own country, Lithuania,where an average purchasing power is relatively low and the market is super small(1/5 of London population) ,yet the default option is to start locally. Luckily the IT sector is different,where most businesses default to foreign markets.
- jotm 7y agoIt's absolutely baffling. I've been looking into it for cheeses and ales, so many UK producers flat out say "We only ship within the UK" even though the cost of shipping is covered by the buyer and it would cost nothing, not even extra paperwork, to ship to the EU (for now).
- jl2718 7y agoWhat does this game look like with a fixed money supply and no trade or movement restrictions? My naive Econ 101 guess is that wealthier nations would export more, not less, and higher value goods. Why does inflation work to produce a trade surplus? It seems that the only reason is decreasing internally-sourced costs like labor, but this just props up obsolete value chains instead of promoting capital innovation. Does this work long-term? Also, in a game with one inflator, how does that turn everybody else into a leisure services economy without a whole bunch of inflationary distributive spending on their part as well? It would seem that the fixed-supply result would look like deflation plus capital excess, which is perfect for investment in new industries. It seems to me that maybe Germany is in roughly this situation whereas the US/Japan/etc can manage money supply according to political will, so a larger portion of productivity is diverted to leisure services and structural inefficiency. Also, is Chinese currency manipulation an economic success story? What would we see with a free market fixed currency in China?
- harikb 7y agoI blame the lax bankruptcy laws in United States (in comparison to Germany). I think it creates a safety net that is too comfortable that the business can (a) give up too early or (b) use this as a pump & dump scheme where the owners walk away with money they had siphoned off early. Compared to German insolvency procedures [1] > The aim of insolvency proceedings is not to protect the cor-porate debtor from its creditors, but to maximize the insol-vency dividend payable to the creditors. To achieve this aim, proceedings may be directed either at a liquidation of the company’s business or at a reorganization of the company it-self by means of a plan of restructuring (Insolvenzplan). In the event of a liquidation, the company’s business operations may be sold as a going concern to an investor or the business may be wound up and the individual assets sold. 1. https://www.jonesday.com/files/Publication/1ec093d4-66fb-42a6-8115-be0694c59443/Presentation/PublicationAttachment/e5b46572-7aeb-4c34-ab2e-bee2f8f3d3c2/Comparison%20of%20Chapter%2011%20(A4).pdf https://www.jonesday.com/files/Publication/1ec093d4-66fb-42a...
- w_t_payne 7y agoCompeting with China, Germany and the US is possible -- but you have to be deliberate, disciplined and very very very organised.
- tyzerdak 7y agoI don't get why it's good for Germany. If they had their own currency with such exports they could print money to make it weak and so they will have more money. Btw I'm germany hater. Fking nazis team up with russia to fuck europe again.
- dang 7y agoYou can't post like this here. We've banned this account. If you don't want to be banned, you're welcome to email hn@ycombinator.com and give us reason to believe that you'll follow the rules in the future.
- graphicsRat 7y agoAccording to American Society of Mechanical Engineers one reason Germany has kept is industrial base are the Fraunhofer Institutes you will find all over the country right next to universities doing essentially free R&D in almost every area of technology for companies that might otherwise not be able to afford them. (I had a student assistant job at one such institute when I was an MSc student in Germany) https://www.asme.org/topics-resources/content/how-does-germany-do-it https://www.asme.org/topics-resources/content/how-does-germa...
- ThrustVectoring 7y agoThe financial side of things is probably the bigger driver - the German government is notoriously unwilling to issue debt, so domestic German savers have a huge shortfall in safe assets that they must purchase abroad to acquire. These foreign financial assets, on net, can only be bought by sales receipts of exports.
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- cyberpunk 7y agoAs someone who lives and works in Germany I'm always surprised when I hear of the strength of the country. I've worked for several very large corporations here, financial and automotive, and how anything is achieved at all remains a complete mystery to me. It seems to me that all the success reported is directly in spite of their attitude towards technology and IT in general instead of because of it. The culture here is to outsource everything besides PM, then every few years when the projects fail or are over budget (time or money) to replace the partner with someone new and lose all the domain knowledge those teams had and then they have to start again. I've seen millions of euros wasted in this manner, the only way it'll be fixed is when the current generation of management retire. I'd be keen to know if anyone else working here has a similar experience, I've tried to 'fix' this culture several times and haven't succeeded yet. Weirdly, in the last 6 months Azure seems to be making huge inroads, perhaps that'll help.
- crispyporkbites 7y agoWhat you’re seeing are signs of a successful industry. They have money to burn on irrelevant things. At the end of the day the IT system will typically not help your margin on a supply chain beyond a tiny amount.
- cyberpunk 7y agoThe finance gig I had the IT systems were core business. At one point there I was in a meeting where I was the sole engineer and there were 14 project managers involved in my project. We all had a nice laugh about it but, again, this to me is a sign of a sort of sickness, not a sign of success.
- ahartmetz 7y agoIf you only work for very large corporations, you work for some of the most inefficient corporations. You get a higher salary for the resulting frustration. That's the deal. If you want to work in an environment that works according to common sense and achieve something, take a pay cut and join a smaller company. Of course, you still have to do your research and choose wisely.
- cryptica 7y agoThis is a very interesting article. I particularly liked the insight that currency stability may be desirable for the most successful economies but undesirable for the least successful. Being in the cryptocurrency space, I can see how this also plays out on a much smaller scale as well. When your community is made up of nobodies, one of the few advantages that you have is that your cryptocurrency has more upside potential than established players. This can offset the significant downside of not having a reputation.
- neilwilson 7y agoGermany isn't Germany any more. It is a component of the Eurozone - which is a unified currency area - like the USA, or the UK. What Germany does is 'vendor finance' other parts of the Eurozone. The Greek government buys German battleships and the savings the Germans are famous for buy the paper the Greek government issues to close the circle. Then they blame Greece for going into debt once the ponzi scheme reaches its limit. You get the same effect with London to the wider South East of England, arguably England to Scotland and no doubt several areas in the USA where outside of the area, but within the currency zone, is encouraged to borrow to buy the output of the area. China's mercantile currency lock does much the same thing. The eternal problem is that exporting is giving away the output of your people in return for a shiny bauble. If you don't then exchange that shiny bauble for the output of some other people, what was the point of doing all that work in the first place? You may as well have used your productivity to have Friday off instead and gone fishing.
- d10r 7y ago> The eternal problem is that exporting is giving away the output of your people in return for a shiny bauble That's an important point! In the case of China, I'd guess that it was a strategic decision to do so. Being in debt with others gives others political power over you - at least as long as you are not stronger (ultimately, in a physical sense) than them. I guess China wanted to avoid that as long as it wasn't strong enough. Now that China is getting stronger and stronger, they are starting to invest that accumulated capital in order to gain political power over other, weaker nations. That's btw. a hot topic even on Germany, if it's ok to let the Chinese buy local companies and other assets. In the case of Germany, I don't really understand why it went that way. The surplus seems to have become some kind of fetish. During the Greek crisis, the risks of such imbalances became visible. The big risk for Germany is imo that a major country like France or Italy will tip over politically, leading to the destruction of the Euro. There's no playbook for how to handle that and I guess it would be a messy and ugly political process which may render quite some of those collected "shiny baubles" worthless. With European history in mind, I don't think taking that risk is worth it.