10 ms·

Not 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 con

Not 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 ago
Perhaps a bigger distortion was everyone else deciding to become "value-add" over outsourced production. Only so much room for beancounters.
- reaperducer 7y ago
  Especially 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 ago
    I 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 ago
      It sounds like you've never been poor.
      - dsfyu404ed 7y ago
        Speaking generally (not about this unnamed medical device): Poor people can scrape up $15 if it means the difference between 6mo and 2mo. Sure there's some times when the purchase falls on a week between paydays and you buy the cheap (cheap up front, more expensive on a per day basis) version but the next time (or maybe the time after that) the purchase will need to be made at a more convenient time and you will have the extra $15 to spend on the one that has a lower overall cost. Having experience with the $25 model is the barrier to entry, not the $15 difference in cost. It's not hard to justify $15 when the overall cost is lower and the expense is less than monthly. It's very hard to justify the $15 when you don't yet know if the product will last long enough to make the overall cost lower. And lets be honest here, products where +X% the cost gets you >X% the utility are microscopically rare compared to products where that is not the case. They're poor, not stupid. They can do basic math and determine which product satisfies their needs more cheaply on an ongoing basis. For low dollar amounts
        reaperducer 7y ago
        When you receive $x in income each month, and $25 would put you over that $x, then spending $10 makes sense. There are tens of millions of people in America on fixed incomes.
    - dsfyu404ed 7y ago
      I'd bet big bucks that the situation includes details that are omitted for the sake of brevity and narrative. And I say this as someone who has a few hundred of the highest end Bosch and lowest end mystery manufacturer Chinese sawzall blades within arms reach.
ailideex 7y ago
> the common market has distorted things in Germany's favor, an effect that probably won't last. Quite by design. Having the whole Europe on Germany's monetary policy (i.e. Eurozone with EUR interest rates) while not sharing any other policy is heavily in Germany's favour and one of the main reasons the European debt crisis happened. Not to say that being a well governed country with good policy and a culture that is conducive to high productivity and good quality did not help - it definitely did. And I'm not trying to redirect blame for the Eurozone crisis - Greece has mainly itself to blame.
- pergadad 7y ago
  That's a very simplistic view and doesn't at all cover the whole picture. The union benefits all countries in varying ways (eg without the union Italian and Spanish and French banks would long have gone bankrupt). At the same time it also has negative effects. But you have the same issue internally inside any larger country.
  - BurningFrog 7y ago
    > * without the union Italian and Spanish and French banks would long have gone bankrupt* If you think sick institutions should die, that's not a benefit.
    - tpm 7y ago
      Sick banks mostly died anyway, but without outside help even healthy banks would go down in that environment.
    - mrtksn 7y ago
      Institutions don’t die only because they are sick, sometimes certain things need to have certain scale or environment to function. The silicon valley tech giants wouldn’t have enjoyed the same success if the US was not what it is.
  - bpizzi 7y ago
    > eg without the union Italian and Spanish and French banks would long have gone bankrupt Not french banks. At least from IMF representatives pov. Source: https://www.imf.org/external/pubs/ft/wp/2009/wp09201.pdf https://www.imf.org/external/pubs/ft/wp/2009/wp09201.pdf Excerpt: "French banks were not immune but proved relatively resilient to the global financial crisis reflecting their business and supervision features".
nothis 7y ago
Economics in a nutshell: "There must be a single number that explains all of this!" It can't possibly be that Germany actually built its exports based on quality. That can't be replicated by tweaking some tax laws.
- arethuza 7y ago
  A few years back I worked for a large engineering services company (that nobody has ever heard of) and one of the senior managers from Germany described the quality of Mercedes-Benz cars as a "national disgrace" - he was genuinely upset about it.
  - deleted 7y ago
    [deleted]
  - kevin_thibedeau 7y ago
    The original owners keep them for 5 years max. Nothing has to last longer than that.
    - helij 7y ago
      Exactly. I change cars every three years now. The last one I changed after 2 years. I really don't care how reliable they are after 5 years as long as they are comfortable, frugal and safe during my ownership. Technology today just moves too fast to see myself driving 50+ miles a day in a 5+ years old car.
      - CapricornNoble 7y ago
        I'm genuinely curious what sort of technical innovations of recent cars you feel make something like a 2012 Lexus IS-F an unreasonable automotive experience by comparison, let alone a used Mercedes S65 AMG.
        helij 7y ago
        Cameras all around. Safety systems are much improved since 2012 as well. Neither of these two mentioned has blind spot monitor for example.
ergothus 7y ago
> Not a word about the fact that Germany simply produces desirable products? I dont think that's relevant though. Desirable products mean more countries buy your product, means the value of your currency changes, means your products are effectively "more expensive". Sharing a currency with other countries dilutes that effect, just like any prosperous region within a country sharing a currency with poorer regions. I'm not an economist so I cant say how valid any of the points ARE, but from the logic presented I didnt think this was an attack on the quality of German products.
- zozbot234 7y ago
  Nope, tradable goods don't just become "more expensive" because of currency shifts. The prices of tradables are set in a global market and tied together by cross-trading (arbitrage) considerations. What happens when supplying a desirable product is that the industry seeks to expand and that might increase costs overall. The Dutch Disease is an extreme version of this, in which having a single dominating industry sector leads to e.g. bad governance, etc. But these are real effects that are unrelated to currency shifts.
  - ergothus 7y ago
    My economics is weak, can you break this down for me a bit? If I'm selling widgets for $10 (USD), and Narnia wants to buy them at 2 Narnian gold pieces(gp) per USD, it would cost them 20gp each. If the USD "improves", such that it is now 4 gp:$1, my widgets would be 40gp each, making my goods "more expensive" to foreign countries like Narnia. Assuming you're correct, I have at least one flawed understanding above (entirely likely). Can you explain which assumption that is and why? Thanks in advance!
    - martin_a 7y ago
      The important question is: Does Narnia have the money, or is it willing to spend, double the amount on your product? Maybe they will just buy half, because their budget is fixed. That's the point you are missing.
tompccs 7y ago
He does talk about Germany's 200 year 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.
- raxxorrax 7y ago
  I think the current bleak estimates for Japan are quite exaggerated. Just recently economists proclaimed that their latest success must be a statistical fluke. Just look at the living conditions there... To be honest, I believe a lot of economists are a bit of the wrong side from time to time. Maybe analysts face a bleak economic future and got something mixed up?
- vkou 7y ago
  To be fair, this re-unification thing that was happening in 1992 was a bit of a drag on the German economy.
- menotyou 7y ago
  These were the years shortly after reunfication in 1990. The reunfication hit West-Germany during a econonmic boom, so the economy was already producing at capacity and the additional demand shock from East-Germany could not be covered by West-German production. As a result imports raised and exports products were diverted to East-Germany at the same time and for a short time the trade balance became negative and some of the trade balances of Germany's neighbours temporarily improved due to higher demand from East-Germany. BTW: It is a misconception that a trade deficit and a poor economy are related.
- menotyou 7y ago
  Japans economy was much more government managed than completely free at that time. Specifically the Japans Ministry of International Trade and Industry ("MITI") was steering the economy, mainly be using a control called "windows guidance". By given "window guidance" the commercial banks the Bank of Japan controlled which segment of economy was allowed to get what amount of credit. This turned out to be highly competitve compared to the western model of a completely free market economy. This system was later abandoned due to pressure of the US to make the banking system and the BoJ "independent". The result from this operation was that the commercial banks diverted more credit away from real investment to financial markets and assets investments, which in turn resulted in an unsustainable real estate boom in Japan. From of this real estate boom Japan never recovered when the bubble burst. BTW: The Bank of China uses nowadays window guidance as a system to steer the economy - and seems to be pretty successfull with it.
mambojumbo 7y ago
German products arent as high quality ad they used to be and most if them are pretty stale in terms of innovation. Sure they change the shape of cars and add new leds and interior eye candy but that is not progress. Imo german cars are low quality and lack diversity, and same goes for most machinery made in that country. US, Japanese, South Korean or other EU made products can be of similar or higher quality. Germany has such an economic power because the EU is heavily biased towards its needs. Just have a walk around east Europe and you will see how it has become junkyard for german cars. Suddenly the environment doesnt matter. Furthermore Germany is pretty socialist, both corporate and personal and has plenty of ways to subsidise industries and prevent too much innovation from rocking the boat.
- gdrulia 7y ago
  Disclaimer: I'm from Lithuania, little eastern Europe country. There has been a lot of talk about eastern Europe being a junkyard for german cars (or old european cars in general) in recents times, not the least locally, especially by politicians trying to justify weird decisions. Most of the time one vital factor remains overlooked, people don't have money for anything else here. German cars are valued by most the people, whether that is deserved or not is a different question. There are plenty of mechanic shops for repairing those cars and cars itself are cheap. Public transport is mostly horrible, so a car is a must for most people. If a family has a budget of ~€1500 per month, how can you realistically choose anything else but an old imported car from western Europe (majority from germany).
  - makomk 7y ago
    There's a lot of controversy about eastern Europe becoming a junkyard for old German cars because those cars produce lots of pollution that affects the health of everyone in the country, which is the whole reason Germany and the other rich European countries don't want them anymore. Also, to add insult to injury, not only is the EU not allowing countries to block imports of those old polluting cars, they simultaneously expect all EU countries to meet stringent limits on how much of the pollutants they pump out is present in the air of their cities.
wuschel 7y ago
> solid state physicist, spent all his energy trying to accelerate the development of a German electronics sector. Out of cursiosity: What did he try to do, and what organisations was he using?
- zwieback 7y ago
  He was at the Max Planck Institute at the time but on a lot of state and federal commissions to figure out how to get German industry on a fast track to compete with silicon valley.
  - wuschel 7y ago
    Hello Zwieback, thanks for coming back to me on that matter. I am a MPG alumni myself :) Would you be up for a short chat? My email address is in my profile. Cheers!

varjag 7y ago

Perhaps a bigger distortion was everyone else deciding to become "value-add" over outsourced production. Only so much room for beancounters.

reaperducer 7y ago
Especially 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 ago
  I 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 ago
    It sounds like you've never been poor.
    - dsfyu404ed 7y ago
      Speaking generally (not about this unnamed medical device): Poor people can scrape up $15 if it means the difference between 6mo and 2mo. Sure there's some times when the purchase falls on a week between paydays and you buy the cheap (cheap up front, more expensive on a per day basis) version but the next time (or maybe the time after that) the purchase will need to be made at a more convenient time and you will have the extra $15 to spend on the one that has a lower overall cost. Having experience with the $25 model is the barrier to entry, not the $15 difference in cost. It's not hard to justify $15 when the overall cost is lower and the expense is less than monthly. It's very hard to justify the $15 when you don't yet know if the product will last long enough to make the overall cost lower. And lets be honest here, products where +X% the cost gets you >X% the utility are microscopically rare compared to products where that is not the case. They're poor, not stupid. They can do basic math and determine which product satisfies their needs more cheaply on an ongoing basis. For low dollar amounts
      - reaperducer 7y ago
        When you receive $x in income each month, and $25 would put you over that $x, then spending $10 makes sense. There are tens of millions of people in America on fixed incomes.
  - dsfyu404ed 7y ago
    I'd bet big bucks that the situation includes details that are omitted for the sake of brevity and narrative. And I say this as someone who has a few hundred of the highest end Bosch and lowest end mystery manufacturer Chinese sawzall blades within arms reach.

ailideex 7y ago

> the common market has distorted things in Germany's favor, an effect that probably won't last. Quite by design. Having the whole Europe on Germany's monetary policy (i.e. Eurozone with EUR interest rates) while not sharing any other policy is heavily in Germany's favour and one of the main reasons the European debt crisis happened. Not to say that being a well governed country with good policy and a culture that is conducive to high productivity and good quality did not help - it definitely did. And I'm not trying to redirect blame for the Eurozone crisis - Greece has mainly itself to blame.

pergadad 7y ago
That's a very simplistic view and doesn't at all cover the whole picture. The union benefits all countries in varying ways (eg without the union Italian and Spanish and French banks would long have gone bankrupt). At the same time it also has negative effects. But you have the same issue internally inside any larger country.
- BurningFrog 7y ago
  > * without the union Italian and Spanish and French banks would long have gone bankrupt* If you think sick institutions should die, that's not a benefit.
  - tpm 7y ago
    Sick banks mostly died anyway, but without outside help even healthy banks would go down in that environment.
  - mrtksn 7y ago
    Institutions don’t die only because they are sick, sometimes certain things need to have certain scale or environment to function. The silicon valley tech giants wouldn’t have enjoyed the same success if the US was not what it is.
- bpizzi 7y ago
  > eg without the union Italian and Spanish and French banks would long have gone bankrupt Not french banks. At least from IMF representatives pov. Source: https://www.imf.org/external/pubs/ft/wp/2009/wp09201.pdf https://www.imf.org/external/pubs/ft/wp/2009/wp09201.pdf Excerpt: "French banks were not immune but proved relatively resilient to the global financial crisis reflecting their business and supervision features".

nothis 7y ago

Economics in a nutshell: "There must be a single number that explains all of this!" It can't possibly be that Germany actually built its exports based on quality. That can't be replicated by tweaking some tax laws.

arethuza 7y ago
A few years back I worked for a large engineering services company (that nobody has ever heard of) and one of the senior managers from Germany described the quality of Mercedes-Benz cars as a "national disgrace" - he was genuinely upset about it.
- deleted 7y ago
  [deleted]
- kevin_thibedeau 7y ago
  The original owners keep them for 5 years max. Nothing has to last longer than that.
  - helij 7y ago
    Exactly. I change cars every three years now. The last one I changed after 2 years. I really don't care how reliable they are after 5 years as long as they are comfortable, frugal and safe during my ownership. Technology today just moves too fast to see myself driving 50+ miles a day in a 5+ years old car.
    - CapricornNoble 7y ago
      I'm genuinely curious what sort of technical innovations of recent cars you feel make something like a 2012 Lexus IS-F an unreasonable automotive experience by comparison, let alone a used Mercedes S65 AMG.
      - helij 7y ago
        Cameras all around. Safety systems are much improved since 2012 as well. Neither of these two mentioned has blind spot monitor for example.

ergothus 7y ago

> Not a word about the fact that Germany simply produces desirable products? I dont think that's relevant though. Desirable products mean more countries buy your product, means the value of your currency changes, means your products are effectively "more expensive". Sharing a currency with other countries dilutes that effect, just like any prosperous region within a country sharing a currency with poorer regions. I'm not an economist so I cant say how valid any of the points ARE, but from the logic presented I didnt think this was an attack on the quality of German products.

zozbot234 7y ago
Nope, tradable goods don't just become "more expensive" because of currency shifts. The prices of tradables are set in a global market and tied together by cross-trading (arbitrage) considerations. What happens when supplying a desirable product is that the industry seeks to expand and that might increase costs overall. The Dutch Disease is an extreme version of this, in which having a single dominating industry sector leads to e.g. bad governance, etc. But these are real effects that are unrelated to currency shifts.
- ergothus 7y ago
  My economics is weak, can you break this down for me a bit? If I'm selling widgets for $10 (USD), and Narnia wants to buy them at 2 Narnian gold pieces(gp) per USD, it would cost them 20gp each. If the USD "improves", such that it is now 4 gp:$1, my widgets would be 40gp each, making my goods "more expensive" to foreign countries like Narnia. Assuming you're correct, I have at least one flawed understanding above (entirely likely). Can you explain which assumption that is and why? Thanks in advance!
  - martin_a 7y ago
    The important question is: Does Narnia have the money, or is it willing to spend, double the amount on your product? Maybe they will just buy half, because their budget is fixed. That's the point you are missing.

tompccs 7y ago

He does talk about Germany's 200 year 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.

raxxorrax 7y ago
I think the current bleak estimates for Japan are quite exaggerated. Just recently economists proclaimed that their latest success must be a statistical fluke. Just look at the living conditions there... To be honest, I believe a lot of economists are a bit of the wrong side from time to time. Maybe analysts face a bleak economic future and got something mixed up?
vkou 7y ago
To be fair, this re-unification thing that was happening in 1992 was a bit of a drag on the German economy.
menotyou 7y ago
These were the years shortly after reunfication in 1990. The reunfication hit West-Germany during a econonmic boom, so the economy was already producing at capacity and the additional demand shock from East-Germany could not be covered by West-German production. As a result imports raised and exports products were diverted to East-Germany at the same time and for a short time the trade balance became negative and some of the trade balances of Germany's neighbours temporarily improved due to higher demand from East-Germany. BTW: It is a misconception that a trade deficit and a poor economy are related.
menotyou 7y ago
Japans economy was much more government managed than completely free at that time. Specifically the Japans Ministry of International Trade and Industry ("MITI") was steering the economy, mainly be using a control called "windows guidance". By given "window guidance" the commercial banks the Bank of Japan controlled which segment of economy was allowed to get what amount of credit. This turned out to be highly competitve compared to the western model of a completely free market economy. This system was later abandoned due to pressure of the US to make the banking system and the BoJ "independent". The result from this operation was that the commercial banks diverted more credit away from real investment to financial markets and assets investments, which in turn resulted in an unsustainable real estate boom in Japan. From of this real estate boom Japan never recovered when the bubble burst. BTW: The Bank of China uses nowadays window guidance as a system to steer the economy - and seems to be pretty successfull with it.

mambojumbo 7y ago

German products arent as high quality ad they used to be and most if them are pretty stale in terms of innovation. Sure they change the shape of cars and add new leds and interior eye candy but that is not progress. Imo german cars are low quality and lack diversity, and same goes for most machinery made in that country. US, Japanese, South Korean or other EU made products can be of similar or higher quality. Germany has such an economic power because the EU is heavily biased towards its needs. Just have a walk around east Europe and you will see how it has become junkyard for german cars. Suddenly the environment doesnt matter. Furthermore Germany is pretty socialist, both corporate and personal and has plenty of ways to subsidise industries and prevent too much innovation from rocking the boat.

gdrulia 7y ago
Disclaimer: I'm from Lithuania, little eastern Europe country. There has been a lot of talk about eastern Europe being a junkyard for german cars (or old european cars in general) in recents times, not the least locally, especially by politicians trying to justify weird decisions. Most of the time one vital factor remains overlooked, people don't have money for anything else here. German cars are valued by most the people, whether that is deserved or not is a different question. There are plenty of mechanic shops for repairing those cars and cars itself are cheap. Public transport is mostly horrible, so a car is a must for most people. If a family has a budget of ~€1500 per month, how can you realistically choose anything else but an old imported car from western Europe (majority from germany).
- makomk 7y ago
  There's a lot of controversy about eastern Europe becoming a junkyard for old German cars because those cars produce lots of pollution that affects the health of everyone in the country, which is the whole reason Germany and the other rich European countries don't want them anymore. Also, to add insult to injury, not only is the EU not allowing countries to block imports of those old polluting cars, they simultaneously expect all EU countries to meet stringent limits on how much of the pollutants they pump out is present in the air of their cities.

wuschel 7y ago

> solid state physicist, spent all his energy trying to accelerate the development of a German electronics sector. Out of cursiosity: What did he try to do, and what organisations was he using?

zwieback 7y ago
He was at the Max Planck Institute at the time but on a lot of state and federal commissions to figure out how to get German industry on a fast track to compete with silicon valley.
- wuschel 7y ago
  Hello Zwieback, thanks for coming back to me on that matter. I am a MPG alumni myself :) Would you be up for a short chat? My email address is in my profile. Cheers!