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How Germany Became the China of Europe

76 points by prs 16y ago

StudyAnimal 16y ago
It is because of the slightly less socialist government we have here. If we can manage to trim some more of the huge government bureaucratic fat we can expect even more economic health. Germany will always be reasonably socialist, and probably for Germany (considering the culture, total state addicts here, even rich families get child support benefits, you can't change that overnight) a reasonable amount of socialism will be optimal, compared to English speaking countries, but I am sure we have a way to go as far as turning down the socialism dial, and turning up the free market dial.
- dualogy 16y ago
  German citizen who moved out of Germany here. The country rebooted from scratch in '48 with the most unsocialistic / market-libertarian constitution / law landscape the country has ever had so far. Immediately there was the "German economic miracle" (not a miracle at all) but since then socialism has grown every year. Notably faster paced since 1990 but "dialling down socialism a bit and the free market up a bit" is optimistic and illusory. Once this beast feeds and grows, there is no real turning back, all you can possibly adjust is timing. They now have not just income taxes but taxes on everything that moves and every step of every transaction or value chain. Once these taxes exist, they are never removed and keep being raised. Continuous talk about new taxes. All political parties are various shades of socialism and this is apparent in legislation. They make it harder for productive people and firms every year and the real miracle is that there is still "power in the power house", and I'm convinced they're still riding on the momentum of the 50s-70s. All these various 100s of "social state insurances" schemes and constructions are about to collapse a few years down the road and every euro spent on them whether through taxation or debt will not prevent this and just be a waste and destruction of productive human energy. I dropped out, I stay a perpetual traveller and out of Germany because my conscience forbids me to feed this corrupt destructive apparatus and the greater EU with the fruits of my labour. The only legal way for me to still be able do this and keep my citizenship is to stay outside the country for 180 days or more a year, and not stay inside more than 2 months in a row -- roughly. But hey they the left was already calling to tax permanent travellers so I guess I'm not the only one.
  - Fritz2 16y ago
    Wow, I for one enjoy free, good quality kindergarden, highschool, university and healthcare. I am not saying there are no problems here, but I do enjoy the social benefits and I am happy to pay 50% tax for that.
    - StudyAnimal 16y ago
      Well if you include healthcare, you should really add another 13.5% to that, as it is funded by compulsory health insurance rather than tax.
  - StudyAnimal 16y ago
    I basically meant the current center left coalition is slightly less destructive than the far left SPD, you are right, we are still somewhat left of optimal.
    - TillE 16y ago
      If the SPD are "far left", what are Die Grünen? Die Linke? Don't confuse your personal perspective with that of the general population.
- ugh 16y ago
  Politically, little has changed in the last decade. There hasn’t been any major political shift away from anything in the last years. All political parties, for example, share the view that it is important to preserve the welfare state. They might propose little tweaks here and there but that’s about it. There is no controversy about the fundamentals. The “socialist” party is not socialist at all and the “libertarian” party is not libertarian at all. When I look at the current governing coalition I see it much more as a continuation of Kohl’s coalition.
  - chalst 16y ago
    The rise of Die Linke? The near collapse in the SPD? The left is far, far weaker than it was in Kohl's day.
    - ugh 16y ago
      Near collapse? Exaggerating much? And isn’t that just the point? The SPD is weakened from the left not from the right. That doesn’t matter much anyway because it doesn’t change the fundamentals. No party in Germany wants much change.
    - route66 16y ago
      Finally HN turned into a political forum. (Tongue in cheek) The downfall of most parties is due to the fact that they do have no distinct marks anymore. For many socialdemocratic parties in Europe this began with embracing neocon agenda's. Christdemocratic parties turn to nature preservation, ecological parties advocate engagement in afghanistan ... Tells me that the era of differences is over, calling parties extreme left or right in european parliaments is mostly uninformed bogus.
- elmarschraml 16y ago
  Another German here: The trouble with getting out of the crises so well is that it relieves the need for real reforms. We still have an extremely inflexible labor market, extremely high taxes/social security payments, and excessive regulation. Becoming more competitive by keeping down wages works, but is also the stupidest way to do it, since, well, it means you get paid less than you could. Basically German people decided that it's OK to earn less, but cutting taxes, benefits and government interventions would be too much change. On the other hand, I just realized that complaining about a situation that other people envy you for is a very German thing to do...
danac 16y ago
Europe in general (perhaps with the exception of the UK) is much less saturated with Made in China goods than the rest of the world, perhaps due to more stringent adherence to standards and quality, or perhaps as a result of its trade laws that still somewhat protect European-made goods. Germany has benefited greatly from the expansion of the European internal market, and has always had, and still does have, a very good name. Everything from cars to electronics, down to appliances and kitchenware, Made in Germany still speaks volume on the continent. Despite the somewhat higher prices of German goods (and they are actually kept quite low due to various work-sharing labour arrangements), weighing things on a quality-price scale, they still come out better value than a lot of alternatives. So it's really no surprise that the country is running such a huge trade surplus against the rest of the continent.
- bad_user 16y ago
  I have a German car - best car I ever owned :) On the other hand China does export a lot to Europe, especially in Eastern Countries; since they are cheaper. I don't have any stats, but I see "made in China" stuff everywhere.
  - danac 16y ago
    I can see how that's very likely, my experience is limited to Western Europe at the moment:) We still see quite a lot of goods in cheaper stores that come from China, but nothing like the market domination I see back in North America. Over here in NL for example, I see way more stuff coming from France, Germany, Italy, etc, than just China. I think consumers in some parts of Europe prefer goods that are better quality, even if they are a bit more expensive. From a longer term cost-benefit stand point, it usually works out cheaper anyway.
    - bad_user 16y ago
      When speaking about finished products, I also saw lots of stuff made in UE in Eastern Europe. But for example China exports a lot of textiles. Many clothes are still made in Europe, but a large percent of textiles come from China. That said, I'm glad that Germany can be the powerhouse that it is by focusing on quality rather than cheap-labor. It shows that it is possible. Good for them.
rospaya 16y ago
Germany is an export oriented economic powerhouse far longer than China. Chine is looking to become Germany, not the other way around.
- oemera 16y ago
  Thats true but Germany is still too expensive. While other countries are getting better at the quality point Germany doesn't get much cheaper for production. I think if these thinks don't change Germany will get into trouble. (I'm from Germany)
  - henrikschroder 16y ago
    Cheap labour in other countries isn't an infinite resource, I've seen estimates that in about 40-50 years the difference will be gone: China and other countries that currently have cheap labour will have become so enriched that they will have a middle class and social makeup similar to ours, and not so cheap labour anymore.
    - ippisl 16y ago
      Predicting 40-50 years ahead , in today's world is pretty meaningless.
  - danssig 16y ago
    It's not too expensive. They lower cost as much as they can. The only way to get any cheaper would be decrease the quality. Personally, I think that if all capitalism can ever hope to give us is cheap garbage then it's a failure (I don't think that is all it can give us, but some people seem to).
  - maigret 16y ago
    You're thinking like the typical German it seems. What you should know: - Other "cheaper" countries are getting more expensive as well, at a staggering pace. - In Europe, Germany is actually much cheaper than 10 years ago. - Currently the employment for qualified persons is doing very well Germany's problem is rather that it's going out of qualified engineers at a very fast rate, thus accepting immigration should be a key politic. Germany's politicians and CEOs have been very good at scaring people to keep their salary down, but if you look at the state of workforce now you'll see that all this doom speech that all jobs are moving to China and India was not quite true.
scrrr 16y ago
Being from Germany I'd also like to point out that that there's another country that did very well throughout the recent recession, namely our neighbor Poland. The reasons there are probably quite different and also have very little to do with China. GDP growth Germany: http://www.tradingeconomics.com/Economics/GDP-Growth.aspx?Symbol=DEM http://www.tradingeconomics.com/Economics/GDP-Growth.aspx?Sy... GDP growth Poland: http://www.tradingeconomics.com/Economics/GDP-Growth.aspx?Symbol=PLN http://www.tradingeconomics.com/Economics/GDP-Growth.aspx?Sy...
- gahahaha 16y ago
  The Zloty is now worth 18% less than in 2008. That translates into 18% cheaper wages. So for Poland, one important aspect is that they had their own currency. The PIIGS are forced into years of deep depression and painful wage cuts to achieve the same increase in competitiveness.
  - moxica 16y ago
    What everybody forgets is that Germany did proactively cut the real income with other means than inflating the currency. The wage cuts did happen proactively before they became really painfull.
- tonf 16y ago
  The reality is less rosy: http://blogs.wsj.com/new-europe/2011/02/09/polish-government-debt-yields-nearing-critical-level-central-banker-says/ http://blogs.wsj.com/new-europe/2011/02/09/polish-government...
biot 16y ago
I'm annoyed by this quote: > "There is frustration with Germany," says André Sapir, a senior fellow > at Bruegel, a Brussels-based think tank. "Germany is moving ahead, > but what are they doing for the rest of Europe?" I'm having a hard time reading this as anything but "Where's our handout?".
- JanezStupar 16y ago
  Indeed and that's exactly what it is. And (stupid?) sources of these commentaries keep forgetting that Germany and France (but AFAIK mostly Germany) are footing majority of "european" expenses. German workers are the ones willing to tolerate lower wages so that others will be able to develop and compete with them easier. I mean think of it - these guys dug themselves out of shit, while bailing out the rest of Europe. Using mostly common sense and hard work. They also had a retirement plan reforms, which changed retirement from 65 to 67 (!!!!!) for men and they took it with grace, no riots no thrashing of commonwealth (Greece? France??). Disclaimer: I am not German, but I wish that my national leaders would have the integrity and vision of German leaders.
  - jan_g 16y ago
    Most of the time they do have the vision, but the problem is that every proposed reform is heavily objected to by the unions, pensioners, students and so on. For example, flat tax rate reform proposal under previous government, then the pension reform last year. It's always the same: large population groups (pensioners, students, state-payroll workers) do not want to give up those privileges ...
    - JanezStupar 16y ago
      Leaders != politicians unions, pensioners, students, etc... got their own leaders which are defrauding the people they should lead. Thats the difference between Germany and the rest of the Europe. Maybe in industry the fact that workers get to share the board with investors help, I don't know. But I know that Germans manage to not shit in their plate time and again. Edit: Why am I getting down voted on this?
JacobAldridge 16y ago
Single page http://www.time.com/time/printout/0,8816,2053595,00.html http://www.time.com/time/printout/0,8816,2053595,00.html
toadi 16y ago
Well they have a imbalanced trade balance. By cutting wages of the middle class they will never get their domestic trade in order because these people won't have the money to buy their own products.
thirdsun 16y ago
Given the financial benefits of producing and manufacturing in asia, Germany has to emphasize the quality of its products and exports to stay competitive. A good example is a very new running shoe brand named Lunge that manufactures its premium running shoes very close to my hometown here in germany, a product that is usually produced in asian low-cost-countries. As far as i know and in contrast to their competitors Lunge refuses to put their money into marketing and instead focuses its efforts solely on the development and manufacturing of their products. Of course they can't compete on the price level, but I hear lots of good feedback from customers that won't go back to asics, nike & co. and don't mind paying the bonus for substantial products. This also applies to me. More here: http://www.lunge.com http://www.lunge.com
- deleted 16y ago
  [deleted]
- HSO 16y ago
  hehe, never expected to find "fashion tips" on hn but what do i know. was just looking for new walking shoes, and these just might fit the bill. thx for the heads up, will check out one of the two stores in munich later today. on a related note, i think these kinds of products (basics manufactured to high quality standards) have a huge future. "klein aber fein" can become big business given a newly global middle class. another example: leica is sold out everywhere, despite their rather high prices.
perlgeek 16y ago
> "Germany is moving ahead, but what are they doing for the rest of Europe?" Being the No. 1 financial contributor in the European Union, maybe?
- JanezStupar 16y ago
  Indeed (http://en.wikipedia.org/wiki/Budget_of_the_European_Union http://en.wikipedia.org/wiki/Budget_of_the_European_Union), but whats interesting that per capita benefit the Netherlands is paying the most (1467€) followed by Denmark and Sweden, with Germany on 4th position. But one must take notice that Germany's eastern half has more in common with Poland, Czech and Slovakia than with western Germany - the workforce is still socialistic,... So real contribution of western population is enormous.
  - lkozma 16y ago
    How do you describe a "socialistic" workforce?
    - rb2k_ 16y ago
      "working hard" vs "hardly working" The eastern part of Germany has big unemployment problems (http://ryouready.files.wordpress.com/2009/11/germany_by_unemployment.png http://ryouready.files.wordpress.com/2009/11/germany_by_unem...) Baden Württemberg (South West) and Bavaria (South East) and basically the powerhouse inside the powerhouse
      - lkozma 16y ago
        What about Saarland? :)
        rb2k_ 16y ago
        Only a million people and an unemployment rate of 7.5% (vs BW: 4.5%, Bavaria: 4.6%). But compared to the east, they're doing all right. (also: nice wine and good weather)
stretchwithme 16y ago
With so many countries borrowing so much to make their bubbles grow and regrow, citizens of countries that don't go for this false growth are supplying the funds by deferring consumption and saving their money. And countries like Germany and China run trade surpluses, because the bubble countries are not borrowing paper; they're borrowing the labor of all those savers. That labor must be delivered somehow and that's why there has to be a trade surplus. The bubble countries can't resolve this imbalance by cajoling the savers into not saving or somehow obstructing trade. The trade imbalance HAS to equal the net borrowing of the country. The only way is to correct the trade imbalance is balance their budgets AND stop artificially lowering their own interest rates, which causes the private sector to borrow more than it otherwise would. Policymakers have bought into the idea that somehow there is a shell game to be played that magically creates prosperity. But the reality is that all the game playing wastes an enormous amount of resources.
- Derbasti 16y ago
  It feels like you are saying something insightful here but I struggle to parse your writing. Could you somehow rephrase what you just said in more layman-readable English?
  - stretchwithme 16y ago
    What phrases are you having difficulty with? Maybe you can give me some examples?
    - Derbasti 16y ago
      Basically, it is this sentence: > That labor must be delivered somehow and that's why there has to be a trade surplus. How so? How can labor be borrowed? How can it be delivered?
      - stretchwithme 16y ago
        It's more accurate to say that the results of labor are delivered. That might be a product or service. And these things can be exchanged for money, which can then be given to other people in exchange for their labor. Yes, technically you are borrowing money, but it has no effect until its used to purchase the results of labor, which is what you actually want to borrow. Your mortgage is actually borrowing the results of all of the labor required to build it, including the labor to make the sheet rock. If there's a disaster in Haiti and the US lends Haiti a billion dollars, that money will be used to buy things. Or pay people to do things, who will then go and buy things with the money. Demand then rises for these things and more of them must be imported. Even if they come from a third country, that additional demand causes imports to increase there. Ultimately, that additional demand affects exports from the US. And, if Haiti ever pays the money back, Haiti will be the one experiencing an increase in its exports. The beauty is that we are not locked into buying just the products and services the lender offers. We can get anybody's. To learn more about this, you could check out Austrian economics and the division of labor.
ippisl 16y ago
This strategy doesn't seem very helpful to the middle class : "estimates that the disposable income of the German middle class hasn't increased at all in the past decade. About a fifth of the workforce, he says, is stuck in insecure and poorly paid jobs, often earning a dismal $550 a month." And doesn't concentrating on the high end exposes Germany to improving capabilities of Chinese companies , and improvements in the Chinese brands ? china is working on those capabilities , how can Germany defend against those ? move to the higher end ?
- JanezStupar 16y ago
  A person earning $550 a month in Germani (or most of Europe) may be waaay better off than a person making $50k in US. You have your education, kindergarten, medical care, social security, retirement, etc... Already covered - so with these $550 (and this is just not true, minimal wages in Germany are higher - this has to be eastern German minimal wage) you only need to get through month for food and utilities (quite a lot of people earning minimum wages are living in nonprofit apartments). So it's not just black and white. AFAIK $550 is something I can hardly believe to be true, except in Eastern Germany for people aged 40/50+ without any knowhow or qualifications.
  - ippisl 16y ago
    That's interesting. Could you please share more details ? 1. What is the minimum wages in Germany ? 2. What's the rent for nonprofit apartments , or are they free and provided by government ? decent size , reasonable quality neighborhood , or small apartments and shitty neighborhood (junkies , etc ? ) ? 3. What's the starting age for state provided kindergarten , what happens before that age , do women get social security ? 4. In short could german people earning those minimum salaries have a stable living with all the basics provided ?
    - sgift 16y ago
      1. There is no minimum wage, but if you earn less than the guaranteed minimum (359 Euro), the state will pay you the difference ("Aufstocker") 2. The rent is provided by state for jobless for the apartments. There are also programs for poor people which aren't jobless to get the rent from the state. The allowed size of the apartment depends on family size afaik. The quality depends on the city you life in, but is usually not too bad (no junkies). 3. Half-time from the 3rd year is guaranteed. There are programs for younger children and full-time places, but that's not guaranteed (but usually one can get a place). I do not understand the question if women get social security? 4. This is a topic of heated debate within Germany, so no conclusion here.
Derbasti 16y ago
Can someone explain to me just how Germany is supposed to be like China? It seems to me that all the article is saying is that both countries are export driven, but that is just about it.
- econner 16y ago
  The basic idea is that when countries go into surplus an increased foreign demand for their products should push up wage levels, domestic demand and, in turn, price levels. With the rising prices there is less demand and the current account surplus equalizes. I think the general argument is that Germany and China both run huge current account surpluses. China accomplishes this partly through structural regulations and by holding the yuan at an undervalued rate. Germany, on the other hand, cut taxes and reformed its labor and welfare systems in the mid-2000's but in a way that prevents the system from equalizing. The main reason the author gives is that wages don't rise because workers are willing to accept reduced pay raises for job security.

76 points by prs 16y ago

It is because of the slightly less socialist government we have here. If we can manage to trim some more of the huge government bureaucratic fat we can expect even more economic health. Germany will always be reasonably socialist, and probably for Germany (considering the culture, total state addicts here, even rich families get child support benefits, you can't change that overnight) a reasonable amount of socialism will be optimal, compared to English speaking countries, but I am sure we have a way to go as far as turning down the socialism dial, and turning up the free market dial.

dualogy 16y ago
German citizen who moved out of Germany here. The country rebooted from scratch in '48 with the most unsocialistic / market-libertarian constitution / law landscape the country has ever had so far. Immediately there was the "German economic miracle" (not a miracle at all) but since then socialism has grown every year. Notably faster paced since 1990 but "dialling down socialism a bit and the free market up a bit" is optimistic and illusory. Once this beast feeds and grows, there is no real turning back, all you can possibly adjust is timing. They now have not just income taxes but taxes on everything that moves and every step of every transaction or value chain. Once these taxes exist, they are never removed and keep being raised. Continuous talk about new taxes. All political parties are various shades of socialism and this is apparent in legislation. They make it harder for productive people and firms every year and the real miracle is that there is still "power in the power house", and I'm convinced they're still riding on the momentum of the 50s-70s. All these various 100s of "social state insurances" schemes and constructions are about to collapse a few years down the road and every euro spent on them whether through taxation or debt will not prevent this and just be a waste and destruction of productive human energy. I dropped out, I stay a perpetual traveller and out of Germany because my conscience forbids me to feed this corrupt destructive apparatus and the greater EU with the fruits of my labour. The only legal way for me to still be able do this and keep my citizenship is to stay outside the country for 180 days or more a year, and not stay inside more than 2 months in a row -- roughly. But hey they the left was already calling to tax permanent travellers so I guess I'm not the only one.
- Fritz2 16y ago
  Wow, I for one enjoy free, good quality kindergarden, highschool, university and healthcare. I am not saying there are no problems here, but I do enjoy the social benefits and I am happy to pay 50% tax for that.
  - StudyAnimal 16y ago
    Well if you include healthcare, you should really add another 13.5% to that, as it is funded by compulsory health insurance rather than tax.
- StudyAnimal 16y ago
  I basically meant the current center left coalition is slightly less destructive than the far left SPD, you are right, we are still somewhat left of optimal.
  - TillE 16y ago
    If the SPD are "far left", what are Die Grünen? Die Linke? Don't confuse your personal perspective with that of the general population.
ugh 16y ago
Politically, little has changed in the last decade. There hasn’t been any major political shift away from anything in the last years. All political parties, for example, share the view that it is important to preserve the welfare state. They might propose little tweaks here and there but that’s about it. There is no controversy about the fundamentals. The “socialist” party is not socialist at all and the “libertarian” party is not libertarian at all. When I look at the current governing coalition I see it much more as a continuation of Kohl’s coalition.
- chalst 16y ago
  The rise of Die Linke? The near collapse in the SPD? The left is far, far weaker than it was in Kohl's day.
  - ugh 16y ago
    Near collapse? Exaggerating much? And isn’t that just the point? The SPD is weakened from the left not from the right. That doesn’t matter much anyway because it doesn’t change the fundamentals. No party in Germany wants much change.
  - route66 16y ago
    Finally HN turned into a political forum. (Tongue in cheek) The downfall of most parties is due to the fact that they do have no distinct marks anymore. For many socialdemocratic parties in Europe this began with embracing neocon agenda's. Christdemocratic parties turn to nature preservation, ecological parties advocate engagement in afghanistan ... Tells me that the era of differences is over, calling parties extreme left or right in european parliaments is mostly uninformed bogus.
elmarschraml 16y ago
Another German here: The trouble with getting out of the crises so well is that it relieves the need for real reforms. We still have an extremely inflexible labor market, extremely high taxes/social security payments, and excessive regulation. Becoming more competitive by keeping down wages works, but is also the stupidest way to do it, since, well, it means you get paid less than you could. Basically German people decided that it's OK to earn less, but cutting taxes, benefits and government interventions would be too much change. On the other hand, I just realized that complaining about a situation that other people envy you for is a very German thing to do...

danac 16y ago

Europe in general (perhaps with the exception of the UK) is much less saturated with Made in China goods than the rest of the world, perhaps due to more stringent adherence to standards and quality, or perhaps as a result of its trade laws that still somewhat protect European-made goods. Germany has benefited greatly from the expansion of the European internal market, and has always had, and still does have, a very good name. Everything from cars to electronics, down to appliances and kitchenware, Made in Germany still speaks volume on the continent. Despite the somewhat higher prices of German goods (and they are actually kept quite low due to various work-sharing labour arrangements), weighing things on a quality-price scale, they still come out better value than a lot of alternatives. So it's really no surprise that the country is running such a huge trade surplus against the rest of the continent.

bad_user 16y ago
I have a German car - best car I ever owned :) On the other hand China does export a lot to Europe, especially in Eastern Countries; since they are cheaper. I don't have any stats, but I see "made in China" stuff everywhere.
- danac 16y ago
  I can see how that's very likely, my experience is limited to Western Europe at the moment:) We still see quite a lot of goods in cheaper stores that come from China, but nothing like the market domination I see back in North America. Over here in NL for example, I see way more stuff coming from France, Germany, Italy, etc, than just China. I think consumers in some parts of Europe prefer goods that are better quality, even if they are a bit more expensive. From a longer term cost-benefit stand point, it usually works out cheaper anyway.
  - bad_user 16y ago
    When speaking about finished products, I also saw lots of stuff made in UE in Eastern Europe. But for example China exports a lot of textiles. Many clothes are still made in Europe, but a large percent of textiles come from China. That said, I'm glad that Germany can be the powerhouse that it is by focusing on quality rather than cheap-labor. It shows that it is possible. Good for them.

rospaya 16y ago

Germany is an export oriented economic powerhouse far longer than China. Chine is looking to become Germany, not the other way around.

oemera 16y ago
Thats true but Germany is still too expensive. While other countries are getting better at the quality point Germany doesn't get much cheaper for production. I think if these thinks don't change Germany will get into trouble. (I'm from Germany)
- henrikschroder 16y ago
  Cheap labour in other countries isn't an infinite resource, I've seen estimates that in about 40-50 years the difference will be gone: China and other countries that currently have cheap labour will have become so enriched that they will have a middle class and social makeup similar to ours, and not so cheap labour anymore.
  - ippisl 16y ago
    Predicting 40-50 years ahead , in today's world is pretty meaningless.
- danssig 16y ago
  It's not too expensive. They lower cost as much as they can. The only way to get any cheaper would be decrease the quality. Personally, I think that if all capitalism can ever hope to give us is cheap garbage then it's a failure (I don't think that is all it can give us, but some people seem to).
- maigret 16y ago
  You're thinking like the typical German it seems. What you should know: - Other "cheaper" countries are getting more expensive as well, at a staggering pace. - In Europe, Germany is actually much cheaper than 10 years ago. - Currently the employment for qualified persons is doing very well Germany's problem is rather that it's going out of qualified engineers at a very fast rate, thus accepting immigration should be a key politic. Germany's politicians and CEOs have been very good at scaring people to keep their salary down, but if you look at the state of workforce now you'll see that all this doom speech that all jobs are moving to China and India was not quite true.

scrrr 16y ago

Being from Germany I'd also like to point out that that there's another country that did very well throughout the recent recession, namely our neighbor Poland. The reasons there are probably quite different and also have very little to do with China. GDP growth Germany: http://www.tradingeconomics.com/Economics/GDP-Growth.aspx?Symbol=DEM http://www.tradingeconomics.com/Economics/GDP-Growth.aspx?Sy... GDP growth Poland: http://www.tradingeconomics.com/Economics/GDP-Growth.aspx?Symbol=PLN http://www.tradingeconomics.com/Economics/GDP-Growth.aspx?Sy...

gahahaha 16y ago
The Zloty is now worth 18% less than in 2008. That translates into 18% cheaper wages. So for Poland, one important aspect is that they had their own currency. The PIIGS are forced into years of deep depression and painful wage cuts to achieve the same increase in competitiveness.
- moxica 16y ago
  What everybody forgets is that Germany did proactively cut the real income with other means than inflating the currency. The wage cuts did happen proactively before they became really painfull.
tonf 16y ago
The reality is less rosy: http://blogs.wsj.com/new-europe/2011/02/09/polish-government-debt-yields-nearing-critical-level-central-banker-says/ http://blogs.wsj.com/new-europe/2011/02/09/polish-government...

biot 16y ago

I'm annoyed by this quote: > "There is frustration with Germany," says André Sapir, a senior fellow > at Bruegel, a Brussels-based think tank. "Germany is moving ahead, > but what are they doing for the rest of Europe?" I'm having a hard time reading this as anything but "Where's our handout?".

JanezStupar 16y ago
Indeed and that's exactly what it is. And (stupid?) sources of these commentaries keep forgetting that Germany and France (but AFAIK mostly Germany) are footing majority of "european" expenses. German workers are the ones willing to tolerate lower wages so that others will be able to develop and compete with them easier. I mean think of it - these guys dug themselves out of shit, while bailing out the rest of Europe. Using mostly common sense and hard work. They also had a retirement plan reforms, which changed retirement from 65 to 67 (!!!!!) for men and they took it with grace, no riots no thrashing of commonwealth (Greece? France??). Disclaimer: I am not German, but I wish that my national leaders would have the integrity and vision of German leaders.
- jan_g 16y ago
  Most of the time they do have the vision, but the problem is that every proposed reform is heavily objected to by the unions, pensioners, students and so on. For example, flat tax rate reform proposal under previous government, then the pension reform last year. It's always the same: large population groups (pensioners, students, state-payroll workers) do not want to give up those privileges ...
  - JanezStupar 16y ago
    Leaders != politicians unions, pensioners, students, etc... got their own leaders which are defrauding the people they should lead. Thats the difference between Germany and the rest of the Europe. Maybe in industry the fact that workers get to share the board with investors help, I don't know. But I know that Germans manage to not shit in their plate time and again. Edit: Why am I getting down voted on this?

JacobAldridge 16y ago

Single page http://www.time.com/time/printout/0,8816,2053595,00.html http://www.time.com/time/printout/0,8816,2053595,00.html

toadi 16y ago

Well they have a imbalanced trade balance. By cutting wages of the middle class they will never get their domestic trade in order because these people won't have the money to buy their own products.

thirdsun 16y ago

Given the financial benefits of producing and manufacturing in asia, Germany has to emphasize the quality of its products and exports to stay competitive. A good example is a very new running shoe brand named Lunge that manufactures its premium running shoes very close to my hometown here in germany, a product that is usually produced in asian low-cost-countries. As far as i know and in contrast to their competitors Lunge refuses to put their money into marketing and instead focuses its efforts solely on the development and manufacturing of their products. Of course they can't compete on the price level, but I hear lots of good feedback from customers that won't go back to asics, nike & co. and don't mind paying the bonus for substantial products. This also applies to me. More here: http://www.lunge.com http://www.lunge.com

deleted 16y ago
[deleted]
HSO 16y ago
hehe, never expected to find "fashion tips" on hn but what do i know. was just looking for new walking shoes, and these just might fit the bill. thx for the heads up, will check out one of the two stores in munich later today. on a related note, i think these kinds of products (basics manufactured to high quality standards) have a huge future. "klein aber fein" can become big business given a newly global middle class. another example: leica is sold out everywhere, despite their rather high prices.

perlgeek 16y ago

> "Germany is moving ahead, but what are they doing for the rest of Europe?" Being the No. 1 financial contributor in the European Union, maybe?

JanezStupar 16y ago
Indeed (http://en.wikipedia.org/wiki/Budget_of_the_European_Union http://en.wikipedia.org/wiki/Budget_of_the_European_Union), but whats interesting that per capita benefit the Netherlands is paying the most (1467€) followed by Denmark and Sweden, with Germany on 4th position. But one must take notice that Germany's eastern half has more in common with Poland, Czech and Slovakia than with western Germany - the workforce is still socialistic,... So real contribution of western population is enormous.
- lkozma 16y ago
  How do you describe a "socialistic" workforce?
  - rb2k_ 16y ago
    "working hard" vs "hardly working" The eastern part of Germany has big unemployment problems (http://ryouready.files.wordpress.com/2009/11/germany_by_unemployment.png http://ryouready.files.wordpress.com/2009/11/germany_by_unem...) Baden Württemberg (South West) and Bavaria (South East) and basically the powerhouse inside the powerhouse
    - lkozma 16y ago
      What about Saarland? :)
      - rb2k_ 16y ago
        Only a million people and an unemployment rate of 7.5% (vs BW: 4.5%, Bavaria: 4.6%). But compared to the east, they're doing all right. (also: nice wine and good weather)

stretchwithme 16y ago

With so many countries borrowing so much to make their bubbles grow and regrow, citizens of countries that don't go for this false growth are supplying the funds by deferring consumption and saving their money. And countries like Germany and China run trade surpluses, because the bubble countries are not borrowing paper; they're borrowing the labor of all those savers. That labor must be delivered somehow and that's why there has to be a trade surplus. The bubble countries can't resolve this imbalance by cajoling the savers into not saving or somehow obstructing trade. The trade imbalance HAS to equal the net borrowing of the country. The only way is to correct the trade imbalance is balance their budgets AND stop artificially lowering their own interest rates, which causes the private sector to borrow more than it otherwise would. Policymakers have bought into the idea that somehow there is a shell game to be played that magically creates prosperity. But the reality is that all the game playing wastes an enormous amount of resources.

Derbasti 16y ago
It feels like you are saying something insightful here but I struggle to parse your writing. Could you somehow rephrase what you just said in more layman-readable English?
- stretchwithme 16y ago
  What phrases are you having difficulty with? Maybe you can give me some examples?
  - Derbasti 16y ago
    Basically, it is this sentence: > That labor must be delivered somehow and that's why there has to be a trade surplus. How so? How can labor be borrowed? How can it be delivered?
    - stretchwithme 16y ago
      It's more accurate to say that the results of labor are delivered. That might be a product or service. And these things can be exchanged for money, which can then be given to other people in exchange for their labor. Yes, technically you are borrowing money, but it has no effect until its used to purchase the results of labor, which is what you actually want to borrow. Your mortgage is actually borrowing the results of all of the labor required to build it, including the labor to make the sheet rock. If there's a disaster in Haiti and the US lends Haiti a billion dollars, that money will be used to buy things. Or pay people to do things, who will then go and buy things with the money. Demand then rises for these things and more of them must be imported. Even if they come from a third country, that additional demand causes imports to increase there. Ultimately, that additional demand affects exports from the US. And, if Haiti ever pays the money back, Haiti will be the one experiencing an increase in its exports. The beauty is that we are not locked into buying just the products and services the lender offers. We can get anybody's. To learn more about this, you could check out Austrian economics and the division of labor.

ippisl 16y ago

This strategy doesn't seem very helpful to the middle class : "estimates that the disposable income of the German middle class hasn't increased at all in the past decade. About a fifth of the workforce, he says, is stuck in insecure and poorly paid jobs, often earning a dismal $550 a month." And doesn't concentrating on the high end exposes Germany to improving capabilities of Chinese companies , and improvements in the Chinese brands ? china is working on those capabilities , how can Germany defend against those ? move to the higher end ?

JanezStupar 16y ago
A person earning $550 a month in Germani (or most of Europe) may be waaay better off than a person making $50k in US. You have your education, kindergarten, medical care, social security, retirement, etc... Already covered - so with these $550 (and this is just not true, minimal wages in Germany are higher - this has to be eastern German minimal wage) you only need to get through month for food and utilities (quite a lot of people earning minimum wages are living in nonprofit apartments). So it's not just black and white. AFAIK $550 is something I can hardly believe to be true, except in Eastern Germany for people aged 40/50+ without any knowhow or qualifications.
- ippisl 16y ago
  That's interesting. Could you please share more details ? 1. What is the minimum wages in Germany ? 2. What's the rent for nonprofit apartments , or are they free and provided by government ? decent size , reasonable quality neighborhood , or small apartments and shitty neighborhood (junkies , etc ? ) ? 3. What's the starting age for state provided kindergarten , what happens before that age , do women get social security ? 4. In short could german people earning those minimum salaries have a stable living with all the basics provided ?
  - sgift 16y ago
    1. There is no minimum wage, but if you earn less than the guaranteed minimum (359 Euro), the state will pay you the difference ("Aufstocker") 2. The rent is provided by state for jobless for the apartments. There are also programs for poor people which aren't jobless to get the rent from the state. The allowed size of the apartment depends on family size afaik. The quality depends on the city you life in, but is usually not too bad (no junkies). 3. Half-time from the 3rd year is guaranteed. There are programs for younger children and full-time places, but that's not guaranteed (but usually one can get a place). I do not understand the question if women get social security? 4. This is a topic of heated debate within Germany, so no conclusion here.

Derbasti 16y ago

Can someone explain to me just how Germany is supposed to be like China? It seems to me that all the article is saying is that both countries are export driven, but that is just about it.

econner 16y ago
The basic idea is that when countries go into surplus an increased foreign demand for their products should push up wage levels, domestic demand and, in turn, price levels. With the rising prices there is less demand and the current account surplus equalizes. I think the general argument is that Germany and China both run huge current account surpluses. China accomplishes this partly through structural regulations and by holding the yuan at an undervalued rate. Germany, on the other hand, cut taxes and reformed its labor and welfare systems in the mid-2000's but in a way that prevents the system from equalizing. The main reason the author gives is that wages don't rise because workers are willing to accept reduced pay raises for job security.