

How Germany Became the China of Europe - prs
http://www.time.com/time/magazine/article/0,9171,2053595,00.html

======
biot
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?".

~~~
credo
I understand the sentiment, but you're overlooking one big factor.

In a true free market scenario with freely floating currencies, currencies in
countries like Spain, Italy, Ireland, Greece would have devalued. Germany's
currency would have strengthened. This would have made German exports (to
other EU countries) much less competitive than they currently are.

However, the Euro tightly integrates these other countries with Germany and
makes it very difficult for them to revive their economies.

Using a single currency without a single federal government was a risk for all
countries involved. Germany has a huge interest in keeping the Euro alive and
the EU as a single unit. It shouldn't be surprising that many people in other
European countries expect something in return (for having given up the options
that they had before the Euro)

~~~
fxj
people in germany are very pissed about the "rettungsschirm" which guarantees
in principle the bail-out of all the other euro countries (PIIGS, portugal,
italy, ireland, greece, spain) because it is german money that is given to the
other countries. if there would be a referendum about the euro, german people
would vote for leaving the euro zone. they want their deutschmarks back. the
euro is a political instrument and was never welcome by the people in
euroland.

~~~
darklajid
Don't use terms as "people in Germany" (implying all), "german people would
vote" and "was never welcome (sic) by the people".

I'm from Germany, I'm not pissed. I wouldn't vote against the currency and was
actually glad when it was introduced. qed.

~~~
fxj
[http://www.manager-
magazin.de/politik/deutschland/0,2828,736...](http://www.manager-
magazin.de/politik/deutschland/0,2828,736655,00.html)

Jeder Zweite will zurück zur D-Mark

Every second german wants the D-mark back

Date: 27.12.2010

~~~
sgift
From this follows that every second german doesn't want the D-mark back. Far
from "people in Germany". Also, this poll was done after a big campaign by
BILD (german tabloid) that other european countries are bleeding Germany,
which probably skewed results in favor of abandoning the Euro.

~~~
yummyfajitas
Telling people the facts "skewed" results in favor of abandoning the Euro?

~~~
route66
How do you conflate a tabloid campaign with "telling facts"?

~~~
yummyfajitas
Sgift described the campaign as informing readers that other countries are
"bleeding Germany" (presumably money, not literal blood).

That doesn't sound inaccurate. Tabloid != incorrect, you know. Tabloid is
merely a pejorative label applied to newspapers which don't attempt to hide
their opinions.

~~~
darklajid
Biggest newspaper, heavily self-opinionated. Even _if_ (big if, I don't buy
it) the "the Euro is costing us poor Germans too much" would be right: What do
you think what would be the outcome of a report like this for the following
survey?

They reach (according to Wikipedia. YMMV) > 12 million readers. If after their
anti Euro campaign (again, ignoring the facts at all) still 50% of the
population are in favor, how does this even remotely make the non-supporters a
majority?

Having done the numbers: The track record for facts from that specific
newspaper is poor. Even if you like their agenda in this point, please don't
implicate that they are NOT largely misleading (to avoid harsher terms).

------
danac
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
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
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
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.

~~~
danac
It's good to know that quality still sells, and prices aren't everything.

Maybe because of Europe's location, I see textiles sourced from places like
Turkey and even Latin America, rather than purely from China/Asia in general.
What kind of things do you see coming out of the UE?

------
scrrr
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?Sy...](http://www.tradingeconomics.com/Economics/GDP-
Growth.aspx?Symbol=DEM) GDP growth Poland:
[http://www.tradingeconomics.com/Economics/GDP-
Growth.aspx?Sy...](http://www.tradingeconomics.com/Economics/GDP-
Growth.aspx?Symbol=PLN)

~~~
gahahaha
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
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.

------
perlgeek
> "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
Indeed (<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
How do you describe a "socialistic" workforce?

~~~
rb2k_
"working hard" vs "hardly working"

The eastern part of Germany has big unemployment problems
([http://ryouready.files.wordpress.com/2009/11/germany_by_unem...](http://ryouready.files.wordpress.com/2009/11/germany_by_unemployment.png))

Baden Württemberg (South West) and Bavaria (South East) and basically the
powerhouse inside the powerhouse

~~~
lkozma
What about Saarland? :)

~~~
rb2k_
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
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
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
What phrases are you having difficulty with? Maybe you can give me some
examples?

~~~
Derbasti
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
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.

~~~
Derbasti
Thank you for clarifying this. There is indeed wisdom in what you say.

~~~
stretchwithme
Thanks.

------
thirdsun
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>

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

~~~
oemera
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
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
Predicting 40-50 years ahead , in today's world is pretty meaningless.

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

------
ippisl
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
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
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
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.

~~~
ippisl
regarding "social security" : before they go back to full employment, do women
get money from the state , and how much.

~~~
sgift
The topic is a bit complex, but yes women get money from the state:

1\. 13 Euro/day for a period of 14 weeks (6 weeks before the birth of the
child, 8 weeks after the birth)

2\. 67% of their last wage (maximum 1800 Euro) until the child is one year
old.

3\. 184 Euro "Kindergeld" (money for the child, roughly translated) from the
day of birth till the child is at least 18 years old (and maybe longer .. as
said: complex)

------
StudyAnimal
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
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
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
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.

------
toadi
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.

------
Derbasti
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
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.

