
The German Model - hussong
http://www.handelsblatt.com/politik/konjunktur/nachrichten/report-the-german-model-seite-all/6966662-all.html
======
Roritharr
Being german i find this very blandly written. Most of the German economists
know and say that Germany is only at the top right now because it has profited
so much from the Euro, especially on the cost of other EU countries.

I find this very shortsighted to attribute Germany's financial and economic
situation to some underlying culture of perfection and expectation.

As much as i'd love to attribute our current success to these things, i think
we should rather look at the very fortunate fiscal situation the EU positioned
us in.

~~~
Tichy
Do you have articles about this "benefiting from the Euro" thing? Being German
myself, I still don't understand what they mean - and btw this seems mostly to
be an accusation by the struggling European countries, not "most German
economists"?

So how does it work - how do we profit from the Euro, on the cost of other EU
countries?

~~~
HSO
It's a strawman. In every country, you will find sectors (and the associated
people) who have a net gain from the EUR and some with a net loss. It doesn't
really matter and would be impossible to figure out who benefits and loses
more, both on the micro and the macro level.

I myself think about it in this (admittedly broad stroke) way:

1) The EUR is not just an economic project. It is a political instrument.
That's why it exists, and that's what will determine its future. The economics
is only a constraint (alas, now binding) not the objective.

2) No matter the history, a breakup now would be incredibly costly for
_everybody_. Bob Rubin, US treasury secretary under Clinton, aptly described
it as "Lehman times x". That's why a complete reversal is highly unlikely.

3) There is a solution: Peripheral states must accept a German-dominated
external voice in their fiscal affairs; Germany must let the ECB monetize the
debt. Neither of which is politically realistic.

4) In the absence of a conventional political solution, the continent "needs"
a holy-shit-moment, something that will scare enough people sufficiently s.th.
politicians can reach the costly compromise (3). So I expect one to happen.

5) What journalists, economists, and whoever writes about the success of a
country _ex post_ does not matter, it's just noise. Think about what people
wrote about Japan in the 80s, the "Asian tigers" in the 90s, the "Washington
consensus", etc etc. Until just a few months ago, it was China's state-
dominated model, now it's Germany's social-consensus-based turn. Or, to stay
with Germany, remember the Economist cover about "the sick man of europe"?
It's quite similar to the attribution bias when successful people write
autobiographies (or have biographies written about themselves). People like
"the illusion of control", and a nice story with a neat, understandable
"explanation" with max three identifiable causes or "factors" that led to the
observation supports it.

Personally, I think the best way to test your understanding of how the world
works is to make predictions _and bet on them_ , preferably money, less
preferably your reputation or your ego. So yeah, this article is probably blah
but I will read it anyway because it will probably make me feel good, having
grown up in and thus having links to the successful system _du jour_ ;-)

~~~
phreeza
Great comment. Can you explain what 'Germany must let the ECB monetize the
debt.' means exactly?

~~~
maigret
Flood the debt with inflation ;) That means the ECB buys the debt basically,
but of course it creates the Euros out of nothing, so that creates more Euros
for the same economical situation.

The reason behind that is that if the ECB buys the debt, it can keep the rates
under a certain level, buying everything that's above with its - theoretically
- unlimited buying power. Of course that has a few flaws. The Euro is then
less valued, so that's a reason more for wanting even more return on bonds.

------
harryf
As a half English, half German who's had a fair bit of professional contact
with the US, I'd argue the main difference between the US and Germany is short
term vs. long term thinking

The US is brilliant at the short term, as characterized by it's sales culture;
the mentality of sell first, build second is extremely effective in allowing
some forms of innovation, capturing market share fast and eliminating certain
forms of waste. This of course was traditionally offset by attracting talent
worldwide, such as academics and engineers, to immigrate to the US

By contrast Germans are famous for their engineering. It's much more a build
first, sell second approach that's characterized by long term thinking and
planning. Socially that's also reflected education where everyone has a
chance, irrespective of your parents income - having a well educated populace
is a huge asset and that's seen as a long term investment.

All that said, Germany's economy may be less wonderful than it seems. While
the US seems to solve any economic issues by "printing money", Germany props
themselves up with exports - that a country of just 80 million people is the
world's 3rd largest exporter (
<http://en.wikipedia.org/wiki/List_of_countries_by_exports> ) is kinda...
strange and makes we wonder if something doesn't quite add up?

Having worked for a couple of years in Germany, one thing that struck me is
taxes came to almost 50% of my salary. Another impression was my generation in
Germany - currently in their 30's - wasn't very motivated toward their own
careers. That might not entirely be a bad thing - less of a rat race - but it
comes across as a generation that doesn't really know what it's purpose is.

So I have a kind of gut feeling that the German focus on exports is done at
the cost of "self neglect".

~~~
saalweachter
Taxes in the US aren't as low as some are inclined to believe (or as high as
others--).

As a programmer renting in NYC with a big salary and no investment income,
Federal, State, and NYC taxes come to about 44%-46% of my income -- maybe
42%-44% since I tend to get a refund. Once you add in health care costs (both
employee and employer contributions), it's probably pretty darn close to 50%.

~~~
_delirium
Individual tax rates can vary considerably, but overall taxation is only about
2/3 as high in the US as in Germany, counting all taxes and sources. Germany's
tax revenue is about 41% of the country's GDP, while all levels of U.S.
government have tax revenue adding to only 27%:
[http://en.wikipedia.org/wiki/List_of_countries_by_tax_revenu...](http://en.wikipedia.org/wiki/List_of_countries_by_tax_revenue_as_percentage_of_GDP)
(on Wikipedia but just reproducing a Heritage Foundation data set).

My own tax rates when I lived in the U.S. were hilariously low, but then I
didn't make a lot of money either, and lived in Texas for part of the time. A
household making even $200k pays only 24% in federal taxes if filing singly,
or 19% if filing jointly, and that's assuming they take nothing but the
standard deduction and none of it is capital gains, so it's quite possible for
that to be even lower.

I do agree it's important to compare like-to-like. For example, my Danish
taxes now are still higher than my US taxes would be for the same income, but
not _as_ much higher once you take into account that in the US I'd have to buy
health insurance separately.

------
_delirium
Oddly this doesn't talk a lot about the _German model_ , despite that being
the title. The education-tracking system is just about the only structural
feature the article discusses. A big part of the German model is
ordoliberalism (<http://en.wikipedia.org/wiki/Ordoliberalism>) and the "social
market economy", a particular view on the relationship between the state and
private sector. The German approach to labor-employer relations is another
part of the model, oriented around consensus-building between sector-wide
unions and sector-wide employers' federations.

------
maayank
Yesterday I submitted an interview with the co-founder of SAP, a leading
figure in the technology sector[1], about the state of the software sector in
Germany. He had lots of criticism and comparisons with the U.S., so if you
find this article interesting consider reading that interview:
<http://news.ycombinator.com/item?id=4344429>

[1] I'm a former employee of SAP, so I'm biased :-)

~~~
mbesto
Former SAP employee here too :)

Great interview. Awesome questions and always enjoy Plattner's view of the
world.

ps- Where were you based? I was in Newton Square and St.Leon/Rot.

~~~
maayank
Research at Ra'anana Israel: <http://goo.gl/maps/M7Xcw>

It is a great interview! Both the reporter and Hasso were not afraid to be
bold.

It is also a common criticism in the local financial newspapers that Israeli
startups have a problem with rapid international growth because of
language/cultural differences, so it was interesting for me to compare what he
said also to the local scene and not just the American one.

~~~
mbesto
Very cool. I worked in support, and would deal with some of the portal guys
from time to time in Ra'anana

~~~
maayank
Would be interesting to hear your take on [1] :-)

In any case, if you're ever in the greater Tel Aviv area give me a shout! (my
email is at my profile)

[1] [http://www.quora.com/Israeli-Culture/Why-are-Israeli-
people-...](http://www.quora.com/Israeli-Culture/Why-are-Israeli-people-so-
hard-to-work-with/answer/Ohad-Samet)

~~~
mbesto
I'm actually considering a Tel Aviv trip in the next year. Would love to make
it out there at some point. I'm based in London now so it's a (relatively)
easy trip over.

In regards to working with Israelis... The only interaction I had was during
an SAP escalation. Typically (and was the case here) customers are extremely
demanding during escalations and SAP (globally) would bend over backwards for
them. I was in America at the time and working with the guys in Ra'anana. In
many cases they pushed back to us and would get very frustrated. Overall I
think it was their attitude towards being part of the team that wasn't that
great.

------
jsilence
Interresting read.

The inside perspective from within Germany is different. Yes the Mittelstand
is the backbone of our economy, but it is also the majority that thinks it is
being f*cked over a lot by government decision which favor big companies with
huge lobbying budgets. The Mittelstand carries the weight, but has little room
and opportunity for shaping our society.

A lot of neocapitalistic concepts have been implemented during the last decade
and have crippled our social security system and eroded workers rights. The
dreaded subcontracted labour is on the rise. Welfare/social subsidy levels
have been ruled inhumane by our courts. Our highest court has ruled that our
voting system is against our contitution. Twice. What an embarrassment.

The dual education system mentioned in the article is indeed quite good. Apart
from that our school and university education system does have serious flaws.
In international comparison (PISA test) we are way apart from the best in
class and nowhere else but in Germany does the quality of your education
correlate as much with the income of your parents as it does here. More money,
better education and vice versa.

The tight organization and structure praised in the article also does have its
downsides. For example if you wanted to open a bicycle repair shop, you need
to have a Zweiradmechanikermeister. (Meister = Master). So you need to be or
employ someone who has been educated for several years as a bicycle repair
mechanic. In a company that has a certificate for educating bicycle repair
mechanics.

Yes, almost all of the space is managed. Over and over. Example: A club owner
brought a ship, renovated it and made it into a bistro/bar/club boat. For the
permission to use the ~20m of harbor space ranging from the ship to the nearby
road he had to negotiate with four different parties. Just because there are
abandoned rairoad tracs running across. Four different bureaucratic entities.

I am a hobbyist bee keeper. Which makes me sort of a registered farmer. With a
farmer registration number and with registered bee stands. With insurance.
With a local bee keeping society and the regional bee keeping society and the
national bee keeping society I have to be member of (by proxy). If I want to
sell some of the honey, I have to comply with nine different laws. For example
I have to comply with a packaging law that tells my what and how I have to
declare the honey on the label.

Despite a broad public consensus that genetically modified food should be
labelled as such, lobbyists prevented just that. But. If my bees collect
pollen from genetically modified plants, I can no longer sell that honey. So
now I have to educate my bees to become certified honey collection masters and
teach them the difference between unmodified and modified plants and teach
them to only collect from the former. But the fathers of my bees died during
sex and the queen despite her royal title does not have any money. No money,
no education.

Lately my girlfriend and I have been camping at a lake in a different city. On
a paid camping ground of course. No wild camping in Germany. With a barbed
wire fence around it. It almost felt like a prison camp. At midnight my
girlfriend and I made a warm summer night walk around the campsite, talking
little and very quietly. Yet someone from inside a camper barked at us what
the fuck we thought we were doing and that there has to be peace and quiet at
ten. Period.

Our health care system is fundamentally broken. You don't get to see what the
doctor bills to your insurance. But also your insurance does not get to see
the bill. There is another layer of indirection in between called the
Kassenärztliche Vereinigung which collects and anonymizes the doctors bills
and sends collective bills to the insurances. You can imagine how easy it is
to bill more than you worked for as a doctor. There is no control instance. In
order to correct this, there are quarterly billing caps for doctors. Thus if
you get sick in the middle of march, june, september or december, when the
caps are hit, then either you don't get treated, or the doctor treats you
without getting paid. A bad doctor will go on vacation four times a year, a
good doctor will treat you on his own expense. I wish I were joking.

The city of Bremerhafen mentioned in the article ranges among the least
favourite cities in Germany. Despite its interresting history only few people
choose to live there. Sky high unemployment and an almost nonexistent social
and cultural life. But hey, the article did not talk about how nice
Bremerhafen is.

Anyway, I guess my perspective is one of the "its always greener on the other
side" variety.

Germany is indeed a good place to live. I sometimes wish we would not try to
be Weltmeister in everything so that we wouldn't have to solve Europes
problems. (We still benefit from the european union, so keeping Europe tight
and up and running benefits our own situation. So.)

~~~
woodpanel
_Lately my girlfriend and I have been camping at a lake in a different city.
On a paid camping ground of course. No wild camping in Germany._

Sorry, but your post to me seems to be at least a bit of a personal rant.

 _A lot of neocapitalistic concepts have been implemented during the last
decade and have crippled our social security system and eroded workers rights.
The dreaded subcontracted labour is on the rise. Welfare/social subsidy levels
have been ruled inhumane by our courts. Our highest court has ruled that our
voting system is against our contitution. Twice. What an embarrassment._

Well I think it rather depends on your point of view.

The social security system was crippled 5 decades ago, when chancellor Konrad
Adenauer, for political gains, transformed it from a capital-backed insurance-
system into todays system where ever fewer workers have to pay for more
benificiaries.

The workers in Germany till this day enjoy one of the most protective rights
in the world. So protective, that it almost proved to be disastrous when
Germany was Europes "sick-man" in the late 90s and it's labor market deemed to
be inflexible to compete with Eastern-Europe and Asia.

Both, the workers rights and the social security system are examples of what
the author might has in mind when writing about "the German model": That the
German society is able to reach a consensus were the parties involved agree to
pain. Don't forget that it were the unions and the lefties (Social-Democrats
and Greens) who worked on and implemented the needed reforms.

~~~
cschwarm
> The social security system was crippled 5 decades ago, …

Check the history of the Rentenversicherung: It was basically ruined by
inflation caused by the First World War. [1]

[1]
[http://de.wikipedia.org/wiki/Gesetzliche_Rentenversicherung_...](http://de.wikipedia.org/wiki/Gesetzliche_Rentenversicherung_%28Deutschland%29#Geschichte)

~~~
woodpanel
Sorry, but I have to disagree. WW1 was rather one of the many causes that made
social-security not working after WW2. The other big one being, well, WW2.

However, changing the financial scheme of social security away from a capital-
backed one towards a "generational accounting" one IS what makes it not
working today (unless the working population keeps it's proportional size in
relation to the retirees).

------
vitaminj
I'm one of the many guest workers in Germany. I'm not an EU citizen and I
didn't speak a lick of german when I got here. I'd say over half the other
engineers in my company are non-german, and most of them couldn't string a
single german sentence together when they started either (some still can't!).

The company has had an open engineering position for a german national (or at
least native speaker) since before I started almost 2 years ago... and still
haven't filled it, even after half a dozen foreigners have joined.

So I can sympathise with the idea that Germany is struggling to find skilled
technical workers. It's telling that a company has to resort to hiring a bunch
of non-german speaking foreigners and sponsor their visas and so on. I'd find
it hard to imagine a French or Italian firm doing the same thing.

The article alludes to the fact that the Mittelstand firms are spread out
across the countryside and many are headquartered in small villages. This is
true and could perhaps be a big factor in why they find it hard to attract
people - I mean, how many skilled engineers are willing to live in the middle
of nowhere? I chose to work to here because the company is one of the leaders
in a niche specialist field, and I certainly don't regret the decision given
the amount I've learned so far. But frankly, I'd rather live in a bigger city.

------
yk
Interesting article, which summarizes nicely how German conservatives like to
view the country. So I think it is more interesting as a report how our
current ruling (center right) coalition views Germany than as being grounded
in reality.

~~~
sprash
Exactly! This article brings up a lot of anecdotal evidence to build up
stereotypes. This should ring all kinds of alarm bells. It is a propaganda
piece with little basis on reality.

------
wahsd
I lulzed when I heard that a Wall Street Financier said "We need to learn from
the German model"

Wall Street will look at the "German model" and scoff at it because it is on
the opposite end of the spectrum of exploitation, deception, manipulation, and
fraud.

Don't get me wrong, humans are involved, so the "German model" is no where
near perfect either, but it is a social democracy at its core; where the
government at least tries to have the best interest of as many of its people
in mind as possible. That is diametrically opposed to everything on Wall
Street and the aristocracy that controls our country and effectively
psychologically abuses the minds of Americans to the point of schizophrenic
mental illness.

There is no way that anyone on "Wall Street" will learn anything, just like
when they almost executed the American economy in 2008 they said "Oops! Sowy!
We learned our lesson and promise to behave." And just like the primal animals
they are, they continue to deceive, defraud, manipulate, corrupt, and exploit
as they are building their next scheme to sell us all a house of cards.

------
woodpanel
Disclaimer: I'm form Germany and usually have a more libertarian view on
things.

Much of the German Model is attributed to ordoliberalism
(<http://en.wikipedia.org/wiki/Ordoliberalism>). But to me this rather "wierd"
play of liberalism itselfs seems to be more influenced by German culture than
the other way around.

And with "culture" I rather mean pieces of wisdom, wich every culture gathers
throughout history. The most destinctive events in German history have in
common that bad things happened out of chaos. And salvation (order) came from
above:

1) The Thirty Years War eraded the German populace. Espacially in Brandenburg
with almost 70% gone. It does not wonder that from that area, the prussians
developed the proto-German clichet-like mindset of good-governance. Germany
went on to be the only country in the world (for a long time) were
evangelicals and catholics considered each other countrymen
(<http://en.wikipedia.org/wiki/Thirty_Years%27_War>)

2) Napoleon had to bring in social reforms and the rule of law. While our
nobils had to give us back our independence and pride from Napoleon and were
the ones "creating" Germany in 1871. The nobils also created social security -
as a means to keep the masses from revolting.

3) While WWII and the Holocaust are examples to what evil this believe in
good-order can lead to, the reaction to the loss of the first and the shame of
the latter are itself shaped by German culture:

\- Implementing democracy with war seems to have worked in Germany, it came
from above.

\- Denouncing anti-semitism came somewhat from above and, to some extent, the
people have obtained this view.

Also:

\- The most successful participants of the German protests of 68 were those
who believed in reforming the "system from within"
(<http://en.wikipedia.org/wiki/Alliance_%2790/The_Greens>)

\- our national-holiday is not a date where good came out of a revolt but
where politicians made a contract come into effect
(<http://en.wikipedia.org/wiki/German_Unity_Day>)

\- Our unions and left-parties were willingly enduring pain, in that they
proactively implemented harsh reforms in the labor market and social security
system.

My point is, our culture makes it hard in Germany to argue against government.
Even our liberals believe in the benefits of good order. The historc feedback
loop tells me it might be better to endure a little pain now (eg giving up
freedoms) than to endure fatal pain later (mob lynching).

PS: This is not a praisal. As libertarian-tending I don't think fear of chaos
is always a sign of maturity. It makes a lot of little things much more costly
(<http://www.youtube.com/watch?v=-oYl-Lm9a6U> ?! Never happening in Germany
without regulatory approval and intense testing) And on the big scale: the
fear of order being disturbed was also an argument against policies that gave
more rights to the German jews in the 1800s. And it is the underlying argument
against anything "capitalist" or "gentrifying" today.

