The German economic miracle—its rise from devastation after World War II to become one of the richest countries in the world—has largely been based on exports. Roughly one-quarter of German jobs depend on exports, compared with about 6% in the U.S. Germany’s home market is too small to absorb the surplus production of its industrial firms.
But German exports have stalled since late 2017 after adjusting for inflation, and industrial output has shrunk by about 15%. That partly reflects a loss of competitiveness: German industry has fallen behind Italy’s in recent years, weighed down by surging labor costs, high corporate taxes and decades of low investment caused by a nationwide focus on debt reduction.
New barriers to international trade have also sprung up amid skepticism in some places of the benefits of an integrated world economy. In the U.S., former President Donald Trump imposed tariffs on goods imported from China and the European Union, among others. Mr. Trump was long critical of Germany’s big trade surpluses and threatened to impose tariffs on imported German autos.
Tom Fairless
A fine example of journalists taking a thesis and presenting facts in favor while quietly dismissing anything that might contradict it. Case in point: the article names examples of manufacturers complaining about rising energy costs and higher wage levels in Germany and considering relocating production to other countries, but the companies cited here are fairly small, with employees in the hundreds or low thousands. The article conveniently sidesteps if these companies would actually be able to relocate, or if that would be the more cost-efficient decision. Outsourcing manufacturing is complicated and time-consuming, a process that involves learning local regulations, building new facilities, training workers, all of which could take years to breakeven; in that time the energy crisis in Germany could very well subside.
The largest example, Ford, isn’t even considering shutting down manufacturing, instead gets mentioned because it chose to expand into Spain instead of Germany. And the article makes no reference to the recently opened Tesla Gigafactory near Berlin – the high demand for workers at this facility may be one of the reasons Ford decided to search for a more distant location, instead of competing for the same workforce.
Another suspicious data point are the GDP growth figures shown in support of the idea that German recovery from the Covid-19 pandemic has been weaker than any major advanced economy
. Their source is… the U.K. Parliament for some reason. It didn’t take me long to find the corresponding OECD data; curiously, while the data for Germany and Japan do show a contraction between Q4 2019 and Q1 2022, the decline is much lower, with -0.17% for Germany and -0.30% for Japan, and it directly contradicts the article’s assertions that Germany’s post-pandemic recovery was the worse among this group of countries.
Honestly it’s a shame that journalists feel the need to employ biased data and exaggeration, because some of these underlying issues are valid and should be of concern, particularly the overreliance on cheap fossil fuels from Russia (and imported energy in general) and an aging and shrinking workforce. Others though are well beyond the control of any German government or the EU, and they may only create some contingency plans for them, not prevent them entirely. Free and open global trade has been a paradigm for decades after the end of the Cold War – until the US suddenly realized that China was thriving under these rules and was set to become a true competitor, and decided to hinder it as much as possible through tariffs and trade barriers, and by fostering a ‘us versus them’ narrative.
Overall, I feel the article displays a dismissive tone that I have come to recognize more and more whenever Americans talk about other parts of the world: in short, our ways are better than anyone else’s, and if they want to succeed, they should be more like us – never mind how dysfunctional many aspects of American economy and culture have become, from guns to the health care system, from failure to act on climate change to student loans and their barely functional political system.
Take this notion that trade surpluses are a bad thing, a veiled accusation leveled frequently at China as well. It casually ignores that, for any country to maintain a decades-long trade deficit, such is the case of the United States, other countries necessarily must have trade surpluses to fuel the extra consumption in the deficit country. The Unites States can easily afford this position, having the dollar as a global reserve currency and the largest military on the planet to back up its interests – most other countries would experience strong devaluation of the national currency without a fairly balanced budget over the longer term. In other words, China and the US are mutually dependent, and should Chinese domestic demand rise to match its industrial output, Chinese exports would drop drastically – and the US would find itself without many of the goods it enjoyed over the years at cheap prices and in abundance.
Pointing fingers at others’ problems may be a tactic to deflect attention from domestic issues as well. For all the noise about the European energy crisis in American media, the European economy actually grew modestly in the second quarter of 2022, whereas the US economy reported a second straight decline. That may well change over the coming months, with a tough winter expected in Europe, but for now things are looking better than many people expected.
I think unchecked American consumerism is more of a problem than anyone cares to publicly admit. The recent inflation surge in the US was caused predominantly by rising consumer demand, as opposed to Europe, where supply chain bottlenecks were primarily to blame. Their consuming habits are also a key driver of global warming, as the average American consumes more than twice the energy of an average European, while their standards of living are not noticeably better, and in some regards worse (see their lagging life expectancy). So the argument that this or that country should boost domestic consumption to allegedly ‘fix its economy’ only leads to flawed policies that would further damage the environment and to other economic imbalances down the road.
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