The German economy is strong compared to many other nations. Currently the German economy is the strongest in Europe.
The German economy was also for many decades before the Euro the strongest of Europe, that was one reason for the strong currency (German Marks).
The sayings of the "weakness" of the German economy was and is a political claim that was made to reduce the workers costs in Germany.
You must also distinguish between productivity (which always was high in Germany in the last decades) and attractiveness to the financial sector (stock etc.). And the second thing is, I guess, what Krugman/Muenchau really meant. And yes, Germany was not so attractive for some time, because growth and ROI where not so high as in the US for example.
But I think, that are two different things. One is about productivity and strength of industries and the other is about the capitalistic demand for more and more growth.
The United States is a net importer, if it quit trading with the world tomorrow American employment would go up. The opposite is true of Germany. Its domestic demand is nowhere near sufficient to absorb current production. Moreover, Germany's trade surplus is substantially the result of trade with Eurozone basket case countries whose trade imbalances are not sustainable.
You also conflate the strength of the Mark with the strength of the German economy. The Mark was a strong currency in the postwar era because the Bundesbank tended to pursue "strong Mark" policies, often to the detriment of the German economy. As recently as 1990 Germany was considered the "sick man of Europe".
> The United States is a net importer,
Because of massive overconsumption, not a particular 'strong economy'. This is a country of consumers.
> if it quit trading with the world tomorrow American employment would go up.
Good luck trying that.
> Moreover, Germany's trade surplus is substantially the result of trade with Eurozone basket case countries whose trade imbalances are not sustainable.
Germany trades world wide. It has for example a trade SURPLUS with China. Because it is able to compete on the world-market.
> You also conflate the strength of the Mark with the strength of the German economy. The Mark was a strong currency in the postwar era because the Bundesbank tended to pursue "strong Mark" policies,
That Mark was strong, because Germany had the strongest economy in Europe and thus could run a strong currency policy.
> often to the detriment of the German economy. As recently as 1990 Germany was considered the "sick man of Europe".
'the sick man of Europe' was a propaganda term by the UK/US press to claim the superiority of their 'service economy'. Actually what happened between 1989 and 2000 was that Germany absorbed the reunification with a collapsed East Germany. Suddenly millions of people from a formerly 'socialist' country were joining West Germany. This was hugely expensive and the problems are still visible for another two decades.
Yeah, a bit of history gives the context.
That's the opposite of how things really work. If you run a strong currency in an export economy, you will get sick, because your trade partners will no longer be able to afford your exports.
That's how it works for Germany for decades.
No one outside Germany cares what a Mercedes S-Class costs. They are buying them independent of the price.
> because your trade partners will no longer be able to afford your exports.
Tell that the Chinese...
This statement contradicts the entire theory of supply and demand. Also, my family owned a Mercedes once, and those things break down too damn often.
>Tell that the Chinese...
The Chinese are running a weak-currency policy.
It doesn't. If it would, the theory would be wrong. Cars like the Mercedes S-Class are not sold based on price - it's a luxury good. Advanced machines for factories are not bought primarily on price - otherwise Germany would have lost these markets long to cheaper competition.
- Product designed and developed in Cupertino, CA
- Product build in China
- Product build on machines from Germany
- Product imported into the US
- Product sold to consumers
----
- Machine designed and developed in Germany
- Machine build in Germany
- Machine imported into China
- Machine sold to Flexconn & Co.
Now think, where productivity takes place.
The same way as the employment rate is probably higher in North Korea. On a more serious note, it has been proven for at least 150 years that Corn Laws and import restrictions do not work, in the best case scenario they are a huge inconvenience for the home consumers, in the worst case scenario they generate famines and national tragedies.
You trade with the world because it makes stuff cheaper. Without trading you would produce that stuff less efficiently, so prices would go up relative to salaries, so people would need to reduce consumption, not only of the stuf that was imported, but of everything.
Whether the end result would be increase or decrease in employement isn't obvious, but I think decrease in employement is more probable.
/me ducks in cover :-)
Germany has been an industrial powerhouse for a long time, and their focus on utterly owning niche markets has been a huge competitive force for many years. The euro helped, but the story doesn't stop there.
I love South Carolina, but it seems like a particularly lousy place to be an industrial worker to me.
The German 40-year old machinist also tends to have a right to continuous training, to be provided by the employer. Since the employer likely already spent quite some money on that employee, they’ll have a higher interest in securing this continuous training and make sure that their employee stays up to date.
Other countries without that mechanism suffered much more.
In Germany we basically loosened the rules for Kurzarbeit (not officially, I think, but the authorities were much more lenient than usual about the legal requirements), because it was a mechanism already in place.
That last part is important. A mechanism that only works okay, but is already implemented everywhere is much better than the perfect mechanism, specifically tailored to your needs, but impossible to roll out on short notice.
In the meanwhile Germany added 20 million people from a collapsed country/economy...
> which created a huge market for German capital goods, which gave Germany a big export surplus.
Germany had an huge export surplus before, during and after it.
> Germany came out the big winner of the euro, therefore its export industry is strong, therefore industry can still engage in long-term investments in its workers
Germany did that before the Euro and is still doing it.
> and the labor unions in Germany are very strong, so they can force corporations to spend on training programs.
The companies are more than willing to train their workers. No unions necessary.
> Germany does a good job training its workers, and therefore the Germany economy is strong, is probably wrong on at least 2 counts: > 1.) it probably reverses cause and effect
There is no 'cause and effect'. It makes much more sense to model economy as a system with multiple feedback loops.
The education and training systems constantly creates new workers with relatively high skill sets. You can guess the effects from that and you can also easily guess why the companies are doing this.
> 2.) the German economy is not really strong
That would not make any sense to say. 80+ million people, fourth largest economy in the world.
http://www.tradingeconomics.com/charts/germany-current-accou...
The current surplus is not a feature of German productivity but the result of having an undervalued Euro and depressed domestic demand.
> The current surplus is not a feature of German productivity but the result of having an undervalued Euro and depressed domestic demand.
The Euro is not really undervalued. The current surplus is a feature of Germany's long term export oriented industry.
How can the Euro be 'under-valued' in Germany?
Not 'at the moment' - Germany has been a strong exporter for almost five decades now...
> then Germany will find itself in real trouble.
Since Germany runs this model since a long time, it has a lot of experience dealing with its effects.
Germany has not had anything like this level of current account surplus before. It is entirely due to mistakes in macro economics (wrong parity within the Euro and a refusal to boost domestic demand).
Sadly Germans seem unable to understand that their surplus is not a sign of economic success, but the result of misguided policies that keep the rest of Europe in recession.
That has a simple reason: Germany is a larger country in a unified Europe now. After recovering from the effects of the reunification, you have now a stronger and larger economy with more and larger trading partners. For the larger export success are a few simple reasons responsible:
* the east european market directly next to Germany is now larger and easier to access. Poland.
* Germany is no 33% larger than before the reunification. Once the added economy started to recover from the effects of reunification and many investments in East Germany were done, the now larger economy, contcentrated back on the european and world market.
* globalization has nicely enhanced the reach of even small companies in rural Germany to trade with even remote locations
> It is entirely due to mistakes in macro economics
That's entirely wrong.
...which in turn strengthens the German position, right? In turn giving them de facto economic success?
He can sketch a picture and create a tool from the sketch in essentially the same day, whereas his counterparts take just as long just to sketch the tool in a CAD program of some sort.
He has always had a problem with CAD design. He can navigate it, but he has difficulty with actual modeling. Luckily he is at such a rank in his profession to where he has an intern assigned to him to translate his graph paper sketches into document-able CAD files and do other computerized clerical work that he's not up on.
Sure there are some times when knowing how things were done decades ago is useful if you have to repair something, or do something unusual. But what drives machine tools today is throughput, throughput, throughput and the techniques used by today's CNC machining centers completely obsolete entire categories of tools from years past.
What is more likely is that a machinist who was experienced in operating manual machines, and who has modernized his training can command a premium because his skill gained in doing things the manual way give him a better ability to program a controller to do it more efficiently (CAM software is only so good).
Sure, but apprenticeship means there's a culture of on-the-job learning and teaching, and strong trade unions lead to german workers being entitled to continuous learning and improvement.
Having apprenticeships means moving 'school' closer to the 40-year olds. Maybe that 40 year old is forced to stay up-to-date by his 20-year old apprentice?
And your Germany/Southern Europe argument made me think of the China/USA relation. How good that analogy is? I wouldn't dare take a guess at.
As part of a master/apprentice relationship the master is expected to teach the apprentice how to use the brand new machining center or at least how to use it to make money. A master who can't teach, or at least set an example, is going to have employment issues. Life on the floor was not really different than my experiences in IT... boss selects a new tool, you will use it in at most a couple days of fooling around, or find a new job, doesn't matter if its machining or IT. If you're the wisest employee, you can expect to get assigned to the new toy and to train the other employees informally if nothing more advanced.
There is/was a continuous and constant struggle between the school instructor component of an apprenticeship and the masters on the job. The instructors want cool sexy toys and resume stuffers like teaching cutting edge tools, but the masters on the job want the instructors to teach the basics. There is also a lot of general experience aka "we don't do centerless grinding machining here, so I hope your classroom instructor is covering at least the basics". And the masters continually complained about instructors who taught the kids the basics of g-code but not how to read a print, lots of "walk before you run" complaining.
At least this is how it was at a former employer for machinists, tool and die makers, millwrights, and industrial electricians. I have no first hand data about plumbers and carpenters.
Something that confuses youth culture on HN is it takes a kid 16 or so years of study to learn "2014 work". So they freak out that a 40 year old dude would have to stop working completely for 16 years to learn "2024 work". Reality of course is that things develop VERY slowly and most of the 16 years of school are focused on 2000-4000 years of human development. Actual development is so slow in most large industries like machining or IT coding, that its not hard at all to keep up other than anecdotes and complainers and people who've basically retired on the job.
This is not a popular view, but I do agree. If one learns the basics, the javascript framework of the week becomes much less intimidating as an obstacle to professional success. There are rarely new things in software development, but the do come along (big data and machine learning).
This is strictly a cultural bias, in the same way in the US apprenticing at all is antagonized, and can easily change.
I know you mean that Germany has that cultural perception still but still has higher employment matching, I'm just saying it is not a technical problem that you can only apprentice in your early years.
In many cases, the job that a 40 or 50 year old machinist in the US had, is gone. The company is gone. The plant is abandoned or town down. The equipment was shipped off to China.
The author acknowledges the dilemma that to maintain competitiveness, the US will have to do something substantive. To match the Germans in skill set infrastructure, the education system will have to reform to look more German, in a way. Exactly how seems unclear.
> Exxon has stupendous institutional capacity and depth of fundamentals and resources that swallow any capacity facebook could ever even fathom to have or make.
Exxon is a much bigger company than Facebook, but the U.S. is a much larger economy that "...swallow[s] any capacity [Germany] could even fathom to have or make". How does your analogy hold again?
Furthermore, many economists don't agree with your proposition that Germany has strong fundamentals. Just look at the Paul Krugman post at the top of the thread.
Edit: removed first sentence because it was too aggressive.
"With new technology transforming work across a range of sectors, more and more businesses are struggling to find workers with the skills to man new machines and manage new processes."
How would apprenticeship explain why a 40 year old German machinist is more likely to be employed than a 40 year old American machinist?
There are many people, in the USA, who are in their 40s and 50s and who are unemployed. Apprenticeship, in its traditional form, would not help them.
There is another way to look at this, which is to say that the German economy is really weak, but the weakness of the economy was hidden by the introduction of the euro, and the irresponsible lending that German banks engaged in, which allowed an unsustainable debt-fueled bubble to appear in Southern Europe, which created a huge market for German capital goods, which gave Germany a big export surplus. Consider the summary that Paul Krugman gives of Wolfgang Münchau description of the situation:
http://krugman.blogs.nytimes.com/2014/10/12/german-weakness/
Germany came out the big winner of the euro, therefore its export industry is strong, therefore industry can still engage in long-term investments in its workers, and the labor unions in Germany are very strong, so they can force corporations to spend on training programs. All of which helps. But the roots of German success, in 2014, originate with the great financial changes of the last 25 years, and that success makes German's training programs look great. But to suggest that Germany does a good job training its workers, and therefore the Germany economy is strong, is probably wrong on at least 2 counts:
1.) it probably reverses cause and effect
2.) the German economy is not really strong