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 :-)
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.