Ist Deutschland in trouble? Well according to Richard Fisher it is.


Can Germany hold its own in the New World of a reconfigured Europe, an ascendant China and a 21st Century America? Is German economic decline exaggerated? Or inevitable?
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The answer to the first two questions is “no.” Unless it rapidly changes course, Germany cannot hold its own in the new world of a newly configured Europe, a rapacious China — and a flexible, highly adaptive American economy.
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Germany’s economic decline is, if anything, understated — rather than exaggerated. And the decline of Germany’s economy and Germany’s role in the world is all but inevitable unless dramatic reforms are taken soon. Very soon.
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The likelihood of strong German leadership turning warlike and to territorial expansion is non-existent. The likelihood that continued poor leadership will lead to German ruin, however, is certain.
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I understand that Germany has been impacted by the psychosis of defeat. It was defeated first by the Japanese in consumer electronics.
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Then it was defeated by Intel and Microsoft and the technology giants of the United States, then by bankers from New York, London and Zurich — and now Germany is besieged by the Chinese.
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But we no longer live in an industrial age. That is now the province of lower-cost labor and technically capable people who have been liberated by the end of the Cold War.
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Think of the eastern side of Europe at least up to the Urals, the emergence of the southern countries of Europe as they moved into the modern era of Europe, the implementation of the plans of Deng Xiaoping in China — and, now, in response to the successful example of China, the emergence of India.
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Labor in the ten new EU member countries is available for a fifth of the cost of German labor. Chinese labor is available for less than 5% — one twentieth — of the cost of German labor.
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No amount of currency revaluation of the renminbi and no amount of foolish bluster about the need to raise taxes in Poland or Estonia or the Euro-acceding countries will make up for this reality.
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Inevitably, these new competitors will creep up the value-added ladder, hollowing out the comparative advantage once held by the former leaders of the industrial age.
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The massive changes required of Germany will be hard. It is always easier to choose a certain present over an uncertain future.
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The beginning of the end of an old regime, of the old way, of business as usual, is always a troubled time. It requires new thinking, bold thinking. Transitions are full of pitfalls, of risk, of pain.
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It is time for Germany’s leaders to be serious and discipline themselves. To stop talking and moaning about their predicament, to stop making convenient patchwork solutions to sustain themselves in office or position themselves for the next election.
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Today, Germany faces the kind of profound crisis of confidence the United States faced in the late 1970s. Just as the late Ronald Reagan moved the United States towards the vision of a brighter future, Germany’s leaders need now to inspire the people of this great country by deeds, in addition to words.

http://www.theglobalist.com/DBWeb/StoryId.aspx?StoryId=4000



Germany, the world’s now fifth largest economy is suffering from stagnation, the economy is not growing. She still is the world’s #1 exporter, and Germany still does have a significant influence in the EU. Almost all Europeans economies depend on the German market for their exports. Germany and France are the natural leaders of Europe that is true, but both states are having a real problem with economic growth. I was reading an article about Germany and outsourcing, for Germany if she exports her jobs she will be making less money then if she kept them. But Germany is currently suffering from a lack of confidence; her economy imo has reached saturation. How much more can it really go? Germany like most European states population is declining without immigration, it is has a huge dependency load. Germany is an example of where the US economy should not go, with high labour costs:

Germany Labour costs:


Labour costs per hour (USD)
2000: 23.38
2001: 23.23
2002: 25.08
2003: 30.86


Do you want that?

[b]"Do you want that?"[b]

Ja, Bitte. The entire world needs higher labour costs, and the pride of workmanship that higher rewards encourage. We'd do far better to bleed the wages of upper management in industry, if we want to better grease the wheels of industry, than annihilate the working middle class. I fly a German sailplane, and let me tell you, the workers who created her earned their pay very well. Personal attention to detail is worth paying for.

Why is everybody obsessed with economic growth?

Nothing exceeds, like excess, I guess. More, more, more. It's interesting, that compulsive behavior seems to be considered normal in many business and ecomomics circles.

The entire world needs higher labour costs, and the pride of workmanship that higher rewards encourage.

But that is a very oddly thought out argument, what is considered high labour costs in India compared to Germany is significantly less. In this world of hyper-globalization if I can hire a Chinese laborer at 5% of a German one, or a Eastern European one for 1/5 that of a German, German industry is highly uncompetitive. Now there is no doubt that Germany is the world’s largest exporter for a reason, their goods are good. But like the US in the 70’s things are to over bloated. Germany needs a new direction to get that economy up and running again, exports aren’t doing it this time. I personally think there isn’t that much Germany can do, the world is shifting away from the West, and our eventual decline has finally come.

I don't think we actually disagree. If we in the "West" stop innovating more than the rest of the world, and if we cease surpassing other producers in terms of quality, then we're economic toast. The means-of-production cat is so far out of the bag, we'll never get it back again- And then comes nanotechnology not far ahead, when portable microfactories start replicating. Then even more than now, creativity and problem-solving will be far more valued than the ability to crank out widgets.

Regardless of where they are, people with exceptional productivity will be rewarded. If the "East" is truly to surpass the ole' "West" in productivity, innovation, and quality, then working-wage and civil rights reform will have to come first. Arguably, this is all happening, which is good or bad news, depending on our emotional attachments to the Eurocentric World (who couldn't even innovate a logical moniker for ourselves). I despise the flat-earth East-West vernacular- but that's another thread.

What the "West" had better really get going on right now, if we know what's good for us, is figuring out what's good for us, and faster than the competition. That is, we need a new generation of creative thinkers and problem-solvers, not assembly-line workers, on our best road ahead.

germany needs to cut taxes significantly and to reduce burden on starting up businesses as well as obligations. You cannot expect a small business to pay to fire someone just like a large bussiness can. They cant provide severance pay that is demanded and other things. Furthermore they cant be taxed as much as large corporations in order to survive because they cant hire accounting firms or do other things which would lower their burden. A 50% tax rate or higher on small business effectively kills it and presents an oligapoly for large firms in that specific area creating higher prices for consumers and lower value.

Germans have too many safety nets at the expense of business innovation and competition. You have to be a citizen to start a corporation which is rediculous. And other barriers prevent interest and competitiveness for business like it exists in britain. I wouldn't say germany is on decline but they need a kick in the pants to realize that higher benefits for workers are not necessarily good if they disqualify small business survival and creation.

IMHO, I have a friend who has a software company in Germany. The software is one of the best and ahead of its time at a global level. The problem is, they do not have marketing funds. German investment funds are behind times and look to do safe investments meaning, if a US company jumps in, then they do.

I think, the same story is across the board. But German thinktanks are looking at EU nations as their playground hoping to change the shape of the future. However, I doubt they will get anywhere due to the fact that we all woke up a sleeping dragon called China. There are a lot of smart people in Germany, but if they are all technocrats rather than leaders, then the future looks ify...still they will keep their leadership role in the EU, since there does not look like anyone else can fill the gap.

Well here is a brief synopsis of the German economic situation:

Germany's affluent and technologically powerful economy- the fifth largest national economy in the world - has become one of the slowest growing economies in the entire euro zone, and a quick turnaround is not in the offing in the foreseeable future. Growth in 2001 - 2003 fell short of 1%. The modernization and integration of the eastern German economy continues to be a costly long-term process, with annual transfers from west to east amounting to roughly $70 billion. Germany's ageing population, combined with high unemployment, has pushed social security outlays to a level exceeding contributions from workers. Structural rigidities in the labor market - including strict regulations on laying off workers and the setting of wages on a national basis - have made unemployment a chronic problem. Corporate restructuring and growing capital markets are setting the foundations that could allow Germany to meet the long-term challenges of European economic integration and globalization, particularly if labor market rigidities are further addressed. The government is also starting long-needed structural reforms designed to revitalize the country's economy. In the short run, however, the fall in government revenues and the rise in expenditures have raised the deficit above the EU's 3% debt limit.

http://www.cia.gov/cia/publications/factbook/geos/gm.html#Econ


A group of forecasters polled by The Economist predicts that GDP will grow by 1.4% in 2004 and 1.7% in 2005 (the euro area growing by 1.8% and 2%, respectively), with prices rising by 1.6% in 2004 and 1.2% in 2005.
http://www.economist.com/countries/Germany/profile.cfm?folder=Profile-Forecast


How can this economy really transform itself, it used to be at the forefront of the post-war economic miracle?

...And then comes nanotechnology not far ahead, when portable microfactories start replicating. Then even more than now, creativity and problem-solving will be far more valued than the ability to crank out widgets.

Nano....shit is mainly a shameless hype to cheat a buck from Uncle Sam. There is little practical substance there, very little. it has plenty of the hype, scifi and shameless fraud. I've been there, observed nano "research" up close and personal. You'll be dead long time and "microfactory" chit will be still just around the corner (just 1 or 2 grants away). MBAs in charge and all color CEOs cranked up utilizing a word "nanotechnologist" to relieve outsourcing worries. It's unbeliavable that somebody buys such a lame, pathetic reasoning.


Then even more than now, creativity and problem-solving will be far more valued than the ability to crank out widgets.

My life experiences tell me that superb ability to kiss ass of the people in charge (and shit on everybody else) is far more $rewarding$ than creativity and everything else. Americans avoid sci/eng careers as hell. This sad fact suggests that real creativity and problem solving skills are not valued much by market. Even truck driving is more certain bet on the prosperity than engineering/science. Sad but true.



That is, we need a new generation of creative thinkers and problem-solvers, not assembly-line workers, on our best road ahead.

Wake up. The bulk of creative thinking and problem solving is done by immigrants, H1Bs, F1s, ....(the same in the Western Europe). West provides mainly marketing and business management expertise.

How can this economy really transform itself, it used to be at the forefront of the post-war economic miracle?

The Germans should learn from Americans as to the method of marketing and applied research. The best brains in USA are mostly immigrants - Chinese, Indians, Japanese and some Europeans. They are respected for their contribution. Germans in Germany do not. Basically they are bigots in general. So too much inbreeding of ideas can get you so far.

I just came back from Mexico on a management consulting to Government of Mexico. What I found is sad. They shun hiring Americans (Chinese, Indians etc) for new ideas and solutions.


Wake up. The bulk of creative thinking and problem solving is done by immigrants, H1Bs, F1s, ....(the same in the Western Europe). West provides mainly marketing and business management expertise.

That is exactly in line of what I found. If a country wants to get ahead, hire the best brains irrespetive of their national origin, and use their advice. Throughout early eighties, when I was in China, they just soaked in knowledge from us [Americans (the mix), Germans, Australians, Japanese] and look where they are going now. In China, even though, I was young then, the upper management of the government just soaked the ideas - asked jus probing questions etc...in effect we taught them how to do things that made us successful. I can not say the same for Mexico.

My friends frustration in Germany says, the banks, the leaders and even the companies etc do not get it.

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The most important weapon in the war for economic supremacy in the 21st century will be the organization of knowledge -Alvin Toffler

I agree that there is a major structural problem in the US and in W.Europe in terms of education, the pursuit of profit has indeed gone too far. As mentioned Even truck driving is more certain bet on the prosperity than engineering/science. Sad but true. Is truly quite sad, but it is largely true. The US is where England was toward the end of her economic hyperpowerdom, all America needs is a “nuveau America” to take over her production capabilities, by all expectations that “nuveau America” will be China.


Perhaps Britain's advance contained the seeds of its inability to lead the productivity revolutions of the twentieth century. Britain's relative prosperity had been based on a set of technologies that greatly multiplied the productivity of unskilled workers. The poor British educational system, its weak corps of technical engineers, and the easy availability of unskilled Irish and rural British workers were no great handicap as long as the most dynamic edge of the economy intensively used both machines and unskilled workers, but not skilled workers. But technologies that made heavy use of skilled workers would be the locus of industrial development in the twentieth century.

-Brad Delong


Replace the 20th centuries mass industrialization with hi-tech, and the low educational standards of the UK and the US, the similarities are overt. The UK lost out to the US in 1872 in GDP; the US was a large country with almost endless resources, and markets. Expanding westwards towards the Pacific, with the British funding most of it! I personally don’t see much of a difference between that and Americans funding the growth of China. China has sent a multitude of men and women to the best American universities to learn the most they could, with that amazing work ethic that Asians have for education. Americans on the other hand have relative to the rest of the world lost that post war capital, and technological advantage. To think the US in 1998 had a multi-billion surplus when it came to hi-tech imports and today has a multi-billion deficit. Imo in my lifetime, I should see the US like the way the UK is today.

...and the low educational standards of the UK and the US...

Education is really a small component of the the neuroeconomics. There are plenty of educated people in the US that are out of work because of cheap labor elsewhere. All the cool stuff are still coming from US design houses. Unfortunately some of them are owned by the Japanese and in a few years it will be Chinese.

I was flying back from New York and my co-passenger turned out to be an American designing furnitures in China. Most cutting edge technology is designed by US, UK, German companies (and some Japanese), yet the bean counters send the production to China.

Bottom Line: The same greed that got us (UK, US etc) at the top of our game is now pushing us down the hill....we engineers have the imagination to take on any one, but if our accountants are ready to sell their mother for a buck....we need to rethink the whole situation....

What goes up...sooner or later....must come down...

saw on the net:

Berlin beckons Indian techies
siliconindia News Bureau Monday, July 26, 2004

NEW DELHI: "It's easier for a terrorist to get asylum in Germany than it is for a foreign software expert to enter the German labour market ," one Indian computer specialist told German Foreign Minister Joschka Fischer during the meeting in Mumbai.

But this may not be the case anymore as Berlin had relaxed some of its immigration laws, making it easier for foreign computer specialists to work in Germany.

Joschka Fischer, on his tour through Asia, addressing the Indo-German Chamber of Commerce said that IT firms and computer experts should consider Germany as a place for investment and employment.

more... (http://www.siliconindia.com/shownewsdata.asp?newsno=24989&newscat=Technology)

Education is really a small component of the the neuroeconomics. There are plenty of educated people in the US that are out of work because of cheap labor elsewhere.

What is the Bush administrations policy for unemployed workers? Re-educate. Right now it is true that the US maintains a technological edge over her competitors but the recent move to India, and even China for some R&D is troublesome for the US.

Bottom Line: The same greed that got us (UK, US etc) at the top of our game is now pushing us down the hill....we engineers have the imagination to take on any one, but if our accountants are ready to sell their mother for a buck....we need to rethink the whole situation....

I don’t think that’s nessecarily true, the US economy like most of the 1st world is “overvalued”, with globalization there are going to be victims. Those victims are going to be the first world, and is that all really that bad?

What is the Bush administrations policy for unemployed workers? Re-educate. Right now it is true that the US maintains a technological edge over her competitors but the recent move to India, and even China for some R&D is troublesome for the US.

Politics...politics...the government has no data to support their conclusions. I work with local job service as a volunteer to provide advice. What I found is scary. There is no data gathered as to the nature of unemployment and their relation with outsoucing. If you do not have the data, it is difficult to make judgement on and basically you speak out of your arse as Bush does.

The comments made by the so called experts in CNN (university professors and business news writers) also do not have data to support their wild ass guess....


I don’t think that’s nessecarily true, the US economy like most of the 1st world is “overvalued”, with globalization there are going to be victims. Those victims are going to be the first world, and is that all really that bad?

If they are so overvalued then why there are still long lines at the visa counter and why we are getting a million illegal Mexicans per year crossing the border with great peril to their life? The economy in any country usually reflect the value (quality) of living in that country. Otherwise people will be running to where the quality of life is the best.

If they are so overvalued then why there are still long lines at the visa counter and why we are getting a million illegal Mexicans per year crossing the border with great peril to their life? The economy in any country usually reflect the value (quality) of living in that country. Otherwise people will be running to where the quality of life is the best.

You know why the US has grown over the past 20 years it has? The reason is because America is an economy of debt. It’s almost fallacious it’s so bad; yes the US economy is overvalued imo. Her fundamentals are horrid, $1 trillion in twin deficits, debt that exceeds GDP, living standards for millions below that of most other first world states, low educational standards, inequality in income distribution, you don’t even have universal healthcare, rampant crime, and economy sucking 21 million barrels of oil a day, your economy is unsustainable. William Canton (or Catton) stated the theory of overshoot the Western economy is in a severe state of overshoot. The best quality of life on Earth is Norway, and Canada not the US.

The best quality of life on Earth is Norway, and Canada not the US.

I guess out of 6 billion people no one wants that good life, otherwise they would be flocking to Norway. Do you know that Norway is rainy year-around and has only 3% arable land and no permanent crops so it has to depend on outside to do its good life....

Norway is not a country, it is a "country club" with only 4.5 million people and the size of New Mexico. GDP growth rate 0.5%. As a local member of the local country club, I can tell you we get better food than the stuff in any Oslo buffet.

Norway's good life comes mostly from oil/gas. and the prices they fetch in world market. It is a welfare society while getting rich on fossil fuel that pollutes the planet. How long do you think they will have that good life when the oil runs out in 20 years and/or the whole planet gets polluted with acid rain and ground water contamination which already started in Norway? And the fact that they opted out of EU means they want all the benefits of the planet with none of the responsibilities.

Dont even think about emulating Norway...it would not last long.

I guess out of 6 billion people no one wants that good life, otherwise they would be flocking to Norway. Do you know that Norway is rainy year-around and has only 3% arable land and no permanent crops so it has to depend on outside to do its good life....

Norway makes money by her massive oil reserves, and she does maintain very high tax rates. GDP per capita in Norway is $100 less then in the US, at $37,700 thus indicating that Norwegians are slightly less productive (at least in theory). Also why didn’t I hear any criticism of Canada, secondly since when did Norway (of all places) become the topic of conversation? Norway accepts many refugees, and it cannot accept millions, and millions don’t go. The reason why millions come to American is because America is a place where a poor person could get rich. That doesn’t mean that the US is a better place to live.

Norway's good life comes mostly from oil/gas.

Mostly yes, is that so wrong? Here is the fundamentals of the Norwegian economy vs. that of the US:

[i]Norway:
Gini index:25.8 (1995)
Labor force -services 74%, industry 22%, agriculture, forestry, and fishing 4% (1995)
Unemployment
rate:
4.5% (2003 est.)
Budget:
revenues: $71.7 billion
expenditures: $57.6 billion, including capital expenditures of $NA (2000 est.)
Debt - external:
$0 (Norway is a net external creditor) (2003 est.)

USA:
Population below poverty line:
12% (2003 est.)
Distribution of family income - Gini index:
40.8 (1997)
Labor force - by occupation:
managerial, professional, and technical 31%, sales and office 28.9%, services 13.6%, manufacturing, extraction, transportation, and crafts 24.1%, farming, forestry, and fishing 2.4%
Unemployment rate:
6.2% (2003)
Budget:
revenues: $1.946 trillion
expenditures: $2.052 trillion, including capital expenditures of NA (2002 est.)
Debt - external:
$1.4 trillion (2001 est.)

[i]How long do you think they will have that good life when the oil runs out in 20 years and/or the whole planet gets polluted with acid rain and ground water contamination which already started in Norway?

Although I would imagine Norway’s economy would suffer, the fact is that oil prices are only going to be going up in the foreseeable future. They would be able to save enough money to become a virtual bank collecting interest from debtors.

Norweigens are not stupid, they are putting there Oil money in a massive fund, i dont know/remember the number but it quite big.

Thanks Kunax, no they aren't stupid. They are going to become a banking nation...quite literally.

So do Saudis, Omanis, Kuwatis...if Deutschland had the same oil reserve, they too would be sitting pretty and this thread would not be posted...

Yes, but you stated that Norway was dead once her oil was gone.

...if Deutschland had the same oil reserve,

If we all...if we all.

Actually, the latest UN ranking put America at #6 and Canada at #7 in terms of quality of life/best place to live.

Canada has risen to #4.

Value of money is not absolute, i.e. money/gold/... are valuable only and only when they can (theoretically) be exchanged for useful for existence goods. I doubt prolonged existence of (many) banking nations is possible. 1 or 2 may exist for a while. Not more. Paper/electronic/metal savings of those nations will plunge quite rapidly as soon as they will become just paper/$ file owners. Therefore, saving paper/electronic $ (which were earned by selling finite resources) for the future generations is oxymoron. I think it's more useful to burn that paper than to pile it. If paper will not be wisely invested in something potentially useful NOW, it will not help future resourceless generations at all.

So why not bring back the Gold Standard?

So why not bring back the Gold Standard?
Gold standard would destroy world wide dollar ponzi scheme. It will hurt bad (otherwise, it will hurt anyway but later). I've read that during seige of Leningrad (in Russia) during WWII people traded expensive jewelry for 1lb of bread and dead rat. Even gold does not have intrinsic value. However, gold was used as an exchang tool for thousands of years. So it's more wise to hord gold than to hord paper money. I am not economists, but it seems to me that with gold standard ability of government to regulate economy (print $) will be greatly diminished=more severe boom bust cycles, economic expansions would be hard if possible without devaluation of gold supported $. Limited supply of gold and growing supply of human souls striving for prosperity make gold standard unlikely. And there is possibility that trillions tonns of gold dissolved in world's oceans will be economical to extract in the near future. Then gold standard may come back.