{"id":413297,"date":"2010-03-10T11:23:23","date_gmt":"2010-03-10T16:23:23","guid":{"rendered":"tag:www.economist.com,21005288"},"modified":"2010-03-10T11:23:23","modified_gmt":"2010-03-10T16:23:23","slug":"being-germany","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/413297","title":{"rendered":"Being Germany"},"content":{"rendered":"

GERMANY, it is well understood, is an export-oriented economy<\/a>:<\/p>\n\n\n\n
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So what, right? Well, Martin Wolf says<\/a>, Germany’s insistence on staying being like Germany means that other European countries can’t be like Germany, which places strains on the European project.<\/p>\n

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Unfortunately, the domestic German debate assumes, wrongly, that the answer is for every member to become like Germany itself. But Germany can be Germany \u2013 an economy with fiscal discipline, feeble domestic demand and a huge export surplus \u2013 only because others are not.<\/p>\n<\/blockquote>\n

Tyler Cowen says<\/a> that Mr Wolf is making a mistake here; economic growth is positive sum:<\/p>\n

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Say that Portugal, Italy, and Greece were more like Germany, economically speaking that is.  Toss in Albania to make the contrast starker.  They would have higher productivity and higher output.  They would export more.  But with their higher wealth, they would import more too.  That includes more imports from Germany, most likely.  German *net exports* might well decline, as Germans buy more olive oil and high-powered computer software from Albania.  But German exports need not decline *on net* (over a longer run of continuing global growth they certainly will not decline) and that should prove good enough for the German model to sustain itself.<\/p>\n

No economist thinks that being wealthy is a zero-sum game.  “Being like Germany” isn’t exactly the same as being wealthy, but the German model succeeds (in large part) because of its high absolute<\/em> level of exports.  “Net exports” is a zero-sum game at any single point in time, but when it comes to secular growth that’s also not the variable which matters.<\/p>\n

The bottom line is that people are blaming Germany (and China) a bit too much here.<\/p>\n<\/blockquote>\n

This is obviously true; a richer, more productive Greece would be good for Greece and Germany, just as a richer, more productive China will ultimately be good for everyone. At the same time, I think it’s worth thinking about the ways that exports figure in development and in economic recovery. Net exports, as Mr Cowen notes, are a zero-sum game at any one point. China’s decision to aggressively pursue growth in net exports as a development strategy will ultimately be good for the world, since 1.3 billion wealthy Chinese citizens will import a lot of things from other countries. But in the meantime, China’s progression along the path of export-intensive development has necessarily prevented other developing nations from walking a similar path.<\/p>\n

The problem becomes more acute amid recovery from a deep recession. Economies with weak domestic demand must look to net exports for a lift, but not everyone can export their way out of recession. And here, Germany’s persistent trade surplus is particularly problematic, both because Germany’s economy is doing relatively well and because it poses a threat in the current, disinflationary environment<\/a>:<\/p>\n

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Latvia’s model: drop wages to increase export income. Greece: drop wages to increase export income. France, Germany, Spain, Portugal, etc., etc. It’s impossible that the whole of the Eurozone<\/span> will drop wages to increase export income. It’s especially bad for countries like Latvia or Hungary, where the lion’s-share of trade occurs withing the boundaries of Europe.<\/p>\n

And what happens when export income does not provide the impetus for aggregate demand growth? Well, there’s not much left. Can’t devalue the currency (via printing money), and tax revenues will fall faster than a ten-pound weight: rising deficits; rising debt; rising debt service (via surging credit spreads). Sovereign default seems like a near-certainty…<\/p>\n<\/blockquote>\n

These issues are complicated. Scott Sumner has argued, fairly persuasively, that China’s renminbi policy was highly stimulative and allowed the Chinese economy to continue growing through the recession, thereby placing a floor under global output. And Mr Cowen is correct that it’s unfair to blame Germany for keeping its fiscal house in order, investing heavily in education, and generally being responsible. But while it’s right to not sweat things like market share from a long-run perspective, it’s also true that when the pie isn’t growing or is growing painfully slowly, market share matters a lot<\/em>. Capturing a larger share is the only way to boost the fortunes of one’s domestic population. And for Germany and China to be completely insensitive to this fact, at a time when they have much more fiscal room than others to cushion their citizens against the downturn, is problematic.<\/p>\n","protected":false},"excerpt":{"rendered":"

GERMANY, it is well understood, is an export-oriented economy: So what, right? Well, Martin Wolf says, Germany’s insistence on staying being like Germany means that other European countries can’t be like Germany, which places strains on the European project. Unfortunately, the domestic German debate assumes, wrongly, that the answer is for every member to become […]<\/p>\n","protected":false},"author":4534,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-413297","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/413297","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/4534"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=413297"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/413297\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=413297"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=413297"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=413297"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}