Monday, January 23, 2012

Is Germany the Envy of the United States?

I'm glad for the Germans.

Their economy is certainly the envy of Europe. But I doubt we'll be seeing these kinds of comparisons in a few years, when the U.S. returns to strong economic growth rates and continued unquestioned leadership of the world economy.

At Los Angeles Times, "Germany has the economic strengths America once boasted":
Every summer, Volkmar and Vera Kruger spend three weeks vacationing in the south of France or at a cool getaway in Denmark. For the other three weeks of their annual vacation, they garden or travel a few hours away to root for their favorite team in Germany's biggest soccer stadium.

The couple, in their early 50s, aren't retired or well off. They live in a small Tudor-style house in this middle-class town about 30 miles northwest of Frankfurt. He's a foreman at a glass factory; she works part time for a company that tracks inventories for retailers. Their combined income is a modest $40,000.

Yet the Krugers have a higher standard of living than many Americans who have twice that income.

Their secret: little debt, frugal habits and a government that is intensely focused on high production, low inflation and extensive social services.

That has given them job security and good medical care as well as well-maintained roads, trains and bike paths. Both of their adult children are out on their own, thanks in part to Germany's job-training system and heavy subsidies for university education.

For instance, Volkmar's out-of-pocket costs for stomach surgery and 10 days in a hospital totaled just $13 a day. College tuition for their son runs about $260 a semester.

Germany, with its manufacturing base and export prowess, is the America of yesteryear, an economic power unlike any of its European neighbors. As the world's fourth-largest economy, it has thrived on principles that the United States seems to have gradually lost.

It has tightly managed its budget and adopted reforms — such as raising the retirement age — that some other Eurozone nations are just now being forced to undertake. And few countries can match Germany's capabilities for producing and exporting machinery and other equipment, or its infrastructure for research, apprenticeships and financing that support manufacturing.

"German industry is strong," said Volkmar, speaking in halting English as he occasionally looks up translations on a laptop. "People work good. That's why the German economy is best in Europe."
There's a simple explanation for this. Germany is Germany and the U.S. is the U.S. They have different economies, different economic systems, and different political cultures. And Germany has always been a powerhouse in Europe, or, at least since the end of the 19th century when it made a bid for international mastery and overtook Great Britain in the European balance of power. But it was the U.S. that stopped Germany's attempt at world hegemony and the U.S. was instrumental in rebuilding the German state into the powerhouse that it is today. The continent has been known for slow growth rates and high unemployment for decades, and a relatively austere fiscal policy over the last few years has enabled the German economy to better withstand recent international financial crises than its regional neighbors.

But the U.S. is out of recession and unemployment rates in the American economy are heading downward. As the financial and housing sectors continue to shake out we should see more improvement, particularly after businesses begin to invest and expand their payrolls, putting people back to work. This will take longer should Barack Obama be reelected. Top business leaders have indicated that investment in infrastructure and human resources has been delayed amid uncertainty in the business climate --- particularly the threat of continued onerous taxes and regulation, such as ObamaCare and environmental mandates. Get a Republican in the White House and the good news we're starting to see in the economy will accelerate. And with a couple of quarters of robust economic growth rates of say 4 or 5 percent of GDP, we'll soon have news articles touting America as the envy of the world again.