> <http://www.project-syndicate.org/commentary/sinn6/English>
> > Germany's Pathological Export Boom
> Hans-Werner Sinn
Ah, Eurolibs . This is like shooting fish in a barrel. Well, here goes...
> But Germany is gradually becoming a bazaar economy in a different
> sense, because nowadays it specializes in packaging and selling its
> products
Nonsense. It also specializes in designing and inventing products. Infineon, STM, Daimler and SAP are world-class companies, at the forefronts of their tech and markets. Munich, where Sinn is based, is crawling with high tech firms.
> To assess whether excessive specialization has occurred in Germany,
> we must focus on the labor market, for it is here that the effect of
> specialization is most visible.
Labor market changes are slow and messy, and occur over time, not like stock prices or FDI. German labor markets are still suffering from the demolition of eastern Germany's industrial base from 1990-1994.
> In fact, since the fall of communism, the percentage decline in
> German industrial employment has been larger than in any other OECD
> country.
An artifact of the collapse of the East, where 40% of the workforce officially worked in industry.
> To remain price competitive, they
> have had to rely on imported components.
The evidence for this is very thin. Most imports are coming from other industrialized countries, or relatively high-wage, high-skill places like the Czech Republic.
> The manufacture of electrical products, such as chips and passive
> devices, has quite often been shifted completely to Asia, while
> even automobiles that are still assembled in Germany rely heavily
> on components produced in Eastern Europe.
Those aren't exactly low-wage sweatshops. They're highly industrialized members of the EU, with topnotch infrastructure, educational systems, etc. Design and R & D still takes place at home.
> At bottom, the coincidence of unemployment and booming exports can be
> explained by the high and rigid wages from which Germany still
> suffers.
You have to love the capitalist mindset. In a boom? Oh, those pesky wages are holding back growth. Slash 'em! In a bust? Obviously the fault of those no-account, shiftless proles, sitting around and drinking beer all day. Not like expensive economists with secure service jobs who've never worked a day in their lives...
> Excessive wages destroy the
> labor-intensive upstream product stages too fast and also impairs
> other labor-intensive sectors like textiles, simple services,
> tourism, and construction.
Since when is tourism a simple service? Museums, galleries, boutiques, advanced transport systems -- all pretty high-tech. More to the point, Germany can afford high wages, because it also has some of the highest productivity levels in the world.
> But, while
> these sectors therefore grow especially fast, their high capital
> intensity means that they cannot fully employ the released labor,
> with the result that some of the unemployed workers have nowhere to
> turn but the welfare state.
Switzerland does it. Japan does it. Germany did it for most of the post-WW II period, before it fell under the spell of Euromonetarism.
> At the same time, since returns to capital are kept low by high
> wages, very little investment occurs.
Germany has traditionally had higher rates of investment than the US, despite those higher wages. Japan: high rates of investment, low returns to capital. Which is more important - a functioning industrial base, or fatcat rentiers?
-- DRR