Smart German strategy paying off economically

by YankeeJim | August 13, 2010 at 12:56 pm

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The German strategy: keep a lid on wages to ensure that it could export its way to growth with competitive, nimble firms producing the cars and machine tools the world’s economies.

Renewing manufacturing America should be our response, though I don’t see anyone in the Obama administration with the knowledge and experience to understand this. Meetings with Warren Buffet and Bill Clinton won’t cut it.

“Defying Others, Germany Finds Economic Success

By NICHOLAS KULISH

Published: August 13, 2010

BERLIN — Germany has sparred with its European partners over how to respond to the financial crisis, argued with the United States over the benefits of stimulus versus austerity, and defiantly pursued its own vision of how to keep its economy strong.

The weekly market in the southern town of Memmingen in Germany.

Statistics released Friday will buttress the German view that they had the formula right all along. The government on Friday announced economic growth of 2.2 percent compared with the previous quarter, the German economy’s best performance since reunification 20 years ago and an annual rate of close to 9 percent.

The strong growth figures will surely strengthen the conviction here that German workers and companies in recent years made the short-term sacrifices necessary for long-term success that its European partners did not. And it will reinforce the widespread conviction among policy makers that they handled the financial crisis and the painful recession that followed it far better than the United States, which, they never hesitate to remind, brought the world into this crisis.

A vast expansion of a program paying to keep workers employed, rather than dealing with them once they lost their jobs, was the most direct step taken in the heat of the crisis. But the roots of Germany’s export-driven success reach back to the painful restructuring under the previous government of Chancellor Gerhard Schröder.

By paring back unemployment benefits, easing rules for hiring and firing, and working together, management and labor, to keep a lid on wages, Germany ensured that it could again export its way to growth with competitive, nimble firms producing the cars and machine tools the world’s economies — emerging and developed alike — demanded.

Germans steered clear of the debt-fueled consumption boom that many believe contributed to the financial crisis. During the recession, Chancellor Angela Merkel resisted the palliative of government spending that the United States and some European partners felt was crucial to restoring growth.”