The quote is quite harsh, but hides a real problem of our (I am from Germany) economic model: Export only works if other countries import. If all countries in the EU would follow the german model and maximized export, while ignoring their home markets Germany's economic growth would be a thing of past.
Germany isn't doing anything to maximize exports. Its just a net lender to the world. It has more savers and policies that don't incent its citizens to borrow too much.
It isn't paper that the world is borrowing from Germany; its the labor of Germans.
If the rest of the world stops subsidizing credit and balanced their budgets, the principle effect will be a decline in interest rates in Germany. And Germans will find it more reasonable to consume more or start new companies at home.
Its not a problem. Germany wins either way.
And those that keep consuming more than they produce will continue to lose, just as individuals do that behave unwisely.
The last page of the article highlights a problem with your line of thought: Wages didn't profit (much) from the economic growth of the last years. And without money germans cannot consume more. This is a problem for an ever increasing part of the work force as cost of living is on the rise.
(There were people who benefited from the economic growth - I count myself among them - but that doesn't invalidate the argument regarding the whole work force)
Wages rose quite a bit in countries that were net borrowers. All the extra cash bid wages up and the higher wages even caused many to move to those countries to get those higher wages. Importing goods is not the only way to import labor.
The net lender countries didn't experience the same wage growth. But they didn't see their currencies inflate either. Except for those otherwise soundly managed countries that for some reason share a currency with a bunch of poorly managed countries. These countries got the stable wages and the privilege of subsidizing their partners.
> And those that keep consuming more than they produce will continue to lose, just as individuals do that behave unwisely.
The comparision between private households and state households is invalid. That's on of the main errors of Neo capitalism. What is wise for individuals is dumb for states.
Because states households are circuits. They press and rotate money. The money they spend comes back partially.
Private individuals households are linear they receive and spend money. The money they spend is lost forever for them.
Money spent by government comes back as tax income by stimulated economic growth.
> Money spent by government comes back as tax income by stimulated economic growth.
You're ignoring the fact that said money was stimulating economic growth before govt took it.
Govt spending is not stimulating. Stimulating spending is stimulating, regardless of who does it. Unstimulating spending is unstimulation, regardless of who does it.
The difference between private spending and public spending is that private spending is usually an attempt to make money while public spending is a combination of keeping govt employees happy and buying votes. (Yes, the two are related.)
Taking money from individuals and using it for politically popular "investments" usually winds up destroying the capital. Politicians don't usually care if its paid back, as long they can claim credit for giving it away.
Private investors are much more likely to earn a return on an investment. Which means they can keep re-investing it.
Yes, you get all the "stimulating" effect without destroying wealth. Of course, its been that way wherever societies become wealthy.
And government handles all of the "investments" wherever societies become poor.
I wonder at what point does a household magically transform into a state that suddenly lives by different rules. When you add the tenth individual? The hundredth?
Of course, the answer is whenever the group becomes large enough so that people lose track of who's taking what.
Government likes to make waves on the pond, point out the highs and distract you from the lows and how much disruption is created.
When the group is small, its a lot easier to identify someone that's just splashing around and claiming to create value.
No, this is not a zero sum game. Germany just makes better stuff. It's not cheating. If everybody else did the same, the world as a whole would be wealthier and the imbalances you're talking about would smooth out.
If everybody just made better stuff they would not need imports from germany anymore. The motivation of trade has always been imbalance. I fail to see how those imbalances would smooth out. (Leaving out the perfect world scenario that every country would have some unique, equally valued tradeable thing/service/whatever, a fair starting situation so to speak. This would be ideology)
If everybody made better stuff (and did not need foreign imports), the world would just have a lot of better stuff (i.e., everyone would be wealthier).
The motivation of trade is simply comparative advantage. Trade is beneficial regardless of whether the products being traded have equal value.
Care to elaborate why this would be the case? I mean, it sounds great and I know the usual arguments that economy is not a zero-sum game, but this sounds way too much like "Hey, it works great in the short run and for one country - let us all do this and hope that it works in the long run!" to me.
Do you really believe that making better stuff more productively is something that only works for one country in the short run? Sure, there are always factors like exchange rates and interest rates that skew the whole thing a little bit one way or the other, but the reality is that Germany is not cheating, they are simply better and them being better does not cause others to fail, it just highlights that fact.
If other nations became more productive, the German current account surplus would shrink and the global productivity level, by implication, would be higher than now. My argument rests on a simple assumption: Higher productivity equals greater wealth. This can of course be questioned on a philosophical level, but not on the basis of mainstream economics.
> Do you really believe that making better stuff more productively is something that only works for one country in the short run?
I don't, but I believe someone has to buy this production or increased productivity doesn't help anyone.
Your assumption sounds correct, but isn't the base of Germany's economic growth in the last years: Germany didn't increase productivity (at least not by a significant margin), but decreased wages (compared with it's neighbors). And this decreased wealth.
Inflation adjusted wages in the US are pretty much unchanged for over a decade as well. Yet, the US has a massive current account deficit whilst Germany, a welfare state, has a current account surplus even with China, a low wage export oriented economy. So wages cannnot possibly be the reason for their success.
I don't deny at all that there are many short term effects and flucuations that have nothing to do with productivity. But we're talking about the different speeds of European economies and those different speeds correlate very well with different levels of productivity.
And look at the Greek stock market. The biggest non financial companies there are a Coke bottling company and the lottery. The biggest German listed company (I believe) is Siemens, which makes high tech industrial equipment like power plants or health care equipment. The Chinese want that. They need energy, they don't want to play in the Greek lottery and they can bottle their own Coke. That's the reason for the two speed economy.
I agree with your argument -- IIUC you're invoking comparative advantage. But the two concepts above are fundamentally different. Wealth is a stock, while productivity is a flow multiplier (e.g. A(t) in Solow model: http://en.wikipedia.org/wiki/Solow_residual). Saying "equals" is a bit adventurous, IMHO. Probably a bit pedantic, but then you do stress that that statement is on the basis of "mainstream economics".
It is also out of self interest that Germany pumps money back to the European rescue funds from their trade surplus with these less-than-stellar European economies. It's not altogether unlike how China finances the US debts by selling more stuff to it. So in the end, it just leads to more co-dependence.
