Posted on 02/17/2012 5:57:34 AM PST by SeekAndFind
The German economy has been one of the wonders of the world over the last couple of years. While the rest of Europe staggered, German unemployment fell to the lowest level in decades.
This week the Organization for Economic Cooperation and Development, the club of developed economies around the world, issued a new “Economic Survey of Germany.” The biggest challenge it could find facing the country was finding enough workers.
It recommended steps to encourage more women to work.
“Please accept our sincere congratulations for a well-managed economy,” said Angel Gurría, the O.E.C.D.’s secretary general, in a speech in Berlin. The country’s “growth model has been so successful in navigating through the stormy waters of the crisis.”
The German labor system, with its incentives to move workers to part time rather than lay them off, does appear to have been critical in keeping the country’s unemployment rate from rising more than it did during the credit crisis.
But the decline of unemployment since then has more to do with the fact that Germany — perhaps unintentionally but certainly effectively — has managed to assure that its currency is undervalued, both relative to that of its neighbors and to much of the rest of the world. That has helped the country’s exporters and brought more business to the country.
In the Great Depression, many countries tried devaluations to gain export advantages over rivals. The strategy became known as “beggar thy neighbor.” It generally failed to work because other countries responded with their own devaluations.
(Excerpt) Read more at nytimes.com ...
ACCORDING TO THE ARTICLE, HERE IS HOW GERMANY PREVENTS MASS LAYOFFS DURING BAD TIMES:
The O.E.C.D. report is worth reading for its explanation of labor policies that other countries should consider. In good times, many German workers work overtime but are not immediately paid for it. Those hours are credited to their account, and when times get rough they go on part time but are paid full-time wages, with the difference coming out of the account. Another government policy allows companies to reduce hours with the government making up two-thirds of the lost pay.
Those policies no doubt reduce hiring when times are good, but also hold down layoffs when times are bad.
Not all is rosy in the German labor market. Felix Hüfner, an O.E.C.D. senior economist in charge of the German desk, told me that he was worried about the fact that about two-thirds of younger German workers did not have permanent jobs. Instead, they have “fixed-term contracts,” which make it easier for companies to let them go when the contracts end. Germany may, he said, be in danger of becoming a “two-class society,” with most older workers in a protected group and most younger ones outside of it.
This is a hit job by the N.Y. Times to explain away Germany’s prosperity. They probably have unique explanations for Sweden, Norway, Canada and Australia, Switzerland, Singapore, New Zealand and Netherlands, and for all other countries that are doing well. No, it’s not because these countries have balanced their budgets while we are running a big deficit, or strengthened economic freedom while we are moving toward socialism, it’s a series of coincidences. The N.Y. Times is surprised we are in depressed economic conditions when we are following the Keynesian prescriptions, and those other countries are doing well that aren’t.
Accounting tricks & Hartz IV managed to reduce the Unemployment Rate from over 11% to ~7% - and keep it there ...
The US has never done that - Keynes prescribed using surpluses in the good years to finance the stimuli needed in the bad years. Instead, we run deficits continually and then borrow even MORE to fund the stimuli.
I watch this show called ULTIMATE FACTORIES (I know, exciting life). The German auto factories are always spotless and the workers are tidy. I watched a show about the Corvette factory, and one of the workers was wearing cutoffs and a tank top. One part of the plant had a sink that looked like one in a rest stop that hadn’t been cleaned for a year. I saw a news story about how a BMW plant in the South is increasing production. The workers looked tidy. I’m guessing it’s a UAW thing.
German discipline is the reason.
The Marshall Plan and decades of "free" defense had nothing to do with it.
A good portion of fantasy is also needed if you want to believe in a "German Miracle", since the economy for the PEOPLE of Germany is anything but "good".
The German system sounds like a system of disguised unemployment. When times are bad, workers are kept on the payroll at reduced/govt. subsidized wages.
That's true enough, but Keynes was wrong about government stimulus during recessions. It doesn't work and it couldn't work. Taking money out of the private economy for the government to reinject into the private economy and expecting growth is completely illogical.
And, unfortunately, that's the part of his theory American liberals are most enamored of.
Since no one has ever tried, it's kind of hard to prove that one way or the other. Although when Joseph told the Pharao to do something quite similar, it did have the desired effect.
As to the "liberals", IMHO every one of our congress critters - regardless of thier professed orientation - believe in eternal deficit spending to finance both the good times and the stimili needed to prompt "growth" in bad times.
Scary NY Slimes article on Greece.
Some of the same things apply to the USA, although not to the extent of Greece... yet.
The media wedded to the ruling party which spouts lies is already a fact in the USA.
The Marshall Plan and decades of free defense had plenty to do with it. But other nations that had the same advantages did not succeed like the Germans did. It is German discipline that is behind the German economic miracle. This is not fantasy.
The Marshall Plan and decades of free defense had plenty to do with it. But other nations that had the same advantages did not succeed like the Germans did. It is German discipline that is behind the German economic miracle. This is not fantasy.
Keynes's ideas can't work because he got it all backwards. Consumer spending does not drive the economy, production does. Nonetheless, I do agree with you on the above statement.
While there are many arguments over what Keynes said, or meant to say, or should’ve said, yes, one of the arguments is that Keynesian economics presumes a fiscally solvent government, so as to preclude the expectation of future tax increases, along with something like a gold standard, so as to preclude the expectation of inflation in the future. Whether or not this was actually presumed by Keynes, last year’s winners of the Nobel Prize specifically were honored for their investigation of the fiscal foundations of money and inflation.
Paul Krugman won it in 2008, thus, the prize hase become less than meaningless as a credability builder ....
There is no argument - Keynes prescribed countercyclic actions - the only one of which that has EVER been used is deficit spending in bad times, but this is simply coincidence since we ALWAYS deficit spend, we just do it more when time gets rough ....
As I alluded to earlier, the concept is not new and sound personal financial planning also calls for "saving for a rainy day".
Krugman won the prize for his contribution to international trade. I myself incorporate his thinking in international trade into my course in international economics, and have been doing so since before he got the prize for that. Krugman, singularly among economists, has been shown to be inconsistent in his thinking. He has become a partisan hack. The New York Times and the PBS New Hour retains him specifically because he is partisan and controversial. Plus, observing him on the PBS News Hour, he seems to be in the process of succumbing to some form of mental illness. He wouldn’t be the first.
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