ctrl+c, ctrl+v

Germany's economic model works admirably - for Germany. He plight of other Eurozone countries cannot be solved through a simple copy-and-paste strategy.

The new paranoid mantra dominating Europe’s economic discussion is whether the “German model” can be replicated in other countries in order to achieve the same enviable economic results. Germany has posted impressive growth rates – 3.7% and 3% in 2010 and 2011 respectively – and is expected to grow during 2012, the supposed year of the Mayan apocalypse. Unemployment hovers between six and seven percent, thus boosting consumer spending. Moreover, Germany was the first country in Europe to really concentrate on Asia in its business strategy, achieving an industrial presence and market knowledge years before the others.

Copy and paste would not work

This is just a brief list of recent German economic accomplishments. Of course, every period of success comes with problems. We should not downplay the negative side-effects of recent German economic reforms, such as a slight rise in income inequality. Living costs in Germany are rising, and the invasion of tourists in some cities has led to “anti-tourism” demonstrations by residents. Protest took a Kantian turn in 2011, when the Kreuzberg neighborhood in Berlin hosted a joint residents and tourists demonstration against rising real estate prices.

Yet analysts are also quick to point out the virtues of the German economic model: Long-term planning, a focus on research and investments in education, the focus on manufacturing (rather than on finance), and an adequate level of labor flexibility – although some unions may define it as too adequate.

The crucial question is: Would this mix work in other European countries? Well, no. It could work if the other countries were like Germany. But since they are different, simply super-imposing the German model would not work.

The World’s Opinion Page

Help support Project Syndicate’s mission

subscribe now

Beneath the usual tautologies, there are three main reasons for this. The first reason why copy and paste would not work is that Germany’s success did not happen overnight. Writing for ‘The Daily Beast,’ Andy Kessler informed us that “Germany’s industrial icons — Mercedes, BMW, Siemens, ThyssenKrupp — are so ‘80s. Teutonic efficiency hasn’t adapted well to modern-knowledge industries.” Nevertheless, these large companies are also the ones that led Germany’s expansion into Asian markets under the “Go East” strategy. These companies still make big profits – except for Thyssen, which doesn’t fit Kessler’s boutade. You cannot develop such manufacturing success overnight.

Germany may nevertheless inspire some degree of change

The second reason is that a wide set of labor reforms, like the ones introduced in Germany in the 2000s, call for the sacrifice of political leadership. Making labor contracts flexible and reducing social spending cost Gerhard Schröder his tenure as chancellor as unemployment remained high and reforms were poorly managed. Moreover, the 2000s were a turning point for Germany’s national personality as the country recovered from reunification.
It was a “once in a lifetime” opportunity for far-reaching social reforms that the German leadership decided to exploit.

The third reason is that the power structure within Europe is already set in stone, and trying to leap-frog the gap would not work. Even within a unified market and a currency union (and under the umbrella of political coordination), it is normal that one region prevails above the others. In the European case, this region is not even Germany as a whole, but rather the productive South-Western belt, from Bavaria to the Ruhr. Today, these areas are restructuring the manufacturing map of the continent. Manufacturing is focused on Poland and other Eastern European countries rather than on Italy, France, or Greece.

Although the German model is not replicable as a whole, Germany may nevertheless inspire some degree of change. Long-term vision and investment on education have proven to be important leverages for growth in the medium-run. Instead of trying to copy and paste Germany, Eurozone countries should decide how to better be integrated in a “German-led” economic structure: How to supply components for value-added productions, how to modulate priority infrastructural investment, and how to allow for German direct investment in their territory – and vice-versa.

In order to achieve all this, countries need an accountable elite with a vision. Regular citizens, too, are implicated in this: People do not get any better politicians than what they demand – and German politicians are subject to constant and accurate scanning by journalists and newspaper readers.

Stefano Casertano, The European

http://prosyn.org/yF7cFsA;
  1. Television sets showing a news report on Xi Jinping's speech Anthony Wallace/Getty Images

    Empowering China’s New Miracle Workers

    China’s success in the next five years will depend largely on how well the government manages the tensions underlying its complex agenda. In particular, China’s leaders will need to balance a muscular Communist Party, setting standards and protecting the public interest, with an empowered market, driving the economy into the future.

  2. United States Supreme Court Hisham Ibrahim/Getty Images

    The Sovereignty that Really Matters

    The preference of some countries to isolate themselves within their borders is anachronistic and self-defeating, but it would be a serious mistake for others, fearing contagion, to respond by imposing strict isolation. Even in states that have succumbed to reductionist discourses, much of the population has not.

  3.  The price of Euro and US dollars Daniel Leal Olivas/Getty Images

    Resurrecting Creditor Adjustment

    When the Bretton Woods Agreement was hashed out in 1944, it was agreed that countries with current-account deficits should be able to limit temporarily purchases of goods from countries running surpluses. In the ensuing 73 years, the so-called "scarce-currency clause" has been largely forgotten; but it may be time to bring it back.

  4. Leaders of the Russian Revolution in Red Square Keystone France/Getty Images

    Trump’s Republican Collaborators

    Republican leaders have a choice: they can either continue to collaborate with President Donald Trump, thereby courting disaster, or they can renounce him, finally putting their country’s democracy ahead of loyalty to their party tribe. They are hardly the first politicians to face such a decision.

  5. Angela Merkel, Theresa May and Emmanuel Macron John Thys/Getty Images

    How Money Could Unblock the Brexit Talks

    With talks on the UK's withdrawal from the EU stalled, negotiators should shift to the temporary “transition” Prime Minister Theresa May officially requested last month. Above all, the negotiators should focus immediately on the British budget contributions that will be required to make an orderly transition possible.

  6. Ksenia Sobchak Mladlen Antonov/Getty Images

    Is Vladimir Putin Losing His Grip?

    In recent decades, as President Vladimir Putin has entrenched his authority, Russia has seemed to be moving backward socially and economically. But while the Kremlin knows that it must reverse this trajectory, genuine reform would be incompatible with the kleptocratic character of Putin’s regime.

  7. Right-wing parties hold conference Thomas Lohnes/Getty Images

    Rage Against the Elites

    • With the advantage of hindsight, four recent books bring to bear diverse perspectives on the West’s current populist moment. 
    • Taken together, they help us to understand what that moment is and how it arrived, while reminding us that history is contingent, not inevitable


    Global Bookmark

    Distinguished thinkers review the world’s most important new books on politics, economics, and international affairs.

  8. Treasury Secretary Steven Mnuchin Bill Clark/Getty Images

    Don’t Bank on Bankruptcy for Banks

    As a part of their efforts to roll back the 2010 Dodd-Frank Act, congressional Republicans have approved a measure that would have courts, rather than regulators, oversee megabank bankruptcies. It is now up to the Trump administration to decide if it wants to set the stage for a repeat of the Lehman Brothers collapse in 2008.