As everyone knows, Germany is proud of being an Exportweltmeister. But in the last couple of years I’ve been struck by how much Germans seem to talk about their country as an Exportnation. The term suggests that exports are not just increasingly central to the German economy but also to German national identity itself. What might be called export nationalism is part of why Germany finds it so difficult to solve the euro crisis: in order to correct the economic imbalances within Europe, it must become less competitive in relation to the rest of the eurozone; but its export-dependent economic model success depends on maintaining competitiveness as German manufacturers face increasing competition from emerging economies outside Europe.
The Year Ahead 2018
The world’s leading thinkers and policymakers examine what’s come apart in the past year, and anticipate what will define the year ahead.
In March 1990, as Germany moved rapidly towards reunification, Jürgen Habermas wrote a famous article about what he called “DM nationalism”. He worried that a new form of “chubby-faced” economic nationalism could usurp the fragile post-national national identity based on the concept of “constitutional patriotism” that had gradually emerged in Federal Republic since 1949. Habermas argued that the other elements on which post-war West German national identity was based – for example anti-communism – had weakened since the end of the sixties. That left only the Federal Republic’s economic achievements since the Wirtschaftswunder, or economic miracle – symbolized by the deutsche mark – as a popular source of national pride.
Since Habermas wrote the essay in 1990, Germany has of course not just reunified but also exchanged the mark for the euro. However, in the decade since the creation of the single currency the German economy has also simultaneously recovered and become even more dependent on exports than it used to be. Two-thirds of GDP growth in the last decade has come from exports and nearly half of GDP now comes from exports. Last week it was reported that, according to the Munich-based Ifo institute, Germany will have a trade surplus of $220 billion in 2012 – bigger than any other country in the world, including China. (The institute predicts Germany will also have a trade surplus with China for the first time since 1988.) If there is a new “economic miracle”, it is one produced by exports.
It seems to me that, in this context, Germany’s world-beating exports are now replacing the deutsche mark as the symbol of German economic success. Germans tend to see their trade surplus as a symbol of success – even the term Exportweltmeister suggests it is the winner of a competition. But the size of the trade surplus reflects not just the success of German exporters but also the weakness of Germany’s own market. “The basic problem hasn’t changed”, the economist Peter Bofinger told the Financial Times Deutschland when asked about the new Ifo data. “German domestic demand is too low”. In a sense, the trade surplus is an expression of vulnerability as opposed to strength.
It seems to me that, in the context of the euro crisis, export nationalism has pushed Germany into a corner. Most economists say that in order to solve the crisis, there must be a process of balance of payments adjustment between surplus countries in the eurozone such as Germany and deficit countries such as Greece. This means surplus countries have to become less competitive and deficit countries have to become more competitive. The German economy, therefore, must adjust: its export sector would have to contract somewhat in relation to GDP and some German labour ought to move from the export sector to other sectors, but unemployment need not rise since the level of aggregate demand could be maintained by fiscal expansion.
However, although Germany says it wants deficit countries in Europe to become more competitive, it does not seem to accept as a corollary of this that it must itself become less competitive. And one of the big reasons Germans say they cannot possibly do this is that Germany is no longer competing with the European periphery but with lower-wage economies beyond the eurozone such as China. At the same time, Germany cannot abandon the euro altogether because a stronger German or even northern European currency would instantly make German exports less competitive everywhere. Export nationalism means Germany wants it both ways, but it may yet have to choose – perhaps even this autumn.