Is Germany going to brake? Well, not so fast

Is Germany secretly a BRICS country, as recently claimed? Compared to China or India, its problems are hardly similar.

Last February star editorialist Wolfgang Münchau wrote a witty piece for the FT raising the question whether Germany should behave like a BRIC. Similarly to China and India, the European country is enjoying new export records, and can rely on good companies that often enjoy the benefits of (relatively) low labor costs (laborers eventually enjoy them a little less). So it does not come by surprise if new reports about a slowdown of the actual BRICs lead to skepticism about possible problems in “wanna-be BRIC” Germany.

This should mean that the similarities of Germany with the BRICs should be valid in good and bad times. On this extent, Daniel Altman on Foreign Policy mentioned the main concern about Germany’s economy, in an interesting Foreign Policy article with a horrible title (“No Special Sauce on This Currywurst”, sic). After the usual praise to the 2000s labor market reforms, Altman moves on to say that labor costs in former East Germany have almost caught up with the West, and this might lead to a slowdown: “Wages in the East have almost caught up to those in the West, and eventually the advantage in exports will disappear”.

This is classical deterministic economy. A slowdown due to rising labor costs is what determined the end of Italy’s “Economic Boom” of the 1950s, and even the parallel German “Wirtschaftswunder” of the same period.
Yet, is this really the case of Germany anno 2012? Possibly not.