The World’s Biggest Shock Absorber

Since last autumn, Germany has been accused by many Anglo-American economists, above all by the 2008 Nobel laureate Paul Krugman, of not doing enough to combat the world economic crisis and of free-riding on other countries’ stimulus programs. The data, however, show that this allegation stands reality on its head.

MUNICH – Since last autumn, Germany has been accused by a number of Anglo-American economists, above all by the 2008 Nobel laureate Paul Krugman, of not doing enough to combat the world economic crisis and of free-riding on other countries’ stimulus programs. Recently, The Financial Times asked where the German economists are who defend Germany’s policies, voicing the presumption that they disagree with their government’s policies but are too cowardly to say so publicly, thus conforming to the rituals of the German “consensus society.” From a German point of view, this discussion is a ludicrous inversion of the truth.

Germany has implemented two economic stimulus programs, amounting to €80 billion, or 3.2% of GDP, of which 1% of GDP will take effect in 2009. At first glance, this is indeed less than the American program, which totals 6.2% of GDP, of which 2% will be spent in 2009. But this impression is deceptive, since the German state, through the built-in flexibility of its extensive social-welfare system, already contributes to stabilizing the world economy.

Indeed, Germany’s generous unemployment insurance policies ensure that people are able to maintain their consumption standards even if they lose their jobs. Germany even has short-time allowances that enable companies to reduce their employees’ working hours, with the loss in earnings partly reimbursed by the state. Without this short-time allowance, the average number of unemployed in 2009 would be 300,000 higher than it is now.

To continue reading, please log in or enter your email address.

To access our archive, please log in or register now and read two articles from our archive every month for free. For unlimited access to our archive, as well as to the unrivaled analysis of PS On Point, subscribe now.

required

By proceeding, you agree to our Terms of Service and Privacy Policy, which describes the personal data we collect and how we use it.

Log in

http://prosyn.org/2XnoqNk;

Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated cookie policy and privacy policy.