Economic conundrum

We often hear that high labor costs and excessive regulation have hurt the United States’ ability to compete globally in manufacturing.  Yet one of the goals of the recently concluded G-20 summit was to persuade Germany, no less than China, to whack back its export-driven economy in favor of greater consumerism.   So how does Germany, with its mandatory Mitbestimmung (worker participation in management decisions), strong unions, and extensive welfare protections,  keep its export sector competitive.  Perhaps by concentrating on high-end engineered products.  But so could the U.S., presumably.  I find this a puzzle.

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10 Responses to Economic conundrum

  1. GU says:

    Re: Germany’s competitiveness, it may have to do partly with their cultural values (emphasis on efficiency, hard work, thrift). Only a portion of workers in the U.S. come up in a culture that instills these values.

    I would also guess there is more of a “we’re all in this together” mentality in Germany, again something the U.S. increasingly lacks.

    But, this is pure conjecture . . .

  2. Polichinello says:

    German automotive companies are opening plants in the U.S., and they’re not exactly setting up shop in the Rust Belt.

  3. I’m going to speculate that education plays a major role. The school system in Germany is highly segregated. Less scholarly students are given the option to graduate at the equivalent of grade levels 9 or 10 and go straight into trade school.

    Teaching new manufacturing methods to a US worker with a terrible high school education and a 10-week course in auto body painting (e.g., ) is rather different than teaching a German worker of the same age who has something comparable to a dedicated college-level education in welding, molding, construction, small parts engineering, etc.

  4. gene berman says:

    I am almost at a loss for words. This is supposed to be a meeting-place for folks with at least a generous smattering of knowledge as well as the brains to pick among the smattering for the pieces that fit together to make sense. Hitler said it all in a single word: LEBENSRAUM !

    Germany is a classic “have-not” nation. It’s deficient in its proportion of arable land and is also relatively poor in those things called “natural resources.” What it lacked in those categories it (more than ) made up for through industry, innovation, engineering, and craftsmanship. In an even relatively normal or peaceful world, the many attributes of the Germans brought them prosperity and an even greater population density, meaning an even diminished ability for the population to be fed, housed, clothed, etc. from the product possible from within its borders. They must not only import much of what they need to satisfy their primary needs but must even import the materials necessary (these are the things called “raw materials”) necessary to produce the stuff they will sell to others to “keep the ball rolling.”

    The United States is not only a large country with enormous stretches of arable land (so much in excess of what we need for the raising of crops that we “lose farmland” rather steadily and have been doing so for years)but contains almost every major necessary resource; OUR principal reason for importing is to get what we need more cheaply than we could furnish it from within our borders. We’re a RICH country. The Germans chief
    reason for importing is to get the stuff they need to continue living; they’re a POOR country. (Another country in similar mode is Japan–does that begin to suggest something?)

  5. Gene, if Germany and Japan were the only resource-poor countries in the world, you might have a point. Alas, they aren’t, and you don’t.

    As you are apparently someone with a “generous smattering of knowledge as well as the brains to pick among the smattering for the pieces that fit together to make sense,” you have undoubtedly heard of “selection bias.”

  6. gene berman says:

    Yes, by George,George, you’re right–I’ve gone and chosen an explanation simply because it was laying out there in plain sight where a body couldn’t help but stub his toe on it (and I’m sure I was further biased in selecting it because it looked just like Bill said it would). But I must insist that I wasn’t being hasty–been listening to explanations for all sorts of things for quite some years, so at least have a bit of practice.

    You see, George, first H. McD expressed some puzzlement, a satisfaction of which several took stabs at furnishing. I thought those rather lame and unsatisfactory, not likely to help her improve understanding or get to the bottom of things, so ventured one I thought would provide a better, more fundamental, all-round understanding (not that it’s in any way original–it certainly isn’t). But I must explain that I like a good
    explanation (and even love an even better one), so was at least somewhat disappointed that you hadn’t added another for consideration.

  7. gene berman says:


    You’re right–they certainly aren’t setting up shop in the rust belt. Part of the explanation (for that tendency) is, of course, that the area workforce (and the culture of governance) is more favorable (than in other areas) to “organization,” despite the weaker position of unions in the past.

    But another consideration (that I would suspect of receiving quiet but
    deliberate attention) is that set forth succinctly by the essayist Steve Sailer calls “the Zorro of statisticians,” La Griffe du Lion. If you go to that site (, you can read the essay, “HOW TO MAXIMIZE PRODUCTIVITY…:THE THEORY OF DIFFERENTIAL CUTOFF. The basic
    conclusion may not surprise–but the numbers might. (On a related note, I read somewhere, within the past year, comment by the CEO of Toyota to the effect that they’d found workers hired for their plants here to cost a little less than their Japanese counterparts AND to be slightly more productive.

    (Also thought you might be interested to learn that, 60-65 years ago, the eight states (NY, PA, OH, IN, IL, MI, WI, MN) bordering the Great Lakes (by and large comprising what’s now called the “rust belt”) were producing 37-1/2% of everything produced in the entire world! Of course, production in much of the world had been interfered with or destroyed altogether by WW II–but the figure is still impressive, especially when contrasted to the present state of affairs. It wouldn’t surprise me if most of the iron in the Mesabi Range ended up as rust littering much of the world (and the sea floor). Almost surprising there was even enough left for Gordon Lightfoot to get a song out of it (“Wreck of the Edmund Fitzgerald”).

  8. gene berman says:

    correction to above: end of first para: “unions THAN in the past.”

  9. brian says:

    Title: Obama’s socialism is different from that of Germany

    It dawns on me that any kind of social system or principle does make different effects depending on who exercises the system or principle. For example, American democracy or freedom would not work in Iraq or Italy or Spain.

    Bush thought democratic election would make Iraq a free democratic nation. (I call Bush one of the worst morons in American history. Carter and Bush are neck and neck.)
    Every nation or society has its specific history, culture, religion, experience, custom, and ethnic constitution.

    Communism has made different effects in Russia, China, North Korea, Vietnam, Cambodia, etc. European socialism makes different effects in Sweden, Norway, Denmark, Germany, France, Spain, etc. American people are the mixture of various different ethnic groups of people. Compared to this, Germany and Sweden are relatively homogenous societies.

    What I worry about is that Obama and his men’s socialism is quite different in its quality from that of Germany. Obama and his men’s political and ideological background is alarmingly racial. American racism is now reversed. Obama’s background is concealed to public in many areas. These and other worrisome factors make us worry about Obama’s socialism.

    We have no reason to welcome Obama’s socialism with the reason German socialism works fine. Water can be milk or poison depending who drinks it. Cow turns water into milk, and serpent turns water to poison.

    Obama is a charlatan in “all areas.” He does not know what is religion. He is an Islam-sympathetic false Christian. He is a make-believe Christian. He does not know much about national and international security. He has little understanding in military affairs and diplomacy. He is naïve, immature (juvenile), sentimental, radical, dangerously ambitious, narrow (in knowledge and thoughts), irrational, ignorant, and idealistic. His goal is to destroy American value and tradition. Taliban and bin Laden are not his main concern. His main enemies are in America. He hates America. America and Obama are not compatible with each other. Either one must go.

    Capitalism is the flower of America. American people love freedom, competition, innovation, mass production and mass consumption, speedy transaction and generosity. American capitalism has made a miracle of the 20th Century. Innovation, invention, world peace, freedom, prosperity are the fruits of American capitalism. It has worked incredibly fine. The present economic recession is not the failure of capitalism. The cause of the failure is that government has intervened (supported and directed) in the financial market and housing market too much. It was not the principle of free market economy. Obama (acorn) has contributed in the destruction of housing market. Auto companies have not run their business with the principle of competition. Incompetent CEOs and greedy unions have run auto companies with the principle of wealth-distribution rather than with the principle of capitalism (competition).

    Recent news says that huge Japan airline company (JAL) has irreparably bankrupted. The cause of the failure was reported that Japan government has intervened and supported the JAL for the past several decades, and the JAL CEOs have not minded the deficit business.

  10. Well, Heather, you might consider the possibility that “high labor costs and excessive regulation have hurt the United States’ ability to compete globally” is false and antiquated dogma. Every “business minded” [read lobbyist dominated] politician in America has abandoned the notion of “competition” among countries for the notion of a Global Economy. This is as true of the Democratic Leadership Council [the Clintonistas] as The Club For Growth. The mere fact that you speak of Germany rather than Europe shows that you have some catching up to do.

    The current situation has been manufactured by the logical policy consequences of such a point of view. The United States is not so much a consumer economy as an investment economy. It’s function is to flush capital into countries such as India and China, whether by direct capitalization or consumption, so that the obviously high octane investment opportunities can be exploited. If you don’t believe me, start reading the annual reports of globally structured corporations once you suspend commitment to the “labor costs–regulation” dogma, or the way in which American mutual funds integrate investment abroad into their holdings.

    The real controls on the Global Economy are two: United States debt borrowed in dollars that sustains the primacy of our currency worldwide, and scarce and shrinking fossil fuel resources mostly cartelized among less industrialized nations. The national debt fuels both the “consumer economy” side of our economy–by what the US purchases with the money and by the response of the Fed [exaggerated lowering of interest rates] to the massive US borrowing on the down side of our economic cycle–as well the “investment economy” driving equities speculation and newly capitalized IPO’s in the American market.

    The fossil fuel imbalance flushes more money into OPEC than they possibly can consume in durable goods which then becomes a major capital source [money must go somewhere] for industry outside of the USA. To examine this in action, study the pivotal role of Bahrain as center of the international equities market.

    This should clear up your confusion very quickly.

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