Thursday, October 28, 2010

Deutschland über alles

Pick your leaders - pick your fate.
German unemployment fell slightly in October, dropping to its lowest level in 18 years as the impact of persistently strong growth in Europe's top economy continued to filter through to the jobs market.

The number of jobless fell by 3,000 to a seasonally adjusted 3.153 million, figures from the Labor Office showed on Thursday, while the headline level dipped to 2.945 million, confirming figures announced a day earlier.

The headline reading fell below the 3 million mark — a key political threshold — for the first time since November 2008, to its lowest point since October 1992.
... On an adjusted basis, the jobless rate held steady at 7.5 percent.
The German way ... the numbers speak for themselves. We went Left - and they did the economically right thing.
In June, the German government announced an austerity package Why has the German (and broader European) economy sizzled at the same time as the much touted “Summer of Recovery” in the U.S. has fizzled?
As economist John Cochrane puts it, belief in the efficacy of government expenditure as economic stimulus requires a world where “people make plans to consume more, invest more, and pay more taxes with the same income (emphasis added).” The “same income” point is significant because an increase in consumption for a given amount of national income naturally results in a larger trade deficit. The increase in aggregate consumption not only increases spending on imports, but also increases domestic spending on goods and services that would have otherwise been exported (see Tony Makin’s chapter).

Although no breakdown is yet available, most analysts anticipate that a major driver of the German economic expansion was an increase in net exports. Part of this is due to the decline in the value of the euro, which made German-produced goods less expensive, but some of it is directly attributable to stimulus spending in the U.S. and China. When a hypercompetitive, high-end manufacturing base like Germany sees major trading partners increase government expenditure, the optimal policy response is to do nothing. Some of the increase in external demand will translate to increased exports, providing a boost to the domestic economy without a penny of additional borrowing.
While the Obama Administration’s critique is reasonable from a raw arithmetic standpoint, blaming Germany’s robust growth on its failure to stimulate domestic consumption rings hollow. As the International Monetary Fund (IMF) explains in its 2010 review of the German economy, “Germany’s strong export orientation stems from the openness of its economy, its long-standing manufacturing traditions and its competitiveness in global markets.” After enduring nearly a decade of slow growth and low inflation, Germany has disinflated its way to an extremely competitive position thanks to painful labor market reforms. The cost of one hour of labor in Germany is now extremely low relative to the economic value added in that hour. Better coordination of public expenditures is not going to erase Germany’s huge competitive advantage in high-end manufacturing.

... that provided the private sector with a clear and unambiguous message that public debt levels would not grow unsustainably. This likely instilled confidence in the private sector by reducing households and businesses’ estimates of the burden of government, which leads to an increase in consumption and investment.
We can recover. All we need is the right leaders, the right policy, and time.

Sigh. They earned it.


Curtis said...

It's sad to have to ask as a native born German, what was that?

ewok40k said...

On  slightly less scale the same here in Poland (helped with constitutional limit on national debt)... Heck, even Sarkozy in France is standing firm on increasing pension age. Go Europe!

UltimaRatioRegis said...

Curtis, the name of the piece is "Deutschland uber Alles", the German national anthem. 

Deutschland, Deutschland uber Alles,
Uber Alles im die Welt...

The German ceremonial song equivalent to our Taps is "Ich hatt einen Kameraden".

"Ich hatt einen Kameraden, einen bessren finst du nicht..."

I once had a comrade, a better one you'll never find. 

Incredibly moving song.

Skippy-san said...

You are ignoring some fundamental differences between Germany and here. Plus austerity is not working everywhere in Europe. I spent the whole summer in Romanian and they are under a draconian austerity program-and it is not working. And the Romanians were pretty pissed off abougt it-especially the military folks I was working with who just ate a 25% pay cut.

But, not to worry, when the US Navy sends Sailors there-they are going to screw them over even worse. Not enough Sailors and not enough facilities-all in the spirit of saving money.

El Gordo said...

You are ignoring some fundamental differences between here and Germany and Romania. Romania was part of the third world in 1990, and not even one of the better parts. Romania is probably better off today than at any time in history, certainly any time in the last 60 years. Austerity? They have hardly had time to get rich.

El Gordo said...

The first verse of the national anthem, the one that begins "Deutschland uber alles", is not used in Germany. It has been "verboten" since the Third Reich. Sing it and Germans will assume you´re a nazi. And if you´re a German singing it, you probably are.

El Gordo said...

Even the last German finance minister, a Social Democrat (!) named Steinbrück, spoke of avoiding "crass Keynesianism". The German equivalent of the stimulus was far smaller, a bigger share went to infrastructure projects which were already scheduled anyway and it also contained tax cuts. Add to this better labor relations, the overhaul (euphemism for cutting) of unemployment benefits under the last government and and the fact that real wages have been stagnating for several years. That was some bitter medicine to swallow and Germany still has huge unsolved problems. But you know what would be the biggest problem? A government that causes deficits of 10% of GDP while ramming through even more expensive, anti-growth policies like there´s no tomorrow.

I said this to people around the time Obama held his Berlin speech in 2008: Germans may like the idea of Obama as American president but they would not have voted for him. Not after having a closer look. They are no longer looking for saviors. They by and large despise their politicians and want them boring and well-controlled.

When Obama/Pelosi took over, it was perfectly clear to me that the US would have stubbornly high unemployment. Social Democracies generally have unemployment, permanent underclasses and cannot integrate immigrants. None of which helps the common guy. Why should the US be different? We don´t even have the honest and efficient public administration and homogenous culture of Germany or Sweden. We are simply to big and diverse for that nonsense.

C-dore 14 said...

It was always interesting to hear it played at NATO ceremonies (especially ones that included the French).

BTW, its tune, "Austria" by Franz Joseph Haydn, is the music for the hymn "Glorious Things of Thee are Spoken" that I've heard in Episcopal and Lutheran churches ever since I can remember.

C-dore 14 said...

Yep, 20 years is just long enough to forget what life was like when Nicolae and Elena Ceausescu ran the place.  Now THAT was draconian.

Of course revolutions tend to occur when the government fails to meet rising expectations.

Andy said...

I went through Training Command Primary & Basic with a group of Bundesmarine fellow JO's. Most of their fathers had, naturally, fought in WWII.  We didn't bring up our faith (Jewish) and they didn't bring up what their father's had done, by some sort of silent agreement.  Yet, becuase I speak some German, we were often the only non-Germans at their admittedly great parties. They were Boomers, just as we were, and there was nary a hint of the old attitudes, even when they were smashed.

Yet watching that video gives me the big creepies.  What with the lighting and the torches, just a wee bit too reminiscent.

ewok40k said...

I bet should Germany ever again come under attack, it's enemies would have tough opponents. And regarding euro-politics: much of the day-to-day managing is done by the civil services, unelected, unsung, unpopular beaurocrats  who speak numbers not ideas. And even career politicians tend to take reality into account.
I am living in a pretty run-down corner of Poland, unemployment is high since local shipyard went bankrupt. But still when I remember the crisis times of communism, I will take present day - anyday. Even unemployed are seeking jobs thru internet, and can afford cold coke or beer in summer.

FCCSWAW said...

Correct.  Only the third verse is now allowed/sung.  "Deutschland über alles" is very taboo post WW2.  Another big reason is that the original song sings about land no longer owned by Germany.  

- PEP Chief in the Bundesmarine.  

Skippy-san said...

The Romanians I talked to were of mixed minds. They, of course, were happy the government was no longer Communist. However they expected more benefit from becoming aligned with the European Union. At the average citizen level they are not seeing it.

They have cut their military from 350,000 to 78,000. At that they still provide about 2000 to AFG, despite the fact that it is unpopular at home.  Their economy is not growing-and they are feeling squeezed.

ewok40k said...

AFAIK Romania is in even worse shape than Poland, economically. Poland keeps low-to-medium growth steadily. In Romania succession of inept and corrupt governments failed to draw any capital in. But believe me, everything is better than hyperinflation and empty shelves in shops. Witnessed it myself in the final days of communism. Military drawdown was necessary from the times of Cold War. When communists first time published WarPac army numbers, I was amazed that Poland by itself had more tanks than UK and France combined. Soviet Union had more of them than the rest of the world combined.This must have been terrible drain on economy. Now with draft gone, professional military being costly, and additional costs of operations in Iraq/AFG, I am afraid militaries will be shrinking badly in all the new NATO members too.
I'e heard Romanian military has close ties with Israelis who have been modernising their aircraft and tanks, and lately there have been rumors of Israeli AF training mountain flying in Carpathia - possibly for Iran strikes.

El Gordo said...

ewok - makes sense. The Israelis must be experts in doing a lot with very little. Romania may well become to the EU what southern Italy was to northern Italy, but that is still a step up. As I have seen in the case of friends from Slovenia, EU membership has upsides and downsides. There must be a lot of investment they would not have gotten if they weren´t in the EU. On the other hand, being forced to pay for "stuff rich people like" isn´t fun. Take compact fluorescent light bulbs, now mandatory. In the village shop where I saw them, they were over 8 Euros a piece. And made in China. Regular incandescent bulbs used to cost a few cents.

ewok40k said...

Well, we have a Phillips-owned lightbulbs factory churning out new energy-saving ones like there is no tomorrow in my neighbouring province, so not only Chinese ones get sold... I am overall pleased with dropping energy bills I have since switching to laptop pc and new bulbs last year. Overall EU membership was a huge boon to Poland with some excess workforce drained away to UK and now Germany, influx of the capital and increasing political standards regarding transparency. As for the Israelis, our army is mighty pleased with their Spike ATGMs. And they have years of experience of merging captured Soviet equipment with Western-quality electronics.