Friday, November 26, 2010

A Great Disturbance In The Force

If there’s anything that characterizes America, at its finest and its worst, it is massive overreaction—if we’re down, everyone else is like the awesomest ever; if we’re up, we’re the only superpower and all that. You might have noticed that things are down lately, and so we’re prone to overestimating the qualities of other countries. This is probably most commonly done with China—this, a country with a $4,283 per capita nominal GDP, which barely outranks such countries as Turkmenistan—but has lately been Germany, as we can see from this op-ed by Harold Meyerson. To be sure, it’s an interesting piece with many good points about Germany’s mittelstand, the small- and medium-size companies that manufacture a lot of good, interesting and innovative stuff.

What it doesn’t recognize is how Germany is able to compete. With Germany stuck in the euro, Germany always has to deal with higher prices—what with the strength of the euro—or lower-wage countries within the Eurozone (e.g. Poland). This means that the only way for Germany to be remotely competitive as an exporter is to hold down wages:
The German economy expanded a sharp 2.2% in the second quarter from the first—the fastest pace since reunification in 1990. But, despite the export-driven rebound, most German workers aren't getting any richer.

One in five are working in the low-wage sector, defined as earning less than €9 (about $11.50) an hour. Nearly a third of the job openings are temporary and often badly paid.

Average annual net income per employee has fallen steadily since 2004, reaching €15,815 in 2009, down from €16,471 in 2004.

While it’s neat that Germany is running a large trade surplus, it doesn’t seem to be doing Germans much good, given that, like the U.S., their average income fell during a long period in the aughts. Indeed, the percentage of Germans making below the thirty-third percentile wage went well up from 1998 to 2008—by about five percent, meaning that German inequality escalated during the aughts, just like the U.S. did.

This is probably the biggest indictment of the aughts’ economy for developed countries; that even the most successful country can’t seem to make its employees better off—as defined by average wage—would be a sign that something very disturbing happened throughout the countries seemingly best positioned for more good things, and it’s something that ought to be figured out.

No comments:

Post a Comment