As someone who lives and works in Germany I'm always surprised when I hear of the strength of the country. I've worked for several very large corporations here, financial and automotive, and how anything is achieved at all remains a complete mystery to me. It seems to me that all the success reported is directly in spite of their attitude towards technology and IT in general instead of because of it.
The culture here is to outsource everything besides PM, then every few years when the projects fail or are over budget (time or money) to replace the partner with someone new and lose all the domain knowledge those teams had and then they have to start again. I've seen millions of euros wasted in this manner, the only way it'll be fixed is when the current generation of management retire.
I'd be keen to know if anyone else working here has a similar experience, I've tried to 'fix' this culture several times and haven't succeeded yet.
Weirdly, in the last 6 months Azure seems to be making huge inroads, perhaps that'll help.
The most un-understandable thing is that none of this export wealth reaches an individual, especially a guest worker, a foreigner. It's quite shocking to discover by a foreigner specialist lured to the country by the multitude of positive economic news. Cost-cutting and exorbitant charges and contributions everywhere. The entire export wealth is captured by the oligarch families and the highest level executive caste.
Good article, but the model is too simple. UK used to produce more cars than Germany, but it's the opposite now. Why? They haven't shared the same currency. German cars were better.
> And it means those same workers in Spain are less equipped to compete for Manufacturing jobs — because Elon Musk has to pay them in German Euros instead of cheap Spanish Peseta. If you’ve got to pay everyone in German Euros, you might as well get the most productive workers for your “buck”, right?
If that was the reason then he should move his factory 50+ miles East. Why the factory is near the Berlin? Network effects. They have the logistic, supply chain and talent. Even electric car project, created by Polish government is designed and build in Germany.
The analysis is incomplete. It does not take services into account.
Yes, Germany has a positive trade balance in goods. But the trade balance in services is negative. This ... well ... balances the balances.
The UK has shifted its economy from production to services. Hence the negative trade balance for physical products excluding services.
„ France and the UK were opposed to German reunification, and attempted to influence the Soviet Union to stop it.[8] However, in late 1989 France extracted German commitment to the Monetary Union in return for support for German reunification.[9]“
Theres a reason the Politics is becoming extreme, the largest economy is simply neglecting its citizens and simply saving a lot.
Edit: not trying to troll. Many are thankful, but many are worried aswell. I/we dont consider it difficult to understand. Work hard, save, dont go to wars, its a simple equation, but its not all rosey, and things arent perfect. Many claim this prosperity to be illusory, and fear a harsh crises ahead.
Not a word about the fact that Germany simply produces desirable products? Somehow that has to factor in. Financial policy and the education system favors a conservative manufacturing sector that incrementally improves upon what Germany has done for decades.
While I got my ME degree in Germany my dad, who is a solid state physicist, spent all his energy trying to accelerate the development of a German electronics sector. He was always ranting about the hurdles thrown up by politics in Germany, "We'll just continue building cars and machines for the next 100 years." Well, sounds like it's still working although the end of the cold war and the common market has distorted things in Germany's favor, an effect that probably won't last.
I wonder how that plot would look like if they separated individual US states and also considered trade between them. I'd guess the big three (California, Texas, New York) would dominate quite a bit there as well.
It was a fancy read until
> an efficient & strong military
Now I doubt everything.
What does this game look like with a fixed money supply and no trade or movement restrictions? My naive Econ 101 guess is that wealthier nations would export more, not less, and higher value goods. Why does inflation work to produce a trade surplus? It seems that the only reason is decreasing internally-sourced costs like labor, but this just props up obsolete value chains instead of promoting capital innovation. Does this work long-term? Also, in a game with one inflator, how does that turn everybody else into a leisure services economy without a whole bunch of inflationary distributive spending on their part as well? It would seem that the fixed-supply result would look like deflation plus capital excess, which is perfect for investment in new industries. It seems to me that maybe Germany is in roughly this situation whereas the US/Japan/etc can manage money supply according to political will, so a larger portion of productivity is diverted to leisure services and structural inefficiency. Also, is Chinese currency manipulation an economic success story? What would we see with a free market fixed currency in China?
According to American Society of Mechanical Engineers one reason Germany has kept is industrial base are the Fraunhofer Institutes you will find all over the country right next to universities doing essentially free R&D in almost every area of technology for companies that might otherwise not be able to afford them. (I had a student assistant job at one such institute when I was an MSc student in Germany)
https://www.asme.org/topics-resources/content/how-does-germa...
Interesting that the labor culture in Germany relative to the rest of the EU is not mentioned at all. Germany is one of the strongest nations to be an industrial worker and has various laws that are pretty unique to the nation, such as co-determination, I believe this has acted as a defense vs. outsourcing (and when they do outsource, they go to high cost places such as the US) and has kept it's manufacturing base strong.
Germany isn't Germany any more. It is a component of the Eurozone - which is a unified currency area - like the USA, or the UK.
What Germany does is 'vendor finance' other parts of the Eurozone. The Greek government buys German battleships and the savings the Germans are famous for buy the paper the Greek government issues to close the circle. Then they blame Greece for going into debt once the ponzi scheme reaches its limit.
You get the same effect with London to the wider South East of England, arguably England to Scotland and no doubt several areas in the USA where outside of the area, but within the currency zone, is encouraged to borrow to buy the output of the area.
China's mercantile currency lock does much the same thing.
The eternal problem is that exporting is giving away the output of your people in return for a shiny bauble. If you don't then exchange that shiny bauble for the output of some other people, what was the point of doing all that work in the first place?
You may as well have used your productivity to have Friday off instead and gone fishing.
Related : cars selled by european companies will have to average 95gCO2e/km. But this limit is raised for heavy cars, which Germany sell a lot more than others. France's environment minister is angry. The legislation has been tailored for the EU's biggest industry.
The financial side of things is probably the bigger driver - the German government is notoriously unwilling to issue debt, so domestic German savers have a huge shortfall in safe assets that they must purchase abroad to acquire. These foreign financial assets, on net, can only be bought by sales receipts of exports.
I blame the lax bankruptcy laws in United States (in comparison to Germany). I think it creates a safety net that is too comfortable that the business can (a) give up too early or (b) use this as a pump & dump scheme where the owners walk away with money they had siphoned off early.
Compared to German insolvency procedures [1]
> The aim of insolvency proceedings is not to protect the cor-porate debtor from its creditors, but to maximize the insol-vency dividend payable to the creditors. To achieve this aim, proceedings may be directed either at a liquidation of the company’s business or at a reorganization of the company it-self by means of a plan of restructuring (Insolvenzplan). In the event of a liquidation, the company’s business operations may be sold as a going concern to an investor or the business may be wound up and the individual assets sold.
1. https://www.jonesday.com/files/Publication/1ec093d4-66fb-42a...
I've said it before in another comment [1]:
>There's nothing I enjoy more than the plight of the German Saver, who's obsession with "fiscal responsibility" has led to shitty austerity politics all across the EU (to be fair some other northern European countries like Netherlands also share the same view) and depressed growth for the poorer southern European countries. Germany has benefited most of all from the unfinished project of the EU. Without becoming a federal union like the US, but having a common currency, Germany's exports have been artificially cheaper and thus more competitive for over 20 years.
>This is the natural outcome from the obsession with running fiscal surpluses. Now Germany is on the brink of recession and they're finally starting to make some noises about fiscal spending, but the politics will likely limit it to modest deficits than anything transformational. Enjoy the negative rates.
The common currency (Eurozone) is deeply flawed and it only allows a rich country like Germany to win at the expense of poorer countries like Greece or Portugal. I find it insane that EU politics have never really dealt with this. I find it absolutely insane that after the 2011 sovereign debt crisis, Germany somehow managed to escape with keeping the Eurozone intact and having the poor countries impose austerity instead.
There absolutely needs to be a political revolution in the Eurozone countries. Either complete the EU project by becoming a United States of Europe, and receive all the equalizing payments of healthcare, social security, and common military spending at the federal level, or get rid of the common currency. It's just hurting the poorest people in the Eurozone to keep the current arrangement.
You might be under the impression "well Germany might be parasitic vis a vis other Eurozone countries, but at least it's good for working Germans", but you'd be wrong.
The US today has a tight labor market which will eventually drive wages up if it persists long enough. Germany on the other hand has similar employment statistics but they did it with the Hartz reforms [2]. The unemployment stats look great because you can get a shitty low wage job [3].
Germany has kept the wages of workers depressed in order to be an export powerhouse. It's parasitic on other Eurozone neighbors but also on German workers. The people who have benefited the most from this arrangement are the German capital class. The shareholders and managerial class of German industry, whether it's giants like Volkswagen or even the small Mittelstand companies. German workers should have gotten wealthier over time which would have made Germany similar to the US in being driven by domestic consumption. That in turn would have made other EU members better off because those wealthier Germans would have been able to consume more of their goods and services. It's truly baffling how even German workers have put up with this. They're losing to the benefit of German capital.
[1] https://news.ycombinator.com/item?id=20793982
[2] https://theconversation.com/questioning-the-claim-of-germany...
[3] https://en.wikipedia.org/wiki/Marginal_employment#Germany
> ... Nobody Understands
A pretty grandiose claim. Reading the essay, the "understanding" seems little more than the fairly mainstream narrative that the Euro is too weak for Germany and too strong for the EU peripheral. Am I missing something?
This is a very interesting article.
I particularly liked the insight that currency stability may be desirable for the most successful economies but undesirable for the least successful.
Being in the cryptocurrency space, I can see how this also plays out on a much smaller scale as well. When your community is made up of nobodies, one of the few advantages that you have is that your cryptocurrency has more upside potential than established players. This can offset the significant downside of not having a reputation.
Interesting choice to use 1993 as the start for the comparison of Germany's trade surplus: https://tradingeconomics.com/germany/balance-of-trade
so the point is that Germany takes over euro-denominated industrial export to itself and leaves other EU countries figure out themselves whatever they wanna do to survive.
Paul Krugman often rails against German industrial policy vis-a-vis the EU and hits a lot of the same notes in this article. On the other hand, most of the EU countries seem to accept this status quo and many of their citizens end up immigrating to Germany directly or benefiting from the massive EU subsidy regime funded by Germany so there are various forms of wealth re-distribution within the union.
Very informative. Does this imply that Brexit is the rational choice for the UK?
Competing with China, Germany and the US is possible -- but you have to be deliberate, disciplined and very very very organised.
At what point do we stop talking about commerce between Eurozone states as imports/exports?
I stopped reading after the 10th historical inaccuracy. This is why economics/economic history is hard folks (not just the actual economics but creating something readable...this is basically unreadable). Germany, in particular, requires a fairly deep understanding of economics.
Germany has also very low net income inequality.
Article should be named.
Why this time we succeed and conquered our old enemies using capitalism, money and demand for precise machines that save time instead of wasting everything to fight with everyone around.
I will tell you why they can maintain an export economy. that's because their economic tool is called the "european union" all the key economic laws drafted by the EC are designed to advantage germany. That is why england brexited. they are lucid.
This is the type of thought provoking articles that I come to Hackernews for. <3
If anyone objects to the following, please try to formulate rational arguments to counter instead of simply trying to suppress what you disagree with. Suppression of reality does not make reality go away.
"Not a word about the fact that Germany simply produces desirable products?"
Although you are correct in your befuddlement; are you really all that surprised that such a simple question was not even introduced in an article that claims no one understands how Germany is successful?
It's an utterly mind boggling state of affairs today that some people, and seemingly rather large cohorts of them, simply cannot seem to grasp rather basic realities about the world they live in. Sure, "making good products" is more the effect, rather than the cause/origin, but it is still the simplest answer to the apparently perplexing question of how Germany can through doing actual and good work can be as successful as it is. Silicon Valley folks here are scratching their heads asking themselves, "wait, so you can't actually contribute things by being a net worthless money burning machine"?
Sadly though, it is not some waning effect from the end of the cold war and a common market that will end Germany's success that has spanned way more waxing and waning pressures before; it will be the very same thing that destroys and devastates all other civilized and western societies, which will snuff out and smother the German success engine. There is a mania going around that is pushing the genocidal ethnic replacement of the core set of people who embody particular values, traditions, philosophies, practices, knowledge, and skills that make any given country and society; in some odd belief that if you replace a thing with another thing, it will somehow still embody the former thing. It's such a basic fallacy, that it is incomprehensible to rational people how such a belief can be held. If one pollutes water with oil, the oil is also polluted with water, and neither are good for anything as both have had their valuable characteristics compromised. They are also through their pollution neither oil or water, they are a different thing altogether a useless substance.
What it all comes down to is that just as France will soon no longer be French and the French character will be snuffed out when it is at saturation with non-French people and the Native French have been essentially eradicated and neutralized in their ability to drive the French character, so Germany too will no longer be German and have the German character that produced things like the successful economy that people seem unable to understand the progenitor for.
Countries and societies have collective characters and personalities; and when you destroy those, you destroy the effects their character produce. It's not really all that difficult to understand, regardless of whether the mania that has swept the west in particular cannot seem to understand what total self-destruction it is engaged in, from which will also follow immense misery for everyone else in the world that depends on the engine of the world, the west, not sputtering out and seizing up from having been polluted and poisoned.
TLDR: economists are imbeciles.
Never mentions hidden champions[1], never mentions the high level of training and morale and hence productivity for the German worker, never mentions German dedication to quality, never mentions the social capital of corporations which are hundreds of years old, never mentions the fact that MBA quarterly profit maximization uber alles bullshit never caught on in Germany, never mentions the Landesbanks.... I submit this article as evidence that economists don't understand any economy.
I don't get why it's good for Germany. If they had their own currency with such exports they could print money to make it weak and so they will have more money.
Btw I'm germany hater. Fking nazis team up with russia to fuck europe again.
What is often overlooked is this: Germany was export-oriented before the Euro, during the transition and with the Euro. Germany was export-oriented before reunification, during reunification and after reunification.
The industry will adopt to those external factors: Germany was 'Exportweltmeister' with the super strong DM (which dominated European currencies) and it is a leading export nation with the Euro.
There are a lot more factors that support the German model. For example Germany is not a centralized economy (like the UK or France, which are grouped around London and Paris). Thus lots of federal states and cities have strong economies: Munich, Hamburg, DĂĽsseldorf, Frankfurt, Berlin, ...
The extreme angle is the concept of 'unknown medium-sized world market leaders' - so-called hidden champions. Germany probably has almost 50% of all hidden champions world-wide:
https://www.forbes.com/sites/rainerzitelmann/2019/07/15/the-...
You'll find many of these companies in rural regions.
Many of these companies are export-oriented, based on a long tradition and they don't care what the current currency in Germany is.