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The Ex-Wirtschaftswunder

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Germany’s economy has become pathetic and Germany’s politicians are responsible for it. Employers can’t simply fire people without a reason. So they look for “innovative” ways to get rid of employees, like firing them because they recharged personal electronic appliances in the office, costing their company the unbelievable amount of 1.8 Euro-cents. A court has now decided (German news article) that companies cannot fire employees because of such negligible misdemeanor. There was a similar case a couple of months ago, when a court ruled that a cashier couldn’t be fired for stealing 1.30 Euros.

And so the battle between German companies and the unyielding employment protection (Wiki) legislation goes on. This is the neverending story of the search for new ways to fire employees with a reason. Remember, low profits and a bad outlook for business are no legitimate reasons to fire someone in Germany. After all, the employer bears a “social responsiblity” for his employees. Considering these German peculiarities it’s not suprising that the German economy is weak. On the contrary, it’s astonishing that there ever existed something that could be called a Wirtschaftswunder.

Meanwhile, the German government rescues 1.4 million jobs with the help of a concept called “Kurzarbeit” (see explanation). It costs the government €5 billion a year (0.2% of GDP). Considering German labor law, it’s fair to assume that those 1.4 million jobs would have been lost forever, if it weren’t for “Kurzarbeit”.

However, the dirty part of this success story is that only large companies (mostly in the manufacturing industry) are eligible for the program. This seriously distorts profits and the allocation of labor in the economy, heavily favoring already large industries, which are doing most of their business outside Germany. In the meantime, small businesses, especially in the service sector, get no help at all and have to find their own way through the economic downturn.

Do the politicians recognize the problems? No. They talk about spending more money. They want to increase investments into education from currently 5% to 10% of GDP. This increase would have to be financed completely by the tax payers, because Germany doesn’t know even how to spell ‘private funding’. If you scroll down this report, you’ll see that private funding accounts for only 15% of all education expenditures.

To sum up the economic successes of Germany during the last decades, here are some numbers (here’s the source, in German): Consumption (adjusted for inflation) is at the level of 2001. Total domestic demand (investments plus consumption) is a dismal 2.6% higher than in the year 2000. Net fixed capital formation is at 3.9% of GDP, down from 10% in the 1990s, 15% in the 1970s. Real wages are the same as in 1991.

Here’s how Germany compares to other countries in terms of GDP:

Consider the advantages that Germany has had since 1990. They got a 17 million expansion of the workforce, they gained access to Eastern European markets, they kept export prices low by hiding behind a relatively weak Euro. In won’t take long until Germany faces strong manufacturing competition from the BRIC. That will destroy the last solid pillar of the German economy. Anyway, the Wirtschaftswunder is already gone, long ago. Now they are fighting for pure survival.

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