Learning from Germany

I agree with Paul Krugman that we can learn something from Germany:

Consider, for a moment, a tale of two countries. Both have suffered a severe recession and lost jobs as a result — but not on the same scale. In Country A, employment has fallen more than 5 percent, and the unemployment rate has more than doubled. In Country B, employment has fallen only half a percent, and unemployment is only slightly higher than it was before the crisis.

Don’t you think Country A might have something to learn from Country B?

This story isn’t hypothetical. Country A is the United States, where stocks are up, G.D.P. is rising, but the terrible employment situation just keeps getting worse. Country B is Germany, which took a hit to its G.D.P. when world trade collapsed, but has been remarkably successful at avoiding mass job losses. Germany’s jobs miracle hasn’t received much attention in this country — but it’s real, it’s striking, and it raises serious questions about whether the U.S. government is doing the right things to fight unemployment.

However, I think we probably disagree about what lessons should be learned. Dr. Krugman continues in his column by supporting German-style employment policies, central planning, and a WPA-type program.

I think that a somewhat broader look at the differences between the two countries might be enlightening:

  Germany United States Source
Population (in millions) 82 307 1
National language German None 1
Unemployment rate in 2006 11.7% 5.1% 2
Current unemployment rate 7.8% 10.2% 2,5
Per capita GDP $35,400 $46,900 1
Industry as percentage of GDP 30.1% 19.2% 1
Exports as proportion of GDP 51% 9% 1
Population growth rate -.05% .98% 1
Foreign population 8.9% 10.4% 3
Percentage of graduates by cohort from tertiary i.e. college programs 21.2 35.5 4

There are many, many more differences. For example, relatively few of Germany’s foreign population speak no German; many of our foreign population speak no English. Our foreign population is nearly half the size of Germany’s total population. We share a long land border with a country that has a per capita GDP 20% of our own; Germany does not. Our percentage of urban population, oddly, is higher than Germany’s and our area vastly larger. Consequently, there are enormous areas of the United States that are very sparsely populated, not the case in Germany.

We are significantly more diverse than Germany is in race, ethnicity, and nationality. In Germany there continue to be established churches in the sense that the state collects tithes from adherents and distributes them to churches based on adherents’ claiming affiliation with a particular church or sect. My experience in Germany was that Germany has a significantly stronger class system than we do.

In Germany it is very difficult for companies to shed employees. That has the perverse secondary effect of making German companies reluctant to add employees, particularly German employees since there are different requirements for terminating foreign employees than for terminating German ones. Germany’s relatively high level of social services takes a good deal of the sting out of unemployment, making it more palatable to remain unemployed. It was also my experience in Germany that Germans have different attitudes about conforming to rules than Americans typically do.

Note that with Germany’s negative population growth rate the unemployment rate will decline without adding jobs. Here we’ve got to add between 100,000 and 200,000 jobs per month to keep the unemployment rate from increasing even when economic times are good.

What should we learn from Germany? That we are over-educating our young people? How does that square with the rhetoric of the last three administrations, Republican and Democratic? That we should rely more on manufacturing and exporting than we do? I agree. That the same policy that works in manufacturing and export oriented Germany can be effective in the service and consumption oriented United States? I doubt it.

Looking at the enormous number of differences between the countries I don’t draw the same conclusion as Dr. Krugman does. I conclude that Germany and the United States are different countries and a prescription that is effective and deemed fair in one country might be neither effective nor seen as fair in the other.

Sources:

  1. CIA World Factbook
  2. Index Mundi
  3. NationMaster
  4. OECD report, “Education at a Glance 2008”
  5. Bureau of Labor Statistics
24 comments… add one
  • Andy Link

    And then there is France which has had an unemployment rate around 10% for a couple of decades now. I wonder what Dr. Krugman would make of that comparison.

  • PD Shaw Link

    Krugman should also google Agenda 2010, a plan initiated five years ago to overhaul the German economy in the wake of the reunification problems, with a planned series of tax cuts and regulatory reform in the vein of Reagan and Thatcher.

  • The Germans’ allergy to deficit spending is probably worth mentioning, too.

  • Michale…oh Michael…figures.

  • PD Shaw Link

    This Economist article also credits Agenda 2010 with Germany’s comparative success in handling the recession, but what I found interesting was the chart comparing labor unit costs. I haven’t found the source, so my eyeballing it for 2008 shows:

    Italy: 125
    Britain: 125
    USA: 122
    France: 120
    Germany: 100
    Japan: 85

    (1999 = 100)

    http://www.economist.com/world/europe/displaystory.cfm?story_id=14447093

  • Can you explain to me why our Mexican immigrant (legal and not) population makes us different than Germany with its Turkish immigrant population (legal and not)? Are Turks really more assimilated than Mexicans who move without effort from working at Mexican McDonalds to US McDonalds?

    We have Mexico on our border, they have Poland (and other eastern European nations) on theirs. Not seeing the cause and effect here.

    You know what we have that they don’t have? A major political party that maintains as an article of faith the inherent incompetence of government, and that opposes all taxes, and denies the utility of virtually all social programs.

    Maybe the most relevant difference is not immigrant population or educational levels but political ideologies. In fact pretty much all serious German political parties are to our left.

    Come to think of it, can anyone name a successful, highly developed nation with a major party as economically conservative as the GOP?

    If you were to line up all the most economically advanced countries on Earth, how many would be to our right? I think the answer is: none.

    Just saying, maybe it’s not about Mexicans, maybe it’s about Republicans.

  • Andy Link

    Michael,

    Actually, I think a really good case can be made that the German government is much more competent than the US government.

  • Andy:

    Maybe because the Germans believe their government should be competent. Maybe because there’s no constituency for incompetent government, as there is in the US.

  • Can you explain to me why our Mexican immigrant (legal and not) population makes us different than Germany with its Turkish immigrant population (legal and not)?

    If Turkey shared a border with Germany that might be relevant. There have been lots of studies that have shown that the willingness to move across borders for economic reasons is dependent on the relative incomes in the two countries. Once incomes rise above about a third of the neighboring country you don’t see as much economic migration. Ease of migration is dependent on proximity.

    That has an effect on policy here. If we institute a WPA-type jobs program here, something that’s suitable for unskilled or semi-skilled workers, it won’t have the desired results because it’s going to attract workers from across the border.

    BTW, I think that expectations of competent government are a reasonable point. My speculation is that there are lots of reasons for the expectation including a greater feeling of solidarity among Germans or Frenchmen than we have here.

    Fifty years ago the parties weren’t divided along the ideological lines they are now but we still had the same mistrust of government. The incompetence and corruption of government was fertile ground for 19th century humorists. I don’t think the mistrust can be explained by Republican wrongheadedness (even though I agree that the present Republicans are counter-productive in this respect).

  • A WPA program could surely institute identity checks and exclude illegals. The bigger problem would be that most Americans — even now — wouldn’t be rushing to get jobs involving shovels.

    Germany is EU and the EU does share a border with Turkey through Greece. Once a Turk is across the border into Greece he can move pretty easily across open borders to various other EU nations.

    Poles currently have GDP per capita about half of Germany. And of course the famous “Polish plumber” has become an issue is parts of Europe as a consequence. Western Europeans are convinced that Poles (I think this is often generic for Easterners) are stealing jobs.

    Regarding an expectation of incompetence, as you’ve pointed out on previous occasions we didn’t have much of a federal government until the 20th century. Dislike for and distrust of government was already in place. But that doesn’t mean this expectation can’t or shouldn’t be changed. The modern GOP has a sneering contempt for government that may actually exceed that in countries like Italy where the low opinion is justified.

    In order to sustain its ideological posture the GOP requires governmental incompetence. To put it another way, a competent federal government would be a mortal threat to the GOP.

  • Jimbino Link

    Germany is a country that has a PhD physicist at the helm. The USA has almost nobody in SCOTUS, POTUS or COTUS who has mastered math and science. There are about 5 in COTUS, none in POTUS since Hoover and Carter, and only Breyer in SCOTUS.

    We are a country run by lawyers largely ignorant of math, science and economics.

    Germans are multi-lingual. No American president since Teddy has shown such erudition and we have recent experience with a president who is not fluent in any language.

    Virtually all our COTUS, SCOTUS and POTUS (since Carter) are circumcised males. Close to none of the leaders of Germany have been sexually mutilated.

  • Jimbino:

    You were doing great. Until you made the sudden to crazy town.

  • steve Link

    How could you forget to note that Germany has had to integrate East Germany into its economy? That has been a major drag for the old West Germany. OTOH, Germany doesnt have China pegging it s currency to their currency.

    Steve

  • Andy Link

    In order to sustain its ideological posture the GOP requires governmental incompetence. To put it another way, a competent federal government would be a mortal threat to the GOP.

    I guess the GoP doesn’t have to worry then since both political parties don’t score too well in the competence department.

    Our politicians craft complicated legislation that tries to appease too many interests. The legislation ends up as complicated law filled with loopholes and unintended second and third order effects, all of which affects competence.

  • It was also my experience in Germany that Germans have different attitudes about conforming to rules than Americans typically do.

    What a delicate understatement! Germans police not only themselves but each other. It’s shocking to an American, especially a New Yorker.

  • Can you explain to me why our Mexican immigrant (legal and not) population makes us different than Germany with its Turkish immigrant population (legal and not)?

    We have more foreign people in the U.S., both legal and illegal in absolute numbers. Also, I’m going to take a guess that one reason the U.S. has a positive population growth rate isn’t becuase people are having babies, but due to immigration, most of which is illegal. Finally, as Dave points out the foreign segment of the population are more likely to speak German than foreigners in the U.S. speaking english.

    You know what we have that they don’t have? A major political party that maintains as an article of faith the inherent incompetence of government, and that opposes all taxes, and denies the utility of virtually all social programs.

    The Libertarian Party is a major political party? Ohhhh…you mean the Republicans. Yeah, they sure do hate government which is why we saw it expand so much under their watch. No Child Left Behind, the Patriot Act, TARP, etc.

    Why it expanded so much under the last Republican Administration is made me miss the days of Clinton.

    Come to think of it, can anyone name a successful, highly developed nation with a major party as economically conservative as the GOP?

    Ireland, Estonia?

    A WPA program could surely institute identity checks and exclude illegals.

    Right, like we have identity checks at hospital ERs, public schools, and so forth…oh…wait, nevemind.

    Germany is EU and the EU does share a border with Turkey through Greece.

    Bwahahahaha…no Germany is not the EU. It is in the EU, but that isn’t the same thing.

  • Ireland, Estonia?

    I’ll take that as confirmation of my point. Estonia?

    Right, like we have identity checks at hospital ERs, public schools, and so forth…oh…wait, nevemind.

    Was this supposed to be a refutation or agreement? Does the fact that we don’t turn illegals away from emergency rooms mean that we can’t do so at work sites?

    Bwahahahaha…no Germany is not the EU. It is in the EU, but that isn’t the same thing.

    Have you been to the EU? Once inside the EU the borders are open. So the borders of Germany — so far as passport control etc… are concerned — are the same as the EU borders. In the course of a single lovely foie-gras themed dinner I moved from France to Germany to Luxembourg without even knowing which country I was in ant what point.

  • I’ll take that as confirmation of my point. Estonia?

    I think it was Estonia…maybe Lithuania. But whichever Baltic state and Ireland had surprising economic recoveries/growth by either reducing various government programs or not implementing them to begin with. But don’t let facts get in the way, just make a joke.

    Was this supposed to be a refutation or agreement? Does the fact that we don’t turn illegals away from emergency rooms mean that we can’t do so at work sites?

    Oh, I see. Everyone…everyone may I have your attention. Only Michael Reynolds is permitted on The Glittering Eye to use sarcasm. The rest are prohibited by his Majesty Michael Reynolds.

    Yes you twit it is a refutation. History shows that we rarely if ever enforce such laws, regulations and codes. Instead we grant illegals many of the same rights and privleges that citizens enjoy. I’m not saying this is necessarily bad, but that this idea that suddenly we are going to have a two tier system likely isn’t going to be a reality.

    So the borders of Germany — so far as passport control etc… are concerned — are the same as the EU borders.

    That still doesn’t answer the question of how are the borders between Turkey and Greece and what are the EUs and Germany’s policies on illegal immigration and what enforcement is like. You are making the argument that Germany is the U.S. and the U.S. is Germany in regards to the economy, laws, and various policies. I look at Dave’s collection of information and don’t see it.

  • I’m confused. Germany is not America and no lessons should be taken from Germany, but Estonia (or possibly Lithuania) is proof that we could do with more libertarianism.

    Let’s follow the bouncing ball here. Dave makes the point that we are different from Germany in part because they don’t have a border with an impoverished nation.

    I counter, that yes, they do in effect share a border with Turkey.

    Then you jump in with this:
    Bwahahahaha…no Germany is not the EU. It is in the EU, but that isn’t the same thing.

    And I countered with:
    Have you been to the EU? Once inside the EU the borders are open. So the borders of Germany — so far as passport control etc… are concerned — are the same as the EU borders

    To which you reply,
    That still doesn’t answer the question of how are the borders between Turkey and Greece and what are the EUs and Germany’s policies on illegal immigration and what enforcement is like. You are making the argument that Germany is the U.S. and the U.S. is Germany in regards to the economy, laws, and various policies.

    Actually, it does answer the question on borders. A large number of Turks are in Europe. Also Moroccans, Somalians, Sierra Leonans, Ivorians, Algerians, many of them illegals. Once inside the EU there is no real limit on movement. In fact Europe has essentially the same problem we have: a big rich place with a lot of poor places in close proximity. As witness the large numbers of illegal immigrants. So Dave’s point was wrong, and your incoherent defense of it was wrong. Germany does in fact share a border with very poor countries.

    It’s also by the way silly to push the point that Turks are better at speaking German than Mexicans are at speaking English. Mexicans share a basic culture and religion with Americans as evidenced by how quickly they are assimilated and become part of our society. Turks and Africans are far less assimilated in German culture and far less likely ever to be assimilated.

    Yes you twit it is a refutation.

    So, what we have done in the past we must continue doing in the future. Because we haven’t enforced some laws we can safely assume we will go on failing to enforce similar laws.

    But wait! What if I can point to an example where we did carefully enforce laws limiting what illegal aliens can do? For example, what if I were able to point out that we’ve done a very good job of keeping illegal aliens off police forces and out of the military and out of the intelligence services? What if it turned out that we’ve done quite a good job keeping illegal aliens out of the professions, out of political office, out of airplane cockpits, for example.

    By your logic wouldn’t the fact that we had successfully done X in some circumstances mean that we can replicate that success in similar circumstances? Obviously if a record of failure means we are doomed to future failure a record of success would mean that we were likely to enjoy success. Yay! Right?

    Or what if I asked the obvious question? “Steve, if the past is prologue, if we can in no way improve our performance going forward, then why are you so anxious to criticize the system as it is? Is it a purely academic exercise?”

    Or is it rather that change can only come from your faith. From doing things your way. Is it that no improvement is possible in anything, we can never do better, ever, ever, until we all follow you? Is that pretty much it, Steve?

    Of course that would make you a fanatic. You’re not a fanatic are you?

  • Michael, in terms of per capita incomes Germans make about three times what Turks do; Americans make about four times what Mexicans do. That’s enough that the incentives are different. The studies of economic migration behavior have not found that people will move as long as there is a differential. They have found that they’ll move when there’s about the kind of differential we have with Mexico.

    It’s been a very, very long time since I’ve made a border crossing to or from Germany. However, when I was making such border crossings frequently, I found that in order to find a French customs official I’d nearly have to organize a search party while I was routinely stopped for lengthy searches and interrogations by German customs officials. I attributed it to the difference between Frenchmen and Germans.

    I have no idea what crossing into Germany from Poland or Austria is like these days. I can only assume that German border officials are as scrupulous as ever.

    Our immigration rate is about 30% higher than Germany’s and Turks comprise only about a quarter of Germany’s immigrants. Between a third and half of U. S. immigrants are from Mexico and they are highly concentrated in a handful of areas where they generally comprise as much as 70% of the immigrant population. The situations are not comparable.

    My point is not that there’s anything particular to fear about Mexican immigration. I don’t believe there is. My point is that a WPA-style program in the United States would constitute an additional incentive to Mexican economic migrants, experience suggests that policing of such a program would not be particularly scrupulous, and the consequences would not be what Dr. Krugman imagines.

  • Dave:

    Turks are only one element of the foreign population in Germany, so aren’t you comparing a segment with a whole?

    Russians and Ukrainians migrate illegally into Germany and throughout the EU with far lower gaps in earning power. The incentives appear to be powerful enough. There’s also quite a bit of illegal movement into Spain where the differences would be even lower.

    As for border control, as mentioned earlier I moved during the course of a single evening to establishments in France, Luxembourg and Germany. Not only was there no border control we had to check our maps and signs to be sure which country we were in. There is passport control at airports but not typically on roads or as I recall on trains.

    There is border control between Switzerland and Germany but Switzerland is of course not EU. So long as a Turk avoided Switzerland and drove or took a bus or train he should have no difficulty, once in the EU, moving from country to country.

  • I’m confused. Germany is not America and no lessons should be taken from Germany, but Estonia (or possibly Lithuania) is proof that we could do with more libertarianism.

    No, I never made the argument, that becasue Estonia has less government than the U.S. we should follow suit. You asked if there were countries that moved towards less government and prospered and I gave you two examples.

    Now I happen to think with less government things would be better. Not fantastic, not a utopia, but better. Please note that second part as you have a tendency to respond to what you think people have written…not what they have written. And I don’t think this because of the Irish or Estonian experience but for other reasons. That you’ve come up with this notion that becuase of Ireland and Estonia we have to have less government is a fantasy argument you’ve made up.

    Actually, it does answer the question on borders. A large number of Turks are in Europe. Also Moroccans, Somalians, Sierra Leonans, Ivorians, Algerians, many of them illegals. Once inside the EU there is no real limit on movement. In fact Europe has essentially the same problem we have: a big rich place with a lot of poor places in close proximity. As witness the large numbers of illegal immigrants. So Dave’s point was wrong, and your incoherent defense of it was wrong. Germany does in fact share a border with very poor countries.

    Yes I know all this. But just as you wont find as many Mexicans in Michigan as in Southern California, it seems reasonable that you wont find as many Turks in Germany…although who knows. Maybe there was some sort of guest worker program targeting Turkey. But again, this would underscore the point, Germany is not the U.S. Hence trying to draw parallels is not going to be straight forward.

    And no Germany does not share a border with Turkey, it is still several hundred miles distance between Turkey and Germany. And it is even further and more problematic for somebody in Somalia and other countries. What you are arguing is:

    California, New Mexico, Arizona and Texas share a border with Mexico…therefore Michigan shares a border with Mexcio and thus the problems in California, New Mexico, Arizona, and Texas are the same problems in Michigan. Clearly this is false. While each area has problems, they are not the same. California for example is having problems due to the crash in the real estate market. Michigan on the other hand is having problems due to the automobile industry dying, and having Detroit sucking the life blood out of the State probably doesn’t help either.

    It’s also by the way silly to push the point that Turks are better at speaking German than Mexicans are at speaking English. Mexicans share a basic culture and religion with Americans as evidenced by how quickly they are assimilated and become part of our society. Turks and Africans are far less assimilated in German culture and far less likely ever to be assimilated.

    Right which is why every ATM in Southern California has a Spanish option, every place you call has a Spanish option, why there was a big fight over ESL in California, and why just about every form you fill out anywhere will be in both Spanish and English. And have you been to McArthur Park? Surprisingly it is where you’ll find lots of Salvadoran imigrants.

    As for the Turks, not so sure. The Vietnamese and asians in general have done well assimilating, although they too, often live in areas with a high concentration of asians (e.g. Garden Grove and Vietnamese, and Monterey Park and Chinese, West Covina and Filipinos, etc.).

    So, what we have done in the past we must continue doing in the future. Because we haven’t enforced some laws we can safely assume we will go on failing to enforce similar laws.

    It certainly is indicative of what we might see in the future. And keep in mind that Texas, California, New Mexico and Arizona all have large segments of the population that are latino and who are also citizens. Politicians tend not to like pissing off voters. Laws, regulations and policies aimed at denying access to illegal immigrants in the above states often meet with considerable resistance.

    But wait! What if I can point to an example where we did carefully enforce laws limiting what illegal aliens can do? For example, what if I were able to point out that we’ve done a very good job of keeping illegal aliens off police forces and out of the military and out of the intelligence services?

    I don’t know about police forces, but I do believe there is an expedited process to become a citizen if you are willing to serve in the U.S. military. So, coming here illegally, and then looking to join the military could be one way to becoming a citizen. Perhaps not the best example you had in mind. There are a large number of non-citizens currently serving in the U.S.

    By your logic wouldn’t the fact that we had successfully done X in some circumstances mean that we can replicate that success in similar circumstances? Obviously if a record of failure means we are doomed to future failure a record of success would mean that we were likely to enjoy success. Yay! Right?

    I don’t see where I’ve made this argument, so no. I do see where you’ve tried to attribute this argument to me, but then that is a strawman argument. Nice job tearing up, BTW. But it does nothing to anything I’ve written. See my comment about responding to fantasy arguments you’ve made up.

    Turks are only one element of the foreign population in Germany, so aren’t you comparing a segment with a whole?

    Michael, re-read the thread for crying out loud. You brought up Turks and Turkey not Dave. Dave made a some comments about the general nature of Germany’s foreign born population. Its rather shabby to be going after Dave about a point you raised and then he addresses.

    My point is not that there’s anything particular to fear about Mexican immigration. I don’t believe there is. My point is that a WPA-style program in the United States would constitute an additional incentive to Mexican economic migrants, experience suggests that policing of such a program would not be particularly scrupulous, and the consequences would not be what Dr. Krugman imagines.

    Why Dave…you fanatic you.

  • Stuhlmann Link

    One reason that German unemployment hasn’t risen by nearly as much as in the US is that German companies have taken to reducing the hours worked by all their employees, as opposed to laying off part of their employees. One of my neighbors works for Mercedes (at an engine plant in Mannheim), and he has been on reduced hours (and pay) for most of the year. This practice of having everyone work and earn less has helped keep the unemployment figures lower than they otherwise would be.

  • Steve Link

    Agree Stuhlmann, a government funded program supporting part time work while production has been low – seems to be the main reason – not all this other dribble

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