Bashing Germany

During a discussion in Berlin this week, economists argued that German policymakers were too focused on budget consolidation and reducing the welfare state and less about finding the right instruments for long-term economic growth.

Adam Posen, from the Institute for International Economics in Washington, DC, said he understands that Germans are happy about domestic annual growth rates of about three percent. But he added that he doubts that the current upswing is a direct result of what he calls the mini-reforms taken by the previous and the current governments.

"The current recovery is what we used to call in financial markets a dead cat bounce," he said. "If Germany was flat on its back for 15 years, the idea that when the world is booming for several years straight at a level that hasn't been seen since the 50s, it somehow manages to get off its back for a couple of years, should not be so surprising."

The female factor

Richard Freeman from Harvard University said Germany is far from having done its homework on the labor market. He noted for instance that German women find it much harder to pursue a job than their peers in the United States.

This is because German policymakers haven't really understood the huge economic potential of women here, he added.

"The difference between the two economies is that the Americans work full time and the German women work part time," he said. "The Americans have day care centers that people use extensively. It's also the American day care centers are all-day affairs. Half of your people are women. They have to play a major role in the economy."

Neglecting seniors

If women here have a hard time on the labor market, then so do older workers and pensioners, added David Soskice from the Australian National University.


"Mid-career labor markets and late-career labor markets are very, very illiquid in the German economy," he said.

"If you're a highly skilled person and lose your job in your mid-forties or early fifties, you can't just very easily get another job."

The export trap

Adam Posen agreed and added that Germany's preoccupation with remaining the world export champion is also quite misleading.

"The Dirk Nowitzki fallacy is: People say, 'Because Dirk Nowitzki won the MVP, all German people are really good basketball players,'" he said.

"Similarly, if we look at the companies in Germany, there is this tendency to reason backwards from exports. Because there is a couple of little machine tool companies in Baden-Württemberg that happen to make some exports to China, we can fly the flag and say: 'Deutschland Exportweltmeister' (export champion) and everything is okay. But this doesn't really mean anything. There is no correlation between how much you export over the long term and how much you grow."