Pity Germany

Germany gets a lot of criticism these days. That is the price of success and economic health. Critics thinks you should be doing things better – even if what you are doing is much better than whatever everybody else is doing.

The New York Times economics correspondent Neil Irwin has argued: "Europe has been forced to fix its internal imbalances.... largely [by forcing] steep cuts in wages and benefits on the southern European countries so that they can regain competitiveness against Germany.

But there’s an easier way (or what should be an easier way). Middle-income German workers could be paid more. They could use those higher salaries to consume more, whether German-made widgets, vacations in Greece or Spanish wine. That would mean lower trade surpluses for Germany, lower trade deficits for Southern Europe, and less German savings being recycled into Greek or Spanish debt. Higher incomes for working-class Germans would mean a more prosperous, financially stable Europe — and it wouldn’t be too shabby for German workers, either.

Reuters reported: “Germany should pursue reforms to narrow the social divide in employment and pave the way for more sustainable growth, the Organisation for Economic Co-operation and Development (OECD) said on Tuesday. Europe's biggest economy has proved resilient amid global financial turmoil and the euro zone debt crisis, and German unemployment stands at post-unification lows even as job losses mount elsewhere in Europe.” OECD Secretary General Angel Gurria declared: "Germany is doing very well, but our aim is to make sure that everybody is on board.

The same day, “German Chancellor Merkel hosted a star-studded group of A-listers on Tuesday in Berlin. The meeting in the Chancellery included the heads of the Organization for Economic Cooperation and Development (OECD), more commonly called the 'club of rich countries'; the International Monetary Fund (IMF), the World Bank, the World Trade Organization (WTO), and the International Labor Organization (ILO),” reported DW.com. In their post-meeting press release, the world leaders declared that it was their goal “to improve living conditions for all people worldwide and to protect the natural resource base and the Earth's systems … also for future generations."

Meanwhile, there has been an increasing chorus over the last year about whether Germany is spending enough to replace its aging infrastructure. Last June, Der Spiegel reported: “From the outside, Germany appears to have a robust economy. But a new study by a leading economic institute reveals that the country is investing far too little in infrastructure and its future, effectively saving itself to death....Germans save more money than most living in the industrialized world, but they invest very little in their future, making them much weaker economically than leading politicians realize. But according to a new study by the German Institute of Economic Research (DIW), Germany is saving itself to death. One area in serious need of investment is the country's roadway system.”

So under the new economics, German thrift is bad. Perhaps a little more thrift around the world would have saved the world from the great Recession of 2008.