Germany should overcome its Puritan ethic and wean its economy off a “destructive addiction” to industrial exports – in the interests both of Germany itself and of the rest of the world – writes Reginald Dale of the CSIS Transatlantic Media Network in the September issue of the magazine Industry Today. But while this is by far the biggest economic and political challenge facing the country, it has hardly featured in the campaign for national elections on September 27, nor is it likely to be grasped firmly by any new government that may emerge in the weeks ahead.
On the contrary, Angela Merkel, who is expected to continue as Chancellor at the head of a coalition after the elections, has specifically pledged to return Germany to its traditional export-dependent approach after the effects of the global financial crisis wear off. She has made it clear that temporary stimulus and job-boosting measures are meant simply to tide the economy over until its export dominance can resume – neglecting the argument that countries like China and Germany will have to reduce their huge trade surpluses if the global imbalances underlying the crisis are to be resolved, and the corresponding U.S. deficit reduced. The diversion of Germany’s output from the domestic market to exports – mainly of cars, machinery, consumer durables and chemicals – is also holding back the living standards of the country’s people.
One of the factors behind German thriftiness is a Puritan streak that favors hard work and the production of goods over purportedly frivolous spending on services and financial speculation. And while Germany is quick to blame the alleged excesses of “Anglo-Saxon” capitalism for the global crisis, it is less good at examining its own contribution through persistent current account surpluses, which, by definition, not everyone else can match. The answer is for Germany to boost its domestic demand and allow the share of services in the economy to grow closer to that in other advanced countries.
