Latte Ordoliberals

And *that*, exactly *that* is why the conservatives did not get a majority. The system is working, and while it’s not perfect and it hurts, it’s still working.

And barring major catastrophes, we’ll keep it that way, thank you very much.

I have to disagree. Germany’s competitiveness is on a downward trajectory, and Germany is sustaining its current levels of consumption by borrowing heavily against the future. Right now it would be less painful to reform the labor markets and other institutions, following for example the Dutch example, than doing the same reforms later when even more competitiveness has been lost and more government debt accumulated. Germany needs to get its act together now, become innovative and dynamic again, and start investing heavily into education, high-tech, and services. The fact that this is not done, that Germany is wasting time and resources clinging to an out-dated model of the industrial society, is indeed at least partly due to the fact that the infamous median voter is still doing well.

There is, it seems to me, such thing as an english language coverage of economic matters – or maybe at least a “murdochian” coverage of economic matters.

In my bad days i see it as a displacement for simple nationalist discourse. Softness, decay, or feminity on the one hand, hardness, masculinity on the other : capitalism is not an economic option, it’s about being manly.

They’re so cute when they do that :)

I suppose it’s possible that the current trade-off between social welfare and economic growth is ultimately unsustainable. If that’s the argument, say so and substantiate it. Otherwise, it’s just Germans making different choices, and it ain’t nobody’s business if they do.

Without a sub required here.

You’d wonder why the Aspen Institute would hire someone from the AEI. Probably a remnant of the old Germany, before they became “anti-american”.

No doubt they’ll never do it again, of course. I have faith in my ability to reform the mainstream media with a few adequately-written complaints. It’s what keeps me going.

From the most recent IMF Statistics for Current Account Balances, the 2005 projections (Table 26).

Current Account Balances as % of GDP
USA: -6.1
Germany: +4.3

Tell me again who’s borrowing from the future?

Germany is unfortunately indeed borrowing heavily from the future:

http://fistfulofeuros.net/archives/001928.php

If th in post #2 above is really writing from “inside the system,” doesn’t that actually validate Gedmin’s argument? Even if you disagree with Gedmin’s tone it seems reasonable to conclude that so long as things are going “well enough” from the voters’ standpoint, they will maintain the status quo. They’re largely maintaining the status quo, ergo they think things are going well enough.

Why is this so irritating to y’all?

just on the subject of whether “Germany is borrowing from the future”. As a country it clearly isn’t; it has a substantial current a/c surplus with the rest of the world. The German government is, but since it will pay this back by taxing Germans and it is currently spending the money on Germans it’s not really sensible to say that “Germany” is borrowing from the future. It’s the balance between private and government saving that matters here surely and the sum of the two is positive; unlike for the USA where the sum of the two is negative, sorry to bring that up again.

Maybe reforms are required because Germany’s employed are damned tired of buying the unemployed’s overpriced lattes for them. Maybe reforms won’t happen until enough of Germany is unemployed that the flow of lattes stops entirely.

When you rob Peter to pay Paul, maybe you’ve purchased Paul’s vote. Maybe that looks like democracy… but it doesn’t SMELL like it.

Then again, who cares? Germany voted itself into irrelevance years ago. It’s easy to be sanctimonius about your 37-hour work week when somebody else is paying the bills.

If it makes you feel better, Donald Johnson, I’m glad you’re complaining; I’m sorry you’re right and they’re wrong, but sorry’s not doing much these days.

Matt Austern:

Exactly.

With reference to the above-linked appendix:

Table A, page 6: the ratio of GDP Share to Population is 38.2 / 30.5 for the US, but a measly 7.9 / 8.6 for Germany. So we beat Germany, 1.252 to 0.919. Ha!

Oh, no, wait. What the heck is purchasing-power-parity? Some bookkeeping boondoggle, to be sure. Let’s see…Table 2, Page 14, Real GDP is 3.5 for the US, 0.8 for Germany. Re-using the population shares, we get a GDP/Pop of .115 for the US, .093 for Germany. In your face!

What’s this? Real Per-Capita GDP…Table 4, page 17: US 5.2, Germany 9.5? What? Oh, I get it, that’s unemployment. Here it is, same table: Growth in Real Per-Capita GDP: US 2.5, Germany 0.3! Whoohoo!

What the heck is a GDP deflator? Table 8, page 25: we’re kicking the crap out of Germany on that too, but maybe it’s something bad. Hey, whatever!

Table 9, page 26: Hourly earnings: US wins, 6.9 to 2.5! Productivity: US wins, 4.4 to 2.8! That’s how we like our proles: bent-backed in toil and terror of our brutal capitalist overlords! Booyah!

Somehow Germany comes out with a negative unit labor cost. Don’t they feed those people?

Table 14, page 35: General Government Structural Balances: US -3.2, Germany -3.3. Stupid hurricanes!

Table 16, page 37: Japan has 0.0 interest rates. Man, that’s just creepy.

Finally (drum roll please)…Table 26, page 50: Balance of payments on current account: US -759, Germany 131.

Crap. We are so screwed!

No, but seriously: what’s a current account?

Henry,

I was thinking of this post, where, even more in the commetns than in the psot itself, you seemed convinced that raising standards of living in Turkey and Eastern Europe was simply not possible without lowering workers’ standard of living in Western Europe.

Matt Austern,

Everything you say is spot on. Except for one thing: We all know, even if we’re too polite or too cowed to say so these days, what output efficiency is being measured in terms of here.

matt:

It’s even worse that that (re 33), unless I’ve missed something because those numbers reported as % of GDP . However GDP is a relatively poor indicator of quality of life, etc., which is the sort of thing we are really talking about the German electorate choosing.

If you have have a large current account deficit, but also a very large GDP, this percentage will obviously be smaller than if your GDP were lower. This hypothetically lower GDP doesn’t necessarily mean your quality of life is lower, but by this measure, it would appear you are worse off.

I think this effect is significant when comparing two countries whose GDP:quality of life ratio is quite different, such as the US and Germany.

Man I always wonder why the people in the U.S. care so much about the future and dismiss the present. If the Germans want to live well now, not in a distant future, why should the rest of the world care? Are the unemployed German worst off in the present than the hotels employed New Orleans? Is Germany on the brink of collapse and in bed with fascism now, more than the US? I don’t think so, from the posting. But I suppose the mainstream press & economists in the English speaking world lost touch with the reality, always speaking about the people as “numbers”.

It’s surprising to find you guys still linking to that Holbo review of *Dead Right* as if it were some sort of classic. It took Adam Stephanides (in comments attached to said post) about a tenth of Holbo’s word count to demolish his major points; Holbo’s attempts to respond were pretty feeble.

As for Gedmin’s piece, it’s not at all clear why it’s supposed to be any more “jaw-dropping” than leftist laments that Americans are just “doing to well” to admit that, in the long run, they need to give up their SUV’s, their deficit spending, etc.

Dipnut’s comment is the best ever!

I remember one year when I was an undergrad at Stanford, before Big Game, some “school spirit” group published a booklet that (among other things) included a chart comparing various statistics between Stanford and Berkeley… and when the statistics favored Berkeley, they calculated it per capita instead, so they favored Stanford. (My favorite was “height of tallest tower, per capita”, to obscure the fact that the Campanile is substantially taller than Hoover Tower.)

“We can complain that Germans are foolish to support a system that helps the unemployed to the extent that they can sip lattes. ”

Actually, generally speaking, unemployment benefit isn’t a major cost in Western European countries when compared to spending on pensions and any number of other budget items.

It may well be right that there are big problems with the German system but that needs more substantial evidentiary support than just “Dude, the poor can drink latte”.

Where does he establish that the lattes are overpriced? Coffee usually seems quite cheap in Germany.

So we’re getting the argument here that a system and a society that have 19 percent unemployment in the national capital are just fine? We’re getting the argument that nothing is wrong with a national unemployment rate of more than 10 percent, and regional unemployment rates of up to 25 percent?

Gedmin hin, Gedmin her, is that what folks here believe?

“So we’re getting the argument here that a system and a society that have 19 percent unemployment in the national capital are just fine? We’re getting the argument that nothing is wrong with a national unemployment rate of more than 10 percent, and regional unemployment rates of up to 25 percent?”

No, we’re getting an argument against your undefended assumption that these things are prima facie bad. Yeah, where you’re drawing your lines in terms of distguishing acceptable from unacceptable unemployment rates closely follows, for example, how the Fed sees things. And I happen to know that there are good arguments defending drawing those particular lines where they are. Even so, it’s a values-laden determination and I think it’s deeply suspect especially when it’s assumed to be prima facie as part of a larger argument about the proper organization of a society.

Stuff efficiency. More important questions: do the unemployed themselves think that their situation is better than low-paid work? If yes, will they regret it if unemployment goes on for a lifetime? What does it do to social mobility across the generations?

Given that a tradeoff exists between welfare benefits and unemployment the “better pain now” idea is reasonable.

There is a strain of thinking, accessible to both socialists and free-marketeers, that says that what one should aim for is not egalitarianism but the assurance that the worst off are not too badly off.

Two questions here:

(1) In the medium to long term can Germany afford a social welfare system generous enough to make high levels of unemployment tolerable for the unemployed and for those footing the bill?
Nobody so far has said it can’t.
(2) If the answer to question (1) is “yes,” is that what the Germans want?
The only people whose opinions matter on that question are the Germans.
What’s hard about this?

In my previous comment, “What does it do to social mobility across the generations?” was poorly phrased. What I meant was something like “Are the unemployed locked out of the chance of social mobility?”

Knowing my luck on Crooked Timber comment threads this revised version will appear before the original comment (which appears to be awaiting moderation) and totally confuse everyone!

Eventually, I hope, most of the work will be done by machines – should being unemployed still be a bad thing then? Should we be inventing meaningless work just to keep people employed, jobs like gas-station attendant, grocery bagger or telemarketer?

abb1, the possibility you raise has often worried me, being a regular reader of SF stories where the human race is outclassed by machines and decays for lack of purpose. I don’t quite know the answer. But the proto-answers I would offer fall into two groups: (1) irrespective of the very long term, most people nowadays would feel they have a more meaningful life as a gas-station attendant than unemployed. Or, at least, would feel that way on their deathbeds. (2) I forget who, but someone once asked “if you could have two people working for you full-time*, could you think of things for them to do? Nearly everyone answers “yes.” That suggests that there are plenty of services to go round even in the modern economy.

*By hypothesis these two workers would be totally uncoerced and admirably well-paid. Coercion or guilt would confuse the thought-experiement.

Keith is entirely right that terms like “unhappy” and “worse off” are difficult and value laden. I don’t think he and I disagree at all.

That’s really my point. If we’re talking about what a society’s economy should look like, we are unavoidably in the realm of philosophy and psychology. We are talking about what kinds of lives are meaningful and what kinds of freedoms we care about the most. We need to be open about the fact that we’re having a discussion about values, instead of using competing quantitative measures as proxies for competing ethical ideas.

If we all agree on what kind of society we want, what our values are and what kind of goals we’re working for, then we can usefully hold a quantitative discussion about how to get there. But we can’t skip that initial discussion about goals. Until we have it, discussions about things like efficiency just get in the way.

“The only efficient system will solely reward the productive. Is this nice? Definitely not, but it is much more efficient than a system that allows for the unemployed to go unpunished by the market.”

Let’s think about this for a minute. “A” is a $100 million a year CEO. “B” is a low-level worker. “A” makes a series of blunders. “B” loses his job as a result. And efficiency requires that “B” get punished by the market. Do I have that right?

Oh, and so Mr. Gedmin pays taxes in Germany. Big deal. Do you want to know what I think he is worth to the country? About what he’s paid minus his salary.

Furthermore, to say Mr. Gedmin is upset that the “unemployed” can afford purportedly expensive lattes is seriously disingeneous.

You can damn sure bet that he thinks the employed are also paid too much, and he could straighten that up damn quick if he could just stuff more people into the workforce.

Again, the only person in Germany I’m absolutely sure has too much income is the Director of the Aspen Institute.

but i am not like taxings because if the taxings is big from the governments thens this is bad for all of econmics. Taxings makes all to slow down inside the engine of gwoth that we are needing for gwoth. So i think no to this because it not is working so good now.

Posted by Natalie Solent:

“Stuff efficiency. More important questions: do the unemployed themselves think that their situation is better than low-paid work? If yes, will they regret it if unemployment goes on for a lifetime? What does it do to social mobility across the generations?”

What does earning the minimum wage, with no job security, and lousy health care, do to people over a lifetime?

As for social mobility, isn’t it higher in europe than the US?

different chris, one of Gedmin’s tasks in his job is to ask questions that cut across the grain and to annoy people into probing cherished beliefs. looks like even a brief citation here has done thatwork.

i’m curious, though, do you think that someone who pays taxes should shut up about how those taxes are used, just because he doesn’t agree with you?

different chris, one of Gedmin’s tasks in his job is to ask questions that cut across the grain and to annoy people into probing cherished beliefs.

Please. If “Western Europeans are spoiled rotten and have had it too good for too damn long” isn’t a “cherished belief” of the mainstream American media, I don’t know what is. As has been pointed out by several people in this thread, it’s been a staple of the NY Times for years. There is absolutely nothing daring or contrarian about Gedmin’s argument.

Hi –

Apparently no one here actually lives in Germany.

I do.

The German economy is stagnant, German politicians are incompetent, and a majority of the public votes for largesse to be paid for by the those who actually work and pay taxes.

The problems are well documented for the German-speaker in a book by Hans-Werner Sinn “Ist Deutschland Noch Zu Retten?”.

Put simply: Gedmin’s comments are spot-on. Germany is living on borrowed time: it cannot afford to continue to pay those benefitting from the system (retirees, those on the dole) with the income from those financing the system (all taxpayers in Germany). Germans are today where the US might be in 2015 or so: too many old people, too few taxpayers.

The problem is exacerbated by the fact – not opinion, fact – that qualified workers are leaving Germany faster than qualified immigrants are coming in. In other words, the quality of the workforce available in Germany is declining. The vast, vast majority of unemployed in Germany do not have any qualification – and this is critical in Germany, as anyone looking for work here will tell – and immigrants do not help.

Where I work we’ve been desperately looking for a trained econometrician with job experience: we’ve not been able to find one on the market for the last six months. One we did find didn’t want to move from Hamburg to near Frankfurt.

German unemployment is a structural crisis, since unqualified, unskilled labor cannot compete in Germany with unqualified, unskilled labor in China, Vietnam, Turkey, Hungary and Bulgaria.

And it’s not a function of lack of training opportunities: it’s a function of attitude. No one is willing to go train for a job that pays €700/month when you can be on the dole for basically the same price. Working off the books is vastly more rewarding than working legally due to heavy taxation not only of the worker, but also the mandated costs for an employer.

You can protest all you want that this is what the Germans want, but at the end of the day someone has to pay for it. And I have colleagues who are actively planning to emigrate because the burden is becoming onerous. And at least one colleague who is going to Switzerland to work because he will have more disposable income at the end of the day with the same salary than if he stays here.

John

As much as this may satisfy some who seek to propogate class struggle or some such thing (See comment 13), it doesn’t change the fact that people are consuming when they are not producing. The only efficient system will solely reward the productive. Is this nice? Definitely not, but it is much more efficient that a system that allows for the unemployed to go unpunished by the market.

Dude, efficiency is a second-order value. It has no moral weight in itself; it serves as a value to be pursued in context of a set of objectives which make a moral statement. A slave tends to be more efficient than a salaried worker; this does not mean slavery is more moral than capitalism.

If the Germans decide to, in comparison to the US, pursue the “good life” in exchange for a little efficiency, good for them. I think most of us would prefer to live our lives as if we work to live, rather than we live to work.

barry, Gedmin usually writes for German publications, and his arguments do indeed often cut against the grain of consensus here. It irritates people to no end, but occasionally it is useful. I’m pleased that you could find a coherent argument in what a different chris had to say. I could not.

john f. opie, I live in Germany as well. Personally, I don’t think that Gedmin’s article, either the bit quoted here or the piece as a whole, holds much water. Greater flexibility in the labor market is part of a solution, but only part. A significantly simpler tax code is also part of a solution. Serious efforts to reduce non-wage costs are also part of a solution. Reducing the corporatism in public life is also a part. Finding ways to make more Germans the first in their families to attend university is also a part. Making it easier to start a business is also a part. Also on this list are recognizing that not every village will survive, particularly in the East.

And let’s face it, except for Bremen and parts of the Ruhr area, a very high structural level of unemployment is an Eastern problem. That’s one reason why Berlin is so worrying: practically every other post-communist capital is a boom town. If you want to measure unemployment in Central Europe, there are two rules of thumb: the greater the distance from the capital, the higher the unemployment; unemployment rises in an almost linear fashion from west to east within a country.

So the fact that Berlin has such a high level of unemployment is worrying, because it suggests that the forces at work (or more precisely, the sum of choices made by individuals) in other post-communist parts of Central Europe are blocked in Eastern Germany. What the blockages are and what could be done about them are questions too complicated for a blog comment. And lattes don’t have much to do with it.