Germany’s major export: economic optimism
If you live in an advanced economy — in Western Europe, Japan or the United States — odds are you’re in a funk. Unless you live in Germany.
This month, the Pew Research Center released the results of polling it conducted in 44 nations — 10 of them with what Pew characterized as “advanced” economies (including the United States, France, Japan, Germany, Italy and the United Kingdom). The two key questions posed were whether respondents were “satisfied or dissatisfied” with the way things were going in their country and whether they thought the “economic situation in [their] country was good or bad.” Overall, satisfaction with one’s country followed the respondent’s judgment on its economy as the night the day.
While the noonday sun was blazing in China (where 89 percent judged their economy good and 87 percent expressed their satisfaction with the way things were going — allowing that some may have feared giving negative answers), night had descended on people in the advanced economies. In nine of those 10, people were more dissatisfied than content with the way things were headed, and in eight of them, they felt their nation’s economic situation was bad. The political composition of their government didn’t seem to matter. In Tory Britain, 55 percent said the economy was bad; in the Obama-led United States, 58 percent said the same. In nationalist-Keynesian Japan, the figure was 63 percent; in Socialist France, 88 percent; in conservative Spain, 93 percent. The gloomiest continent (including both its advanced economies and such emerging economies as Poland and Ukraine) was Europe, where 88 percent said their economies weren’t doing well.
Except for Germany. Fully 85 percent of Germans said their homeland’s economic situation was good. How do we account for this German exceptionalism?
Let’s start with manufacturing. Like the only two nations with even higher percentages calling their economies a success (China and Vietnam), Germany is an export dynamo, with a huge trade surplus that bolsters its coffers. It owes part of that surplus to the euro, which makes German goods cheaper than they’d be if Germany had its own currency. But part is due to the strength of the country’s manufacturing sector and the concomitant weakness of its financial sector.
Many of Germany’s most successful companies are privately owned and not subject to investor pressure to reward large shareholders through practices prevalent in the United States, such as slashing wages, cutting back on worker training and research and development and buying back stock. Publicly traded German companies still retain their earnings to invest in expansions, a practice that was the U.S. norm until the doctrine of rewarding shareholders with nearly all of a company’s profits took hold during the past quarter-century.
In the United States, major shareholders and the top executives whose pay increasingly is linked to stock price control the corporate boards that approve these kinds of distributions of their companies’ earnings. In Germany, however, the profits that companies rack up are shared more broadly because shareholders don’t dominate corporate boards. By law, any sizable German company must divide the seats on its board equally between management- and worker-selected representatives. Any company with more than 50 employees must have managers meet regularly with workers’ councils to discuss and negotiate issues of working conditions (but not pay). These arrangements have largely ensured that the funding is there for the world’s best worker-training programs and that the most highly skilled and compensated jobs of such globalized German firms as Daimler and Siemens remain in Germany. They have ensured that prosperity is widely shared in Germany — not concentrated at the top, as it is in the United States.
Throughout the ’80s and ’90s, U.S. financiers and governmental officials repeatedly counseled the Germans to get with the Wall Street program: Offshore your production, they said; build up your equity markets; give shareholders a bigger role. Wisely, the Germans demurred.
Americans have grown understandably concerned that nearly all income growth here goes to the wealthiest 1 percent. They are enacting minimum-wage increases in a range of cities and states. But the path to a more equitable economy will require more than that. It requires the reshaping of corporate control along German lines. The key to a more equitable economy — and a happier nation — is more equitable control of its economic institutions.
Just 40 percent of Americans say their nation’s economic situation is good, while 85 percent of Germans feel that way. It’s time to import some of that German exceptionalism.
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