Should We Be More Like Germany?

What do the critics mean when they say that the United States should be more like Germany?

Recently, in the aftermath of reports of Germany’s astonishing 2nd quarter 2010 economic growth, there have been calls that we should be more like Germany. So, for example, Tom Friedman remarks in his column today:

Thanks to Internet diffusion, the rise of cloud computing, social networking and the shift from laptops and desktops to hand-held iPads and iPhones, technology is destroying older, less skilled jobs that paid a decent wage at a faster pace than ever while spinning off more new skilled jobs that pay a decent wage but require more education than ever.

There is only one way to deal with this challenge: more innovation to stimulate new industries and jobs that can pay workers $40 an hour, coupled with a huge initiative to train more Americans to win these jobs over their global competitors. There is no other way.

But the global economy needs a healthy Europe as well, and the third structural challenge we face is that the European Union, a huge market, is facing what the former U.S. ambassador to Germany, John Kornblum, calls its first “existential crisis.” For the first time, he noted, the E.U. “saw the possibility of collapse.” Germany has made clear that if the eurozone is to continue, it will be on the German work ethic not the Greek one. Will its euro-partners be able to raise their games? Uncertain.

Keeping up with Germany won’t be easy. A decade ago Germany was the “sick man of Europe.” No more. The Germans pulled together. Labor gave up wage hikes and allowed businesses to improve competitiveness and worker flexibility, while the government subsidized firms to keep skilled workers on the job in the downturn. Germany is now on the rise, but also not free of structural challenges. Its growth depends on exports to China and it is the biggest financier of Greece. Still, “Germany is no longer the country with the oldest students and youngest retirees,” said Kornblum.

It’s not entirely clear to me what Mr. Friedman or others making similar claims mean. Consider the graph above. It illustrates the percentage of associate or college graduates among OECD countries in the 25 to 34 age cohort. Note that the United States has considerably more graduates as a percentage of the cohort than Germany does. When you further break down the graduates between university graduates (which corresponds to a 4 year college program in the United States) and others, the U. S. lead is even more striking (indeed, this may be part of our problem). But it’s clear that education as such cannot be the primary feature the critics want us to emulate.

It can’t be a difference between Germany and the United States in corporate taxation. According to the OECD the effective rates in the tax countries are much the same.

It’s not a difference in energy intensity between the two countries viz:

To my eye the two biggest differences between Germany and the United States is that the Germans export significantly more as a percentage of their economy and we consume a lot more.

Germany is one of the relatively few countries who have a merchandise trade surplus with China. They should gather rosebuds while they may. What they export to China isn’t wiener schnitzel. Germany manufactures the machine tools that China uses to build its factories which the Chinese, in turn, use to manufacture consumer goods that they export to the United States. It won’t be that way forever. China wants to manufacture its own machine tools and I strongly believe that in the near future Germany will find itself with the same adverse trade situation with respect to China that faces much of the rest of the world.

Our advance publicity notwithstanding we are already a major exporting county and the only way that our exports can rise to German heights as a proportion of our economy is for us to consume less. Despite the president’s goal for doubling our exports the numbers do not support that objective. Our current exports are already high enough that the rest of the world would need to increase its imports from us to degree that I strongly suspect local leaders would find frightening for it to happen.

There are two primary culprits in our consumption patterns in which we differ markedly from Germany: oil and healthcare. We consume more than twice as much oil per capita as the Germans do and we spend twice as much per capita as they do on healthcare.

I see very little in our current policies that would affect either of these two expenses. For us to consume considerably less oil we’d need to change where we live and work and how we move ourselves and the things we buy and sell around. And for us to spend at German levels on healthcare providers would need to take a substantial pay cut. Neither of these things appear to be on the table.

In the end I’m left in a quandary. What in the world do people mean when they say we should be more like Germany?

FILED UNDER: *FEATURED, Economics and Business, Europe, World Politics, , ,
Dave Schuler
About Dave Schuler
Over the years Dave Schuler has worked as a martial arts instructor, a handyman, a musician, a cook, and a translator. He's owned his own company for the last thirty years and has a post-graduate degree in his field. He comes from a family of politicians, teachers, and vaudeville entertainers. All-in-all a pretty good preparation for blogging. He has contributed to OTB since November 2006 but mostly writes at his own blog, The Glittering Eye, which he started in March 2004.

Comments

  1. If it means drinking more beer and driving at high speeds on nice highways, I’d be willing to be more German

  2. Dave Schuler says:

    I’ve driven on the German autobahns. I found it rather frightening.

    However, a propos of the two things you mentioned German drunk driving laws are very severe. It’s hard for me to imagine a U. S. court enforcing them and without such strict laws and enforcement the autobahns would be deathtraps.

    I don’t know if it’s still the same now as when I lived there but in my experience the level of compliance with the law is much, much higher in Germany than it is here. It would take major overturning of our society for Americans to be like Germans in that respect.

  3. john personna says:

    Statistics based on Associate’s degrees seem odd. In my day at least they were far fewer in proportion to Bachelor’s. It also raises the old question of mapping and degree equivalence between countries. That and the old contrast between US trade education and German apprenticeship.

    If you ask me, there is a lot going on sub-surface, but institutional education lags.

    http://hackaday.com/

  4. Dave Schuler says:

    German secondary education corresponds roughly to our associates degree and German tertiary education to our college degree. The bottom line is that we lead Germany in both areas rather than lagging.

    I guess my point is that there’s more than higher education involved. I think the field of study is more important and I don’t see anything on the table that would cause a mass transition from interest group studies to technical education in the United States, for example.

  5. Brummagem Joe says:

    “former U.S. ambassador to Germany, John Kornblum, calls its first “existential crisis.” For the first time, he noted, the E.U. “saw the possibility of collapse.”

    If he actually said it, this has to be one of the dumbest remarks I’ve heard for a while from an allegedly well informed official. I’m just back from nearly three weeks in Europe which looked in fairly rude health to me and there was never the remotest chance of either the EU or it’s currency collapsing. Germany isn’t without it’s problems but it’s an exceptionally well run country that by and large operates in the interests of the majority of it’s citizens and is somwhat less in thrall to national myths than most. Probably because of its history. One of the reasons the German economy is recovering rapidly is because they were able to contain the extent of unemployment by govt funded schemes aimed at assisting companies to keep workers on the payroll rather than laying them off by subsidizing wages and/or working reduced hours. Thus aggregate demand was maintained, companies retained highly skilled workers in whose training they had invested heavily, and when export demand picked up their famous mid sized, or mittelstand, companies were able to respond rapidly. It’s also worth mentioning that Germany is an exceptionally chauvinist country. If there’s a German option, whether it’s kitchen appliances or 100 ton excavators, you buy German even if it’s more expensive. This acts as a powerful hidden form of protectionism. And since German products are generally outstanding it’s a win win for German society.

  6. Brummagem Joe says:

    “The bottom line is that we lead Germany in both areas rather than lagging.”

    Dave, if you’re going strictly by the stats you’re right on quantity, but on educational discipline and quality? More debatable perhaps.

  7. john personna says:

    Dave, did you just ignore the apprenticeship angle?

    Way to skip a point of fact and then say “the bottom line is …”

    I thought apprenticeship in Germany was pretty well known, and has been argued again and again as an answer to US competitiveness and jobs issues:

    “The Apprentice: Germany’s Answer to Jobless Youth”

    http://www.businessweek.com/magazine/content/09_42/b4151033735128.htm

    “How Germany Keeps Kids From Dropping Out”

    http://www.time.com/time/magazine/article/0,9171,1182439,00.html

  8. john personna says:

    (BTW, I dare you to count our music degrees and their engineering degrees separately.)

  9. john personna says:
  10. Maxwell James says:

    From what I can tell, he’s making the inoffensive, if simplistic, point that we need to stop trying to prop up entrenched, dying industries & allow our economy to restructure itself around new opportunities. Picking up from where you left off:

    By contrast, America’s two big parties still cling to their core religious beliefs as if nothing has changed. Republicans try to undermine the president at every turn and offer their nostrum of tax-cuts-will-solve-everything — without ever specifying what services they’ll give up to pay for them. Mr. Obama gave us expanded health care before expanding the economic pie to sustain it.

    You still don’t sense our politicians are saying, “Wait a minute; stop everything; we have got to work together.” Don’t these people have 401k plans of their own and kids worried about jobs?

    The president needs to take America’s labor, business and Congressional leadership up to Camp David and not come back without a grand bargain for taxes, trade promotion, energy, stimulus and budget cutting that offers the market some certainty that we are moving together — not just on a bailout but on an economic rebirth for the 21st century. “Fat chance,” you say. Well then, I say get ready for a long phase of stubborn unemployment and anemic growth.

    I find Friedman tiresome but this is a pretty innocuous column. You make the same argument – albeit more thoughtfully – all the time.

  11. Brummagem Joe says:

    “(BTW, I dare you to count our music degrees and their engineering degrees separately.)”

    I suspect the Germans do fairly well in the music department, and music has a strong mathematical component anyway, but how about “social studies.” And yes Apprenticeships are a very valuable educational resource. Some kids are late developers, and some of the best engineers I’ve ever known didn’t go to MIT but were products of the apprenticeship program at Roll Royce Aero engines in the UK.

  12. john personna says:

    Joe, Friedman is often called on his country-comparison. If I recall correctly, India has tiers of colleges for instance, and 4 year degrees don’t simply map equally from those tiers. That is one factor.

    The other is “quality of degrees.” There I take a pretty utilitarian view. If a degree does not produce positive ROI, it is not an investment. Actually that isn’t a value judgement, is it? That’s what the words mean.

    If music majors make more money than their degrees cost, or spur that much economic growth, they were a positive investment. If not, if they (or history degrees) are only defensible in non-economic terms (ie. cultural values) they are a cost. They are social spending.

    I also use music as a placeholder because I know a nice kid who got college loans to pursue his music degree, and then got a good job as a cable television installer. That image is always ready to mind. Did music mean he had mathematic intuition? Possibly. Could he have saved himself some debt? Probably. It is a microcosm our system. Too much debt, not enough return on investment.

    (I also note that our musical innovators are rarely graduates in music.)

    My “bottom line” is that we should be reinventing the US educational system. I don’t have a hobby-horse of what it should be. I think we should be trying lots of things. We should be innovating. We should view this as a competition.

    The only thing I oppose is the status quo. The people I have least patience with are its defenders.

  13. Dave Schuler says:

    but on educational discipline and quality

    IMO a large proportion of our students are ill-mannered louts. I don’t have a ready public policy solution to this, especially since the phenomenon is at least partially the product of going on three generations of ill-considered public policy.

  14. Dave Schuler says:

    BTW, don’t read more into the post than I’m writing. This is not a “We’re #1!” post. I’m asking three questions

    1) Should we be more like Germany?

    2) What does that mean?

    3) What public policy would encourage that transition?

    and, implicitly, a fourth

    4) Are the public policy alternatives you’re suggesting politically possible?

  15. john personna says:

    Well, my link “Percentage of Graduates in Science, Math, Computer Science, and Engineering” has some solid data on how we differ from Germany.

  16. Dave Schuler says:

    john personna:

    You might want to check on hiring statistics for people in the sciences and engineering in the United States. American students aren’t eschewing the sciences and engineering solely because of laziness or petulance. Other than the life sciences (an area in which jobs are heavily subsidized) the prospects aren’t particularly rosy.

  17. john personna says:

    Last I saw Dave, engineering did have one of the best starting wages:

    http://www.cnbc.com/id/29408064/Highest_Paid_Bachelor_s_Degrees_2010?slide=1

    Geez, they’re all frickin’ engineers.

    Are you pulling it out of your butt?

  18. john personna says:

    BTW, before you go all ‘ad hominem’ on me, how much should I respect someone in this day and age who doesn’t Google a claim before posting it? Particulary when it is led with a snide “You might want to check …”

  19. Andre Kenji says:

    The point is the United States universities produces a lot of lawyers and political scientists and few engineers and programers. Germany and India are more inteligent on that.

  20. Rebecca Burlingame says:

    There are actually two things our government could do that would help straightaway. First, encourage localities to create zoning that actually allows people to walk places where they need to go. People are desparately looking for places such as this in the U.S. and not finding it, whereas take a look at European rentals and one immediately notes the transportation detail that follows.

    The second regarding healthcare – again the U.S. government has a no-cost solution not unlike the one mentioned above: allow healthcare workers besides doctors to take care of non life threatening medical matters. Then, the U.S. might just have an economic chance.

  21. Andy says:

    John & Dave,

    Prospects for engineering vary widely depending on the specific discipline. Scientists vary widely as well.

  22. John Personna says:

    On a mtn, hard to follow link, but that’s the kind of query students and states should do, yes

    (iPhone works new sw)

  23. Michael says:

    Could it be that German companies are more apt to hire qualified candidates with less formal education that are American companies? In my experience, it’s difficult if not impossible to even get your resume considered for an IS/IT position at some companies unless you have a 4 year degree. I’ve been turned away more than once because my 2 year degree + 10 years of experience didn’t qualify me, but a brand new graduate with a BS degree and zero experience would fit the bill.

  24. JKB says:

    I read a book published in 1886 promoting manual education, a system that MIT did implement at that time and was started in Germany. It was essentially an apprenticeship not in a particular discipline of work but in making things. Our once upon a time shop class was probably an outcome but even those have gone away in high schools. The author in discussing the industrial revolution in England attributed a lot of it to the German immigrants in England. Not completely without merit.

    It was put more succinctly by Patrick McGoohan in Ice Station Zebra:

    David Jones: The Russians put our camera made by *our* German scientists and your film made by *your* German scientists into their satellite made by *their* German scientists.

    This is not to say other scientists aren’t up to the task, it is just the German culture promotes precision and quality to a larger part of the society creating a deeper pool. Based on the global warming fraud, our scientists spend their time trying to suppress conflicting research and making up data points that have no relation to math or science principles but make the modeling easier.

  25. Brummagem Joe says:

    “IMO a large proportion of our students are ill-mannered louts.”

    Dave; when I said educational discipline I was referring to field of study not personal standards of behavior. On the whole I don’t have a problem with university students being noisy and bad mannered. They’re young and full of high spirits. I certainly wasn’t a paragon of virtue and I don’t remember my contemporaries being so either. Quite the contrary. Maybe you were Dave?

  26. Brummagem Joe says:

    “Based on the global warming fraud,”

    Surprising then that most German scientific opinion doesn’t consider global warming a “fraud.”

  27. john personna says:

    “This is not to say other scientists aren’t up to the task, it is just the German culture promotes precision and quality to a larger part of the society creating a deeper pool.”

    A culture that has addressed wives of PhD’s as “Frau Doktor” is showing a pretty serious respect for education. We’d be like “does that make her better?” or “I bet she believes in global warming!”

  28. john personna says:

    Michael, it’s sad that “screeners” often don’t understand the technology, and so rely on degree or current pay/position. I think a live demo (online somewhere) can cut through that, but you’ll still only have luck with the screeners that actually hit the link.

  29. Michael says:

    John, the degree requirement isn’t the half of it when it comes to HR screeners. Not knowing the terminology and various acronyms means that they will disqualify a candidate because they didn’t have the exact phrase listed on their resume. As an example, I was once rejected as a candidate because I had “Java Desktop/Enterprise/Micro”, and HR was only looking for someone with “J2SE/J2EE” listed on their resume. By the time I was told of the reason for being rejected, they had already hired somebody else.

    For those that don’t know, J2SE == “Java 2 Standard Edition” and is used for desktop programming, and J2EE == “Java 2 Enterprise Edition” and is use for server programming.

  30. ponce says:

    Only blowing 1.5% of our GDP on “defense” spending?

    Where do I sign?

  31. Larry says:

    1) Should we be more like Germany?

    In what way culturally, haven’t we already done that as we have with so many other
    cultures from around the planet? What will happen to the German Culture as immigration throughout the EU continues to expand. What will Germany look like several decades from now? What influences and changes will immigration have on German Culture and the rest of the EU?

    2) What does that mean?

    see above

    3) What public policy would encourage that transition?

    Could it be that the current German Business Culture has a higher degree of ethical responsibility towards the German population as a whole…hasn’t the American Business ethic under gone a shift away from that responsibility?

    and, implicitly, a fourth

    4) Are the public policy alternatives you’re suggesting politically possible?

    In time, perhaps we, America, are actually in the process of reawakening..or that we are at a major crossroads, we go one way and we fail, we go another and we grow, not just economically but more holistically, that if it’s not to late, we learn how to prosper and thrive with a more sustainable National philosophy, a better way of life..

  32. Brummagem Joe says:

    Michael says:
    Wednesday, August 18, 2010 at 12:56
    “Could it be that German companies are more apt to hire qualified candidates with less formal education that are American companies?”

    This is probably because in many ways American society is extremely rigid contrary to popular belief. It runs on tram lines and once it gets off the tram lines it’s lost. The example you posit is all too typical I fear. You see symptoms of it everywhere from how we make war to buying car insurance. To some degree it’s a factor of size so there is some logic underpinning it all but I can remember when I moved from working for an American company where basically they thought every operation in the business could be covered by a manual to working in the more freewheeling environment of a European company the change was huge. According to much business reporting the books have been thrown away but I wonder when one hears about cases like the recent one of Hurd at HP. Those people must be nuts.

  33. john personna says:

    On this topic, Mark Thoma writes today:

    The Real Reason for Germany’s Industrial Expansion?

  34. Brummagem Joe says:

    “On this topic, Mark Thoma writes today:”

    I’m not sure I buy Mr Thoma’s timing. German industrial expansion didn’t really accelerate until the middle of the 19th century after France, Belgium and Britain, and went into supercharge mode after the founding of the German empire in 1871. If anything his thesis is more true of the US whose disregard of patent laws and copywright protection was blatant throughout the 19th century. Hence the detestation of America by authors like Charles Dickens who saw their works being pirated without recourse. Much the same situation we have with American intellectual property in China at present really.

  35. john personna says:

    I think the safe claim would be that the tragedy of the anti-commons, as it is now called, is sometimes a problem.

    Analysis faces a little bit of a moving target though, as industrial nations generally expand restrictions.