Good news for German industry. less so for Germany

German industry has been working to increase productivity, with notable success:

German firms are conquering the market for the machines that power world industry, racking up record sales of €98billion (£67billion) last year on the back of booming growth in Asia.

Germany’s engineering federation in Frankfurt, VDMA, said the country’s share of the €500billion global market for everything from laser systems to machine tools and polymer electronics rose to 19.3pc in 2004, compared with 5.2pc for France and 4.8pc for Britain.

Sales to China jumped 26pc on the year before, reaching €7.8billion.

Analysts say it is the latest evidence that Germany is emerging as lean and fit “Teutonic tiger” after a decade-long squeeze on wages and corporate costs, despite the continued slump at home and a raft of quality problems in the car industry.

The country is now the biggest exporter of merchandise of all kinds, ahead of the United States, China, and Japan, cornering 10pc of total world export market, according to the World Trade Organisation’s 2005 report.

That won’t do much for Germany’s unemployed, or the German economy in general, at least not in the short run. German wages are too high, even given the high productivity, and the labor market and general regulations being far too rigid. Wages will have to be frozen at current levels for a number of years, and regulations have to become less onerous before any substantial improvements can be expected.

6 thoughts on “Good news for German industry. less so for Germany”

  1. Don’t know if this applies or not, but it is certainly unheard of: in the last two years, Mercedes and BMW cars, as well as Porsche’s Cayenne SUV have been rated by both J. D. Power and Consumer Reports among the worst cars in the world.

  2. I wonder how many of the companies making this stuff are moving part of their production to Central or Eastern Europe.

    Probably easier for a company like Siemens to do than for the Mittelstand companies.

    I wonder if German politicians realize what a valuable national asset they have in the Mittelstand, or if they tend to discount them (as many US politicians would tend to do) under the belief that silicon is more glamorous than metal.

  3. The statistic that Germany is the leading exporter is somewhat misleading. It is only so because Germany is a relatively big state in the much bigger free trading block that the EU represents. The EU has worked to eliminate trade barriers between EU countries, so German goods have much greater access to these markets compared to large non-EU exporters. Plus proximity and land borders favor increased trade with other EU countries. Trade isn’t as free as between a large US state and the rest of the US, but it is supposed to be moving in that direction.

  4. Germany can export all the finest goods until the end of time, but if they can’t develop an even larger services sector to absorb the growing number of unneeded factory workers, then I suspect that the stagnation will continue.

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