Network News

X My Profile
View More Activity

Consider the Germans

Germany's growth numbers look pretty good right now: If the next three quarters are as robust as their last quarter, growth will be almost 9 percent next year. And they think they know why: their stimulus, which focused on keeping workers in their jobs rather than generating new jobs that newly unemployed workers could apply for. "A vast expansion of a program paying to keep workers employed, rather than dealing with them once they lost their jobs, was the most direct step taken in the heat of the crisis," reports the New York Times.

Tyler Cowen agrees with the Germans on this one: "In a highly specialized modern economy, it is much easier to prevent jobs from being destroyed than to create them again, at least assuming those are 'good' jobs in the first place," he writes. As I remember, the stimulus got mocked for focusing on jobs "created or preserved," but a job preserved is simply better than a job created: It's usually higher-wage, the worker is better at it, and the worker doesn't have to stop being productive for awhile.

Now, is this policy difference behind Germany's recovery? Hard to say. Germany's exports benefited massively from the Euro's fall, and they ran some very large deficits early in the crisis. Germany might be doing well because their policy was sound, or they might be doing well because the collapse of the Euro worked in their favor, or some combination of the two. But either way, saving jobs makes a lot of sense, and that's why it's so crazy that we're going to allows states to fire hundreds of thousands of public-sector workers. Their jobs are the easiest to save, and nothing we've done during this recession should make us confident that we can easily replace them.

By Ezra Klein  |  August 16, 2010; 4:59 PM ET
 
Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati   Google Buzz   Previous: Research Desk investigates: Could Congress still enable reconciliation for next year?
Next: Reconciliation

Comments

Didn't Germany's GDP suffer a much larger drop than the US's, or am I misremembering?

Posted by: AZProgressive | August 16, 2010 5:07 PM | Report abuse

I recently read in the Wall Street Journal (http://online.wsj.com/article/SB10001424052748703960004575427020601807384.html) that "Germany's much-criticized policy response to the crisis looks vindicated; it is no surprise to see that it will PUSH AHEAD WITH FISCAL CONSOLIDATION even if the budget deficit may now be lower than expected. Germany's AUSTERITY efforts only kick in next year, and they are relatively modest. They could also serve to reassure conservative German consumers and boost domestic demand further."

Perhaps deep, lasting cuts to U.S. federal entitlement programs and other costly budget items might help "reassure conservative" American "consumers and boost domestic demand further."

Posted by: rmgregory | August 16, 2010 5:21 PM | Report abuse

Ezra says:

"...[the German] stimulus, which focused on keeping workers in their jobs rather than generating new jobs that newly unemployed workers could apply for."

however the NYT article says:

"Government officials here are confident they found the right approach, including a better solution to unemployment. They extended the “Kurzarbeit” or “short work” program to encourage companies to furlough workers or give them fewer hours instead of firing them, making up lost wages out of a fund filled in good times through payroll deductions and company contributions."

This program is apparently entirely funded by employers and employees, and so it is not really a program I would refer to as "stimulus" in the way that Ezra does, since it does not seem to involve government spending at all. It has stimulative benefits, but is more like a self-funding unemployment insurance program than a Keynes-ian stimulus investment by the government.

I agree that if you can have employees furloughed or working reduced hours until the employer is back to full capacity, that's much better than throwing people out the door and having everyone start again from scratch. It sounds like a program that deserves study and consideration in other countries like our own.

Posted by: Patrick_M | August 16, 2010 5:29 PM | Report abuse

Work-sharing already exists in 17 states, and there are proposals to expand it, from both the left and right. Dean Baker of CEPR proposes and employer tax credit for work-sharing. Kevin Hassett of AEI is a strong supporter of work-sharing as well. Paul Krugman and Mark Zandi have urged consideration of the concept. See http://www.cepr.net/index.php/issues/worksharing/ . Work-sharing bills have been introduced as well, including HR 4179, S 1646 and HR 4135.

Posted by: nwoo | August 16, 2010 5:44 PM | Report abuse

I don't think the detailed numbers are out yet, but it appears from news stories that the prime driver of Germany's resurgence is exports, not domestic demand. Domestic demand in Germany was about the same in 2009 as it was in 2000.

Yes, Germany's GDP fell much harder than America's, because it is more dependent on international trade. Now that trade is rebounding, a sharp uptick in exports is boosting GDP.

As far as it goes, paying companies to keep workers on short work (Kurzarbeit) is almost certainly going to be more effective than ad-hoc stimulus.

Posted by: justin84 | August 16, 2010 5:47 PM | Report abuse

Americans should be shouting from the rooftops for more stimulus spending.

Posted by: Chris48 | August 16, 2010 5:49 PM | Report abuse

Seems like it's just very good mercantilism:

http://www.washingtonpost.com/wp-dyn/content/article/2010/05/20/AR2010052005278.html

Posted by: jbirk10 | August 16, 2010 6:07 PM | Report abuse

For the GERMANS, such a policy "bias" genuinely makes sense. But in CONTRAST, the situation HERE is that "we" really need to get a great many "entrenched", "vested-interest" types OUT of what had long been relatively "cushy" jobs for many people ---so that resources CAN GENUINELY BE REDIRECTED TO FUNDAMENTALLY DIFFERENT KINDS OF PURSUITS!

For example, one cannot reorient "our" OIL / NATURAL GAS dependency AWAY from oil (a mile underwater) and toward (instead) natural gas (abundantly available ON LAND, or directly reachable therefrom) WITHOUT "disconnecting" (for starters) those 100,000 or so jobs down in the Gulf that are dependent on DEEP-WATER drilling from the people who NOW HOLD those lucrative jobs, or are positioned "economically downstream" from those who have held them!

And one cannot reorient the whole AUTO INDUSTRY to the whole "new" (actually, quite OLD now already!) "Chimera" Architectural paradigm now (barely) underway WITHOUT ESSENTIALLY CASHIERING THOSE WHOSE "INTERESTS" ARE BOUND UP IN BUILDING AUTOS IN THE OLD (NOW OBSOLETE) WAY! (Hence the bankruptcies of Chrysler and GM, and the "clearing of the boards" in order to START OVER!)

That is COLD and HARD, I know. BUT WITH "OUR" OWN OIL SUPPLY NOW 70% DEPLETED (and specifically the "EASY" stuff), THERE REALLY IS NO LONGER ANY CHOICE! It SIMPLY IS NOT A MATTER OF MERE “POLITICAL” OPINION AND IDEOLOGY --- technological REALITIES actually govern here!

Posted by: BirdsAbound | August 16, 2010 6:29 PM | Report abuse

For the GERMANS, such a policy "bias" genuinely makes sense. But in CONTRAST, the situation HERE is that "we" really need to get a great many "entrenched", "vested-interest" types OUT of what had long been relatively "cushy" jobs for many people ---so that resources CAN GENUINELY BE REDIRECTED TO FUNDAMENTALLY DIFFERENT KINDS OF PURSUITS!

For example, one cannot reorient "our" OIL / NATURAL GAS dependency AWAY from oil (a mile underwater) and toward (instead) natural gas (abundantly available ON LAND, or directly reachable therefrom) WITHOUT "disconnecting" (for starters) those 100,000 or so jobs down in the Gulf that are dependent on DEEP-WATER drilling from the people who NOW HOLD those lucrative jobs, or are positioned "economically downstream" from those who have held them!
And one cannot reorient the whole AUTO INDUSTRY to the whole "new" (actually, quite OLD now already!) "Chimera" Architectural paradigm now (barely) underway WITHOUT ESSENTIALLY CASHIERING THOSE WHOSE "INTERESTS" ARE BOUND UP IN BUILDING AUTOS IN THE OLD (NOW OBSOLETE) WAY! (Hence the bankruptcies of Chrysler and GM, and the "clearing of the boards" in order to START OVER!)

That is COLD and HARD, I know. BUT WITH "OUR" OWN OIL SUPPLY NOW 70% DEPLETED (and specifically the "EASY" stuff), THERE REALLY IS NO LONGER ANY CHOICE! It SIMPLY IS NOT A MATTER OF MERE “POLITICAL” OPINION AND IDEOLOGY --- technological REALITIES actually govern here!

Posted by: BirdsAbound | August 16, 2010 6:31 PM | Report abuse

There are multitudes of factors at play here. One Prof. Krugman brought up today, the trade surplus germany is now running would seem to be one of the biggest, if not the biggest, reason for their success. The editorial he links to, http://www.nytimes.com/2010/08/16/opinion/16mon1.html, says that Germany is piggy backing off of increased demand for machines made by German manufacturers. Now a job saving stimulus obviously helped them to mop up the market when other countries manufacturing sector was being beaten down, but it seems fundamental export-driven demand may be a bigger factor here. Even if you have a good stimulus, it means nothing if demand does not pick up from somewhere. Since it does not seem that the German consumer is not the only one driving their stellar growth, it is hard to lay credit solely at the hands of their stimulus policies.

Posted by: RyanS1 | August 16, 2010 6:45 PM | Report abuse

Ezra;

1. There's no evidence the ruling Democratic party knows anything about jobs or job creation. They simply take turns attacking and demonizing business and corporate America. That's not the German approach.
2. If you are so confident that saving public sector jobs is the key to our success, why don't you put your own money-and those of your Journolist friends-into a fund to do so?

It would do us good to see a Democrat with his hand in his own pocket.

Posted by: Towson_Tiger | August 16, 2010 11:27 PM | Report abuse

Yes, if we could just get workers to accept lower wages, we wouldn't have to lay people off. Wages are being kept artificially high, and public sector unions won't accept less pay (although they love to demand less work).

A very disappointing and misleading piece for Ezra here- leaving out the fundamental differences in the plans is unacceptable bias.

On the larger point of specialized labor, I believe Ezra has pointed out in the past that most of the jobs lost have been in the less educated, less specialized class. In particular, housing construction was out of control...meanwhile, we pay million dollar pensions to millions of public "servants".

Feds and contractors have to take a paycut?

Posted by: staticvars | August 16, 2010 11:35 PM | Report abuse

One of the problems that really jumps out as you read the comments is just how far mainstream conservative thinking has split from reality.
Listen, children, Germany is a socialist state, their wages and benefits for even their lowest paid workers are nothing less than "lavish" by our standards. Let's start with 6 weeks paid vacation and free health care....
Goodness! So just drop your "Austrian school" baggage in the bin marked "incinerator" along with your Ronald Reagan fetishes & voodoo apparatus and try to keep in mind that Germany has an export sector in their economy because they made a conscious decision not to export their manufacturing base.
Instead they invested in it, as a nation, using good old Keynesian economics to develop technology and then to retain the capacity that technology created. It wasn't sold to Bangladesh for an additional half a percentage point on the corporate Dow exchange!!1!!
(I know, stunning, how could they act against the interests of the shareholders like that? Don't they know their own Masters?)
Still, it does not bode well for US of America style capitalism, but what REALLY doesn't bode well for the US of America is all these conservative wingnuts running around pretending socialist Germany is some kind of triumph of Ayn Rand pulp fiction.
Reality, it's not really optional anymore.

Posted by: dijetlau | August 17, 2010 12:59 AM | Report abuse

yeah it is true most of us can save money on our car insurance by making few simple changes find how much you can save http://bit.ly/ah5Jjm

Posted by: jaydenro17 | August 17, 2010 4:13 AM | Report abuse

Congress is going in the wrong direction by failing to stop the States from throwing workers out into the streets.

Republicans think State layoff of workers is a good idea and are blocking money to keep people working.

Posted by: bakho | August 17, 2010 8:25 AM | Report abuse

Klein writes "that's why it's so crazy that we're going to allows states to fire hundreds of thousands of public-sector workers. Their jobs are the easiest to save, and nothing we've done during this recession should make us confident that we can easily replace them."

This is essentially the problem with the way liberals think of the economy. It is a perfect example of misinterpreting the evidence to suit one's beliefs.

The German program saved jobs in firms that actually produce high quality things that people worldwide want to buy.

Public sector employees rarely produce anything anyone within the country, let alone abroad want to consume.

I have little confidence that liberals will acknowledge the difference.

Posted by: jayjunk3 | August 17, 2010 4:28 PM | Report abuse

"I agree that if you can have employees furloughed or working reduced hours until the employer is back to full capacity, that's much better than throwing people out the door and having everyone start again from scratch." posted by Patrick M.

Fat chance getting most unions to agree to that.

Posted by: bgmma50 | August 17, 2010 5:16 PM | Report abuse

"But either way, saving jobs makes a lot of sense, and that's why it's so crazy that we're going to allows states to fire hundreds of thousands of public-sector workers."

What's the sense of borrowing money from China to save non-productive, money pit government jobs? Much better we tell the states to save their own public sector jobs by adopting some Kurzarbeit.

Posted by: bgmma50 | August 17, 2010 5:33 PM | Report abuse

Klein's article is a perfect example of superficial analysis and bending facts to suit one's own agenda.

Klein writes "But either way, saving jobs makes a lot of sense, and that's why it's so crazy that we're going to allows states to fire hundreds of thousands of public-sector workers."

However, before the German government jumped in to save the private (not public) sector jobs, Germany had gone through many years of increasing labor market flexibility for firms (that is not making it difficult for firms to operate at their efficient level).

In contrast, over here in the U.S. we have the government poring in $50 billion to save the jobs of the UAW (which not so coincidentally had worked to get Obama elected). This is simply an example of the horrid labor market inflexibility promoted by this government.

The policies of the US government is as far away from what is making Germany a success. The idea that saving public sector jobs is similar to what the Germans are doing is puerile.

Posted by: jayjunk3 | August 20, 2010 5:11 AM | Report abuse

Post a Comment

We encourage users to analyze, comment on and even challenge washingtonpost.com's articles, blogs, reviews and multimedia features.

User reviews and comments that include profanity or personal attacks or other inappropriate comments or material will be removed from the site. Additionally, entries that are unsigned or contain "signatures" by someone other than the actual author will be removed. Finally, we will take steps to block users who violate any of our posting standards, terms of use or privacy policies or any other policies governing this site. Please review the full rules governing commentaries and discussions.




characters remaining

 
 
RSS Feed
Subscribe to The Post

© 2010 The Washington Post Company