Germany’s troubles started with 11/9

BERLIN, Germany – Once upon a time, Germany was an economic powerhouse in Europe with GDP per person that was 20 percent higher than the EU average. But, according to The Economist, Germany’s GDP has fallen one percent below the EU average, with only four other EU countries with a lower measure.

Germans say their troubles started with 11/9. That’s right, 11/9, not 9/11. That’s for Nov. 11, 1989, the day the Berlin Wall collapsed from sheer People Power and the unstoppable forces of history. That’s also what New York Times writer Thomas Friedman said in an extensive article and book. I walked over the Brandenberger Gate and confirmed for myself that the wall is gone... not a single stone left. Only a commemorative line on the ground remains.

They tell me here that 11/9 is significant to them because that’s the day Germany was unified – no more capitalist West and Communist East – just Germany. But why would a momentous event like that signal the decline of germany? Simply because the cost of unification was so high, the economy was hobbled. Trouble is, the Cold War caused two Germanies to develop and that’s not easy to undo.

Then too, the fall of communism marked the rise of globalization, as Friedman pointed out, and Germany was not ready for it. The social compact that produced a long era of industrial peace and economic growth, became a heavy burden in a world beset with globalization. Now, jobs flow as freely as products across borders. As a result, four million Germans are now out of work and collecting unemployment benefits.

Deutschland, an English language German magazine, explains that globalization represents a big problem for Germany because increasing numbers of businesses are relocating production of goods abroad, even in part. "The exportation of goods is being joined by the exportation of jobs. Production is now carried out where the costs are the lowest."

The problem with many Germans is that while they don’t mind globalization for so long as it causes a strong export performance. But they are unable to accept that jobs would also have to go to lower costs countries. As far as they are concerned, the social compact is inviolable.

What is this social compact? Deutchland magazine explains that for decades, there was this very pragmatic form of economy: The market acts as the regulator of economic activity, supplemented by a social component to protect the individual worker in terms of job security, wages that are collectively bargained, health care and unemployment benefits.

That social compact, together with legendary German industry and technical know how, catapulted Germany to its economic heights in the late 70s and up to late 80s. But it has grown out of date and no prime minister is brave enough to tell the German workers that reality. It made German business less nimble to respond to the realities of globalization. Up to recent times, it was unthinkable for German labor to agree to lose what it enjoyed for so long under the social compact.

The result is a Germany that is Europe’s slowest growing economy, estimated by The Economist at only 1.4 percent, similar to the malady being suffered by Japan during most of the 90s. But even Japan has started to perk up at 3.6 percent GDP growth over 2004 to the last quarter while Germany rose only by 0.2 percent.

There are, however, those who say Germany didn’t do too badly if we factor the cost of unification. It had been very expensive, according to The Economist, costing 1.25 trillion euros since 1990. Hopefully the heavy investments made by the German government in modernizing infrastructure in the country’s former communist East, will start to pay off soon.

Then again, there is good news. Deutschland magazine reports a national change of heart is starting. "It is becoming clear that Germany is willing to implement far reaching reforms... it is increasingly accepted that there is no alternative to such measures... today many people are prepared to work longer and to sacrifice some of their pay to keep their jobs."

In the end, Deutschland concludes, "these represent major reversals in social policy, but without them, there is little chance of the German economy being able to assert itself against the world wide competition and maintain its present position."

I have no doubt the Germans will bounce back, as it seems to be bouncing back. They have bounced back in all their history. They are obviously also making an effort to learn from history with their educational system telling their young people where they went wrong. The Germans are taking a totally different approach from the Japanese, whose educational system is glossing over their historical mistakes.

One other thing they have going for them is the continuing high reputation of the Made in Germany tag on products. That should make the bounce back a lot easier once the needed structural changes in their economic are addressed.

Goethe Institute

I’m in Germany for the next two weeks as guest of the Goethe Institute, together with journalists from Japan, South Korea and Yemen and an environmental planner from Iran. The Germans primarily want to show us what they have by way of advanced technology in dealing with environmental issues and renewable energy.

As you can see, they are hard at work showing the world how Germany has advanced the frontiers of technology in matters that impact on the survival of us all in Spaceship Earth. Unlike other world powers, the Germans are very environmentally conscious and that must be a good thing for the world.

Berlin, a city of three million people, is so clean and orderly that I am suffering a culture shock. Even my chronic sinus problem disappeared. But I am having a difficult time in pedestrian crossings because no one wants to cross the streets during a red light, even when there is absolutely no vehicle in sight. I thought it was sheer waste of time but was too embarrassed to break the rule. Sheer order in the streets could be refreshing.

Now, here’s Dr. Ernie E

"Doc," said the young man lying down on the couch, "you’ve got to help me! Every night I have the same horrible dream. I’m lying in bed when all of a sudden five women rush in and start tearing off my clothes."

The psychiatrist nodded, "And what do you do?"

"I push them away."

"I see. What do you want me to do?"

The patient implored. "I want you to break my arms."

You don’t stop laughing because you grow old. You grow old because you stopped laughing.

Always laugh when you can. It is cheap medicine. – Lord Byron "A cheerful heart is good medicine..." (Prov 17:22a)

"I realize that humor isn’t for everyone. It’s only for people who want to have fun, enjoy life, and feel alive." – Anne Wilson Schaef

To the world, you may be one person; but to one person, you may be the world!!

Boo Chanco’s e-mail address is [email protected]