March 03, 2005

Make Germany Speak English!

I'm too young to remember the days when liberals the world over put Germany and Japan up on a pedestal and declared that all and sundry should emulate their greatness. Presumably it was back in the 1980s, when I was actually living in Japan and experiencing the greatness firsthand (it involved a lot of animated billboards, as I recall). Nevertheless, first Japan caught ill and now Germany, as Mr. Hindrocket reports.

Not knowing much about Germany, it seems true that many of the overly strict labor regulations—most especially the ones that effectively prevents businesses from firing many of their workers—bear a portion of the blame. As does East German reunification. But from talking to Great Germans I Know (i.e. Hans who works at the corner store plus an old high school friend), the bigger problem seems to be that Germans aren't actually suffering any of the effects of economic malaise. Cities and stores are still thriving. The unemployed still collect fat checks. People are happy. 21 percent unemployment over there is less physically painful than 6 percent unemployment here. Eventually, of course, the last slice of pie will be munched away, and macroeconomic problems will turn into everyday lack-of-grocery problems. When that happens, it will be interesting to see whether the government starts hacking away further at the welfare state or not—the usual lurch in times of great hardship is towards the left, no? We'll see. It doesn't seem that Germany's leaders have any incentive to change things otherwise.

The other fun question, too, is whether Germany is hampered by its place in the European Monetary Union. Back in 2002, when the recession first hit, Germany could have used a monetary shot in the arm, ala low interest rates. But the European Central Bank, as I recall, was too worried about overheating other countries, like Ireland and Sweden, so it kept rates high. Now that brings up a good question—we have the exact same situation in the United States. When the Fed starts raising rates because the economy's finally humming along, not all states will be at equal paths, and some will still need loose monetary policy. They'll be stuck in Germany's situation.

So what happens then? My guess is that workers start leaving the state in question, wages sink, and then firms start moving back to the state, reviving the local economy. Good theory, but it doesn't quite work for Germany, whose workers—I've noticed—all speak German, and can't just move elsewhere so easily. The one true solution for this impasse, of course, is simply to make everyone in Europe speak English.
-- Brad Plumer 12:47 PM || ||