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Why Germany Still Has So Many Middle-Class Manufacturing Jobs

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Re: Why Germany Still Has So Many Middle-Class Manufacturing Jobs

#31

Post by pluma »

olewhalehunter wrote: post #16
buro9 wrote: post #11

Wow, that's a pretty appalling article. Seems to avoid even mentioning the desire of most of Europe to try and learn from what went wrong after the Great War. In 1918-1930 Germany was left so weakened by peace treaties that the seeds were sown for WW2. Post-WW2 the allies felt that a Germany crippled would only bring future wars, and a huge co-ordinated effort to build a sustainable industry and economic growth was p…

does the fact that Germany is right smack in the middle of Europe between Eastern European powers that can supply cheap (EDIT: and skilled, looking for better universities or opportunities) labor and Western/Northern European markets that can afford their goods have anything to do with this?

Not really. Historically (especially in the massive growth period after WW2 and before the reunification) the largest influx of immigrant workers came from countries like Italy and Turkey. A large number of seasonal workers these days come from Eastern Europe but that doesn't explain the decades prior.

Re: Why Germany Still Has So Many Middle-Class Manufacturing Jobs

#32

Post by chki »

crdoconnor wrote: post #6

He missed the main reason: currency suppression. Germany has managed to suppress the value of its currency over the years to make its exports artificially cheap, which encouraged growth, creating manufacturing jobs. It did this firstly through reunification (dragging down the value of the DM) and subsequently by joining the Euro (Southern Europe had the value of their currencies pegged higher than their 'natural' val…

While there is definitely some truth to the effects of the value Euro being "too low", I don't think that is the "main reason" for the number of German middle class manufacturers which the article is talking about. This is rather a historical artifact and did not develop in the last 17 years since the introduction of the Euro. I would also like to mention that currency value is not simply a banking vs. industry result in my opinion, there are many up- and downsides to "currency surpression" and Germany does not decide about the value of the Euro but the members of the Eurozone do.

Re: Why Germany Still Has So Many Middle-Class Manufacturing Jobs

#33

Post by bluedino »

qznc wrote: post #7
11thEarlOfMar wrote: post #3

I'd be interested in knowing what percentage of the Hidden Champions are publicly traded companies. Companies of that size are very likely to be acquired in the US. Consolidation is a constant activity by many public firms and probably (I am speculating) tends to reduce the proportion of mid-tier companies relative to Germany. Once acquired, these companies have an additional set of factors weighing on them in that t…

A significant part of the Mittelklasse is certainly part of the car industry. Maybe BMW, Audi, etc are not that keen on acquiring?

In the US, the big three automakers generally don't acquire small companies. A lot of work in the industry is done by companies like Delphi (who also have sites in Germany)

Re: Why Germany Still Has So Many Middle-Class Manufacturing Jobs

#34

Post by pluma »

qznc wrote: post #7
11thEarlOfMar wrote: post #3

I'd be interested in knowing what percentage of the Hidden Champions are publicly traded companies. Companies of that size are very likely to be acquired in the US. Consolidation is a constant activity by many public firms and probably (I am speculating) tends to reduce the proportion of mid-tier companies relative to Germany. Once acquired, these companies have an additional set of factors weighing on them in that t…

A significant part of the Mittelklasse is certainly part of the car industry. Maybe BMW, Audi, etc are not that keen on acquiring?

The term "Hidden Champions" though usually refers to "boring industry" companies like part suppliers, not actual manufacturers of consumer products.

Like the one company that practically has a monopoly on manufacturing the plastic part that goes on the end of flat roof drains -- not exactly something to write home about, but still a massively stable market creating plenty of jobs.

Re: Why Germany Still Has So Many Middle-Class Manufacturing Jobs

#35

Post by crdoconnor »

JanSt wrote: post #21
crdoconnor wrote: post #6

He missed the main reason: currency suppression. Germany has managed to suppress the value of its currency over the years to make its exports artificially cheap, which encouraged growth, creating manufacturing jobs. It did this firstly through reunification (dragging down the value of the DM) and subsequently by joining the Euro (Southern Europe had the value of their currencies pegged higher than their 'natural' val…

You are right and wrong at the same time. The DM was pretty strong and was used as a reserve currency in many european countries, that regularly devalued their respective currency. The current german export strength is based (at least, there may easily be more) on four factors: 1) The weak Euro. Personally, I hate it because the other european countries cannot compete with Germany. Historically, they would have deval…

>The Hartz IV reforms that added flexibility for companies

The Hartz reforms suppressed wages and made the average German poorer:

https://ideas.repec.org/a/wej/wldecn/557.html

Germany's industrial success was evident years before they went into effect.

Hartz is like trickle down economics and a lower minimum wage: the wealthy have good reason to love it and the wealthy will make up spurious reasons why you should love it too - which many people will believe.

>A highly educated workforce

China achieved a similar measure of manufacturing success with an education system that was a great deal worse while the UK has an equally good education system and did not achieve anything like Germany's manufacturing prowess.

The difference in the British and German education system probably has more to do with the industrial pressures than it does the nature of the education systems themselves. If the UK followed a similar export-driven path, they would probably have more apprenticeships and fewer people going to Uni to study English lit.

So no, I don't think it's that.

>Inflation-adjusted wages have actually declined in the last ten years making german products even cheaper for other countries. That' terrible for everyone.

Not everyone. German industrialists (like the guy who wrote this article) love lower wages.

Re: Why Germany Still Has So Many Middle-Class Manufacturing Jobs

#36

Post by JanSt »

IdontRememberIt wrote: post #23

I think the most important factor has been missed: planned luck. All the countries (in Europe) who are having success today are the ones who had a crisis (each for a different reason) in the '90s and made structural reforms. During the crisis in the 2000s and 2010s, these countries (Sweden, Switzerland, Germany, etc.) were leaner, more flexible than their "competitors". Fun fact, most of these countries are protestan…

You are right on the structural reform part, you should not be downvoted! There were massive changes in Germany (Hartz IV Reformen)

Re: Why Germany Still Has So Many Middle-Class Manufacturing Jobs

#37

Post by mbid »

polmuz wrote: post #8

> Tax advantages are another reason. The high taxes on assets in France and the inheritance tax in the U.S. prevent the accumulation of capital necessary for the formation of a strong mid-sized sector. Really? How?

I've heard the argument that, with high inheritance taxes, the heir of a family-owned company has to sell parts or all of the business in order to pay the tax. I don't know enough about the issue to say whether there is some truth to it.

Re: Why Germany Still Has So Many Middle-Class Manufacturing Jobs

#38

Post by olewhalehunter »

pluma wrote: post #31
olewhalehunter wrote: post #16

Earlier quoted context omitted.

does the fact that Germany is right smack in the middle of Europe between Eastern European powers that can supply cheap (EDIT: and skilled, looking for better universities or opportunities) labor and Western/Northern European markets that can afford their goods have anything to do with this?

Not really. Historically (especially in the massive growth period after WW2 and before the reunification) the largest influx of immigrant workers came from countries like Italy and Turkey. A large number of seasonal workers these days come from Eastern Europe but that doesn't explain the decades prior.

Historically (since about the 1700s) didn't large numbers of Europeans from all over the continent go there for the conveniently located scientific community and trade crossroads?

Re: Why Germany Still Has So Many Middle-Class Manufacturing Jobs

#39

Post by skue »

strict9 wrote: post #25

>Germany is far ahead of other large countries with regard to mental internationalization. This includes language competencies, international experience from student exchanges, and university studies. Countries such as France, Italy, Japan, and Korea lag far behind in these respects. Don't know much about France or Italy, but know enough about Korea and to a lesser extent Japan about how important language and intern…

> That along with the bombshell assertion without evidence that the inheritance tax is the greatest burdens companies face today removes any credibility from the rest of the article.

You disagree with one point [1] and question another, so for that reason you discount the entire article? If you can't align new information with your existing mental model, then the new information must be completely wrong?

This attitude has become so pervasive and so pernicious. Somehow even information has become partisan.

[1] BTW, do you have enough familiarity with Germany to make this comparison, or are you holding the author to a higher standard than yourself?

Re: Why Germany Still Has So Many Middle-Class Manufacturing Jobs

#40

Post by thesumofall »

pm90 wrote: post #19
buro9 wrote: post #11

Wow, that's a pretty appalling article. Seems to avoid even mentioning the desire of most of Europe to try and learn from what went wrong after the Great War. In 1918-1930 Germany was left so weakened by peace treaties that the seeds were sown for WW2. Post-WW2 the allies felt that a Germany crippled would only bring future wars, and a huge co-ordinated effort to build a sustainable industry and economic growth was p…

I wonder how/whether increasing the defense budget would help the German economy. Let me just say right away, that I am in no way advocating for increasing the supply of arms and ammunition in the world, which already seems to be at dangerous levels. However, if Germany invested as much in military R&D and a domestic arms industry, I wonder if that would boost the economy as it has done in the US. Also, the immigrati…

Likely difficult to get proper data on that but two things make me doubtful that increased military expenditure would boost its economy:

- it's likely that significant part of the spend would go to the US and hence not really help the German economy

- recent European (and also US) military projects were pretty much a disaster (the A400M being a point in case). Not that this would be much different in other countries but it leaves you wondering how effective it really is to spend money on the military rather than proven ROI-positive investments such as education

Edit: Also, it's not like Germany would really struggle economically ;-)

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