I spoke this AM at an interesting meeting on economic differences between Germany and the US (sponsored by the Friedrich Ebert Foundation). My focus was on manufacturing, an area where the German’s are much more explicit about their industrial policy than we are.
Some of that explicitness might map onto our policy agenda (i.e., if we ever regain sanity)—things like closer connection with the university R&D system and better technical training. Much of it would be less likely here (high union density and close labor-management partnerships).
But here’s the thing I took from the discussion with German economists and policy analysts. The way they think about the economy over there is just much more of a “we’re in this together” dynamic. Their successful manufacturing story is, at root, a function of labor, management, and government working together, making necessary sacrifices and investments to benefit the broad spectrum of stakeholders (same re their broader strategy for dealing with the Great Recession). In large firms, half of all the seats on the board are reserved for union reps; workers councils have an extensive say in production processes and decisions.
This picture is revealing. It plots real GDP and employment for the US and Germany from 2007-2010 (hat tip, SC). The folks at the meeting today described the lengths that German policy makers and employers went to on behalf of avoiding layoffs. “Work sharing”—where all workers take hours reductions to avoid layoffs (and receive gov’t benefits to offset part of the wage loss)—was prominent in this regard.
As you can see, the decline in real GDP was similar across our two countries—it’s the employment path that’s different. The Germans traded away productivity to ensure that people kept their jobs. Now that GDP’s rising again, firms are poised for expansion, having held onto their skilled workers.
I don’t want to overdo it—we’re different culturally, historically, and politically. It’s wrong to think that their model can be imported, just as it was wrong in the 1990s to argue that our model should be exported.
But there’s something to learn here about the benefits of recognizing that at the end of the day, we really are in this together. It’s got to be a WITT, not a YOYO, world.
(WITT: we’re in this together; YOYO: you’re on your own)