Posted by: Dirk | January 30, 2015

Mercantilism is official German government policy

I have just seen Dirk Becker (socialdemocrats) talking in front of the German parliament (in German, obviously). It is very important to recognize that the German government seems to be identifying a net exporting position (exports are higher than imports) with a policy that maximizes welfare of Germans. There is no other way to understand the speech by Becker, given that another colleague of his pointed out that the Germans are accumulated foreign debt because of their current account surplus and Becker argued strongly (in voice; weakly in argument) against this point. That the German economy has a private sector surplus and a black zero for the public sector is just possible because the rest of the world moves into debt (or decreases foreign assets).

Message to the rest of Europe: if you think that German domestic demand policy will be geared towards European economic needs, forget about it. Low inflation rates or even deflation are a problem? Still there is no admitting that weak German domestic demand has played a role in this. The German government also denies that the ECB should use quantitative easing to tackle this problem. Apparently, the German government believes a. whatever the market produces is just and b. that nations can only be successful by net exporting (= building up foreign assets). This is clearly mercantilist policy, and this has been pointed out by many economists already (like here). Germany, as it stands, is abusing the euro to force other nations into taking large debt positions. Given the high amount of debt there, a fall in nominal wages will increase the financial troubles in the periphery.

The European nations that are in crisis will be dependent on this German government if they want to increase the welfare of their population. I wish them all the best.


Responses

  1. Reblogged this on sdbast.

  2. Published this today. Germany seems to export its policies, too: https://rwer.wordpress.com/2015/01/30/graphs-of-the-day-current-accounts-in-europe/

  3. I have been saying to my countryman for a long time now: Do not do what Germans tell us, do what Germans do; implement high wages and high social safety net.

    And comment above is not right, only policy that germany export is about trade balance, not the part on how they achieved it.
    To import their policy we should raise wages and safety net in order to get agile and high technology economy. High wages force adoption of high technology to improve productivity. Once you do have agile economy and extra capacity then you keep wages on level while surounding countries inflate it. Then just collect ripe fruits.
    Germany did not achieve high exports by forcing down the wages,like others are doing now, but by not allowing them to grow while surounding economies did allow.
    There is a huge difference in not allowing to grow and forcing wages down, fiscal position is not becoming worse and no forclosures and bankrupcies.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Categories

%d bloggers like this: