According to OEC, Germany is the 3rd largest export economy in the world and the 3rd most complex economy according to the Economic Complexity Index (ECI). In 2015 the GDP of Germany was $3.36T and its GDP per capita was $48k.
Germany had by far the highest share of EU-28 trade in 2016 among the EU Member States, contributing 28.7 % of the total and 7.5% higher than the remaining 21 smaller countries. The next three largest exporters, the United Kingdom (11.1 %), Italy (10.5 %), France (10.5 %), the Netherlands (7.2 %), France (9.4 %), Belgium (5.7%) and Spain (5%), while the remaining 21 countries contributed (21.2%).
The question of: How is it possible that German exports and E.U exports are at the same level? This assertion is not accurate based on the statistical numbers released by the European Union in 2016…” contributing 28.7 % of the total exports and 7.5% above the remaining 21 smaller countries.”
Amazingly, Germany runs its economy in a way that is hardly a recipe for economic success, one would think. But Germany is Europe's industrial powerhouse and the world’s second largest exporter; Germany has single-handed stopped the Euro-zone from falling back into recession and the only nation with enough resources to save the euro currency.
Among the 34 members of the OECD only the Dutch work fewer hours, than the Germans while children spend 25% less time in the classroom than their Italian counterparts, and its workers are six more times more productive that other economies in Europe which make all of these remarkable facts.
So why is the German economy so commanding?
Starting with a common currency Germany partnered with more sluggish economies in southern Europe, when it adopted a much weaker currency than otherwise would have been in the case of its Deutschemark which would be a great deal stronger today than the euro. This alone provided a terrific boost to German exports, which makes its products cheaper in foreign markets.
Another big ticket item in the German economy and just as important is the relatively low levels of private debt. While the rest of Europe satiated itself on cheap money throughout the 1990s and 2000s, German companies and individuals refused to spend beyond their means. One reason for this is that real interest rates in Germany remained stable, unlike those in other economies where zero interest rates were not uncommon.
In bankers opinions the UK, Italy, Spain and Portugal have higher inflation meaning that real rates moved down, providing a huge incentive to borrow money. But cultural differences are just as significant as Germans are uncomfortable with the concept of borrowing money and prefer to live within their own means.
Labor Legislation
Germany's current economic pre-eminence in Europe has other, deep-rooted reasons and amazingly but in fact, the relatively low number of hours spent at work and in the classroom and yet, it is the most productive economy in OECD.
Germany adopted a program of fundamental labor market reform in 2003, ignited perhaps by the excesses of post-unification wage increases. It followed that it enacted strong employment protection legislation and placed a degree of trust on behalf of the workforce in well-capitalized companies that had not borrowed cheap money. This resulted in the Social Democratic party being able to extract concessions from the labor unions to push for moderation in wage increases. The reforms laid the foundation for a stable and flexible labor market. While unemployment across Europe and the US soared during the global recessions, in Germany the jobless number barely glimmered. German workers were simply willing to work fewer hours, knowing that they would keep their jobs because of it. They were all willing to moderate wage demands due to a strong bond that exists between workers and employers which, is not comparable with many other countries.
Job Training
Still, one of the more important issues to Germany's industrial strength is the education system. Hours learning at school for aged 7-14 ends at mid-day for lunchtime across much of Germany and is designed to allow children to spend more time with their families. In the later years of schooling the German model really stands apart from other nations.
Almost half of all youngsters in upper secondary school are in vocational training, and the other half of these youngsters are in apprenticeships. Apprentices between the age of 15 to 16 spend more time in the workplace receiving on-the-job training than they do in school. After three to four years of OJT they are almost guaranteed a full-time job in their chosen industry. Moreover, in Germany, there are fewer stigmas attached to vocational training and technical colleges than in many countries were a college degree is given more importance. However In many countries, management training comes from those who attended business school, but in Germany, one can make it to the top of even the very leading companies without a college degree.
Therefore, the German education system is a continuous purveyor of highly skilled workers that meet the specific needs of the country. Additionally, the country has a long-established and powerful manufacturing base, which is ingrained in stable, small businesses that have long provided the backbone of the economy. There is much to learn from the German model, but vision less replication may not be the answer for other cultures.
Nonetheless, there are limits to value added in manufacturing and if a country wants to move up the value chain, it needs to do it in services. For this branch of economics, perhaps one day Germany will once again look to others for creativeness.
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