> 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.
Ya this is propaganda (inheritance taxes affect mainly the very wealthy, not the lower and middle classes). Germany's real secret is that labor still has voting rights within corporations:
And actually if you look at the history of the United States, the civil rights movement depended on a strong labor sector. They don’t teach this in schools, but Martin Luther King, Jr was a threat to the establishment more for his emphasis on unifying workers than for breaking down racial barriers:
The labor movements between WWII and Ronald Reagan’s election led to the US becoming the largest industrial superpower in the world, with some of the highest per capita incomes. The loss of unions and the decline of worker’s rights in the US (and accompanying stagnation of wages post-2000) coincide exactly with the loss of civil rights as we’ve moved to a more authoritarian society.
Things like the loss of habeas corpus under GW Bush and Obama just blow my mind, and I think if the electorate knew what was really going on they would not elect the people they do. But they don’t, that’s why capitalists have traditionally pushed for the privatization of public schools and funding propaganda (infotainment) to preserve the echo chamber. The more striated, divided and polarized a society is, the more wealth can be concentrated in fewer hands. Older nations like Germany have a better handle on this because they’ve seen it repeated in history so many times and are more aware of the dangers of unilateral thinking and monarchy. Inclusivity has paid off handsomely for them.
Yeah this sounds like a bunch of baloney. Inheritance continues to be the most likely way for people to get rich in both the US and France, and the tax is nowhere near the amount that would cause a serious dent in the assets being inherited.
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.
The one direct exposure I have had to the issue of inheritance tax was with a small Midwest-based distributor. The owner was very old and wanted to pass the company to his daughters, who had actually been running the business for decades (and when I came along, his granddaughters were working the office).
His issue was that what the government decided his business to be worth could only be paid with more cash than his business generated in 5 years. This meant that his heirs would have to mortgage their shares to cover the inheritance tax, which places ownership into a different category of investment.
The owner could have gifted a small interest in the company
to each daughter, grand-daughter, and perhaps their spouses
in each year of those decades, letting subsequent value growth
and inflation accrue to the surviving family members.
And also, perhaps transformed the company ownership structure
into a limited partnership as well, claiming a lower market value
for the shares owned by limited partners.
tl;dr: First rule of US estate planning: Die broke.
This is exactly what should have been done, but requires a longer term commitment, as well as releasing _some_ control while still alive. (both of which I think are a good thing in context)
Note especially the discount from fair market value
for shares of interest in an FLP.
[usual disclaimers - not a lawyer, not legal advice,
see a qualified professional in your jurisdiction, etc.]
The problem with tax/estate planning is the same problem as insurance
- the time when you really want to have done it
is often the time when it is too late to get it.
(e.g., founder/owner is dying, building is flooding or on fire, etc.).
That sounds like a failure of tax & estate planning. If you wait until you are very old to give away your assets you are putting yourself in the pay-the-most-inheritance-tax position. If the daughters had been running the business for decades already, they would have had lots of time to shift the ownership. This isn't an argument against inheritance tax, it's an argument for better education about personal finances.
Yes, the primary focus of a business owner must be on tax planning, because this generates efficient operations, undoubtedly.
Also, laws change all of the time. My impression, every time I dig down with real people, IRL, is they have the same general opinion as you and others like you here, but have no actual exposure to the actual laws, as they implemented. The only occasion I come across this and I see that the business owner, with a small team tax attorneys and CPAs, can't seem to spend enough money to escape huge taxes.
I can only assume that the business owner is clueless and the Internet anons are the experts he should have hired.
Actually, a primary focus of a business owner must be on tax planning, because (assuming a successful business) it is going to be their largest expense by far.
Unfortunately, the way tax laws are applied usually makes it impossible to apply in retrospect - you have to build it into the business structure from before day 1; and often the non-monetary cost is prohibitive -- e.g., you can reduce your tax burden by 70% by moving to a different state / country.
As a successful business owner, tax is going to be one of your largest expenses. Makes sense to a major optimization target.
So you're saying it this is not an example against inheritance tax because the family could've used loopholes in the legislation to circumvent paying the tax?
I think the idea is that capital gets broken up into smaller chunks. When we're talking about creating middle-class manufacturing jobs, you obviously need to build, say, a factory to create those jobs. That factory requires a very large investment of capital, which becomes less likely when you start breaking up large estates.
I've no idea if it actually plays out this way in the real world, but that seems to be implication here.
The assertion that the peak of this curve is skewed towards the left (low tax rates), rather than the right (high rates)?
That is, that if the "job creators" don't keep enough of the margin on goods produced, they will just get pissed off, take their marbles and go home, rather than actually bothering to hire a few more people to grab additional marginal income?
The way the Laffer Curve was usually presented, was to give one the impression that there were marginal tax rates so high that they were somehow greater than 100% and ate into income earned at a lower marginal rate, which would otherwise have been retained had there been less of it.
Thus, "trickle down" being the idea that when the rich have more money, they will for some reason voluntarily use it to hire people to produce products and services, regardless of whether or not there is any actual demand, or anticipated demand, for them.
Yes, a marginal tax rate of 110% would be bad. Good thing we don't do that :-) (I guess I should be ready for some example from 1880 where combined locality through federal taxes did for some specific dollar amount - but hopefully such freaky exceptions don't really exist, or at least often enough to matter)
Edit: I realize that the Laffer Curve was primarily about tax revenues, BUT, a large component of the theory was that as the activity increased to generate the tax revenues, it was due to somebody doing the work that created the additional earnings.
There is a common misconception of the Laffer curve that is based on trying to interpret the data. However, what the Laffer curve demonstrates is that there is a curve, nothing else.
Please note that I do not consider anything from Wikipedia as evidence of anything, so if you are trying to get me to respond to something to do within a Wikipedia article, it just isn't going to happen. The number of times I have discovered serious issues with those articles, especially on political, philosophical, and academic topics is, frankly, disturbing.
There is a theory within some economic schools of thought that savings generates production, but this is not directly to do with tax rates or the Laffer curve, nor even rich people.
Thus, the "+". The article is fair in that regard - it's just an abstract curve, with no exact formula, let alone coefficients. In practice, though, when somebody brings up Laffer, they are going to claim constants that generate a curve that peaks with a low tax rate.
In one sense, you are likely right: there is probably no formal academic theory of "supply side economics. But we have been subject to hearing this interrelated line of argument over and over since Reagan.
Okay, there is no formal concept or hypothesis of trickle down economics. (However, most PhD economists use the phrase "economic theory," but you may have some insight into this that they have not yet been exposed to.)
Sure there is. The concept is that if you allow the richest to keep all their riches, they will spend it on things which will stimulate the rest of the economy. Of course, this has proven to be a seriously misguided theory, with the actual results being a lack of consumer spending and concentration of wealth to the wealthy. Is that succinct enough for you? Now, whether a bonafide economist came up with this, or RR just pulled it out of his butt is another question...
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' value, Germany's was pegged lower).
Germany's export boom after joining the Euro would have been short lived if they reverted back to the DM as the value of their currency would have risen in value, pushing up the cost of exports, ending the boom. Instead it continued unabated.
China also achieved the same thing largely by buying foreign debt (mostly US treasuries). As did Singapore, Taiwan, Hong Kong and Japan, all of which achieved similar results. There's no magic sauce, it's just a question of whether industry takes political precedence over banking (which likes an overvalued currency).
I don't understand why this comment is being down voted. While "currency suppression/ currency manipulation" is usually spoken about in association with fraud, this is most certainly one of the reasons that has allowed German manufacturing to remain competitive despite having higher labor costs. Excellent comment.
I think the reason this is downvoted is that the situation in Germany is relatively unchanged since before the Euro was introduced. Saying German success is mostly based on the Euro is a great narrative but completely ignores the reality that Germany's economy was already strong and getting stronger in the decades before that.
That's not saying Germany doesn't benefit from the Euro today or that it wouldn't be profoundly stupid for Germany to abandon the Eurozone but it's not an explanation, just a contributing factor.
"Saying German success is mostly based on the Euro is a great narrative but completely ignores the reality that Germany's economy was already strong and getting stronger in the decades before that."
Which part of "it wasn't just the Euro, reunification had the same effect" was I unclear about?
"Germany surpassed the United States to become the world’s leading exporter in 1992, around the time that Germany joined the European Union as a founding member."
As I said Germany was already the world's second largest exporter in 1960. Behind the US, which has 4 times the population.
Germany then became the largest exporter in 86, 87, 88, 90, 2003, 2004, 2005, 2006, 2007, 2008.
In 2016 Germany is the third largest exporter after China and the US. The account surplus (goods, services and investments) was the largest, next is China.
Thus the claim that Germany is a leading exporter because of Euro currency manipulation fails to explain why Germany was one of the leading exporters in the 60s, 70s, 80s, 90s, 2000s and 2010s. In all those years it was in the top three.
Reunification had the Ostmark valued at parity with the DM, even though it was clearly worth a lot less, so essentially it was a large money printing and subsidy.
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 devalued their own currency and thus gained competitiveness relative to Germany. There is no such mechanism left now, and that's terrible for Europe. However, the salary in Germany is way higher than in the South-Europe (say Spain), so these countries should still be able to compete. They can't though, and that is mostly due to productivity, which is very high in Germany.
2) The Hartz IV reforms that added flexibility for companies and deconstructed some of the welfare state under Gerhard Schröder (the welfare state would now still be seen as hardcore-socialistic by some americans)
and last but not least
3) A highly educated workforce (free university + a sophisticated apprenticeship system) + A high workplace efficiency (germans tend to be very productive at work) coupled with long recovery periods (most have 30 days off (24 days is minimum allowed) + unlimited sick days + strict rules on overtime) and a high level of automation + universal healthcare -> Workers recover quickly, have more energy when at work and are less stressed.
4) Inflation-adjusted wages have actually declined in the last ten years making german products even cheaper for other countries. That' terrible for everyone.
Most Germans would rather see a stronger Euro - there is no way to make that happen though. Currency markets are no longer adjusting properly which is a huge distortion and leads to many problems
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.
> All the Hartz reforms did was suppress wages and make the average German poorer.
That's exactly what I'm saying. (edit: on the wages and poorer part; it's of course _NOT_ everything they did)
> 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.
Without those reforms Germany would be part of the European crisis. It was called "the sick man of Europe" not long ago, not without a reason.
> China achieved a similar measure of manufacturing success with an education system that was a great deal worse
They did mostly mass production by hand while german factories are mostly automated and people there do a lot of higher-value work that requires much more knowledge than the chinese kind of manufacturing.
> while the UK has an equally good education system and did not achieve anything like Germany's manufacturing prowess.
The UK is and has been much more focused on finance. The brightest will join a bank there, while in Germany they will engineer new things. Germany has 2-3x the number of patents per year compared to the UK
> Not everyone. German industrialists (like the guy who wrote this article) love lower wages.
Sure, everyone is wrong. Nearly everyone would be right.
"Without those reforms Germany would be part of the European crisis. It was called "the sick man of Europe" not long ago, not without a reason."
It would have been fine. Germany was labeled the sick man of Europe in the late 90s. It wasn't Hartz that gave it an economic boost, it was joining the Eurozone.
Plenty of other countries have had similar reforms and not experienced any beneficial stimulus (although that doesn't stop European elites trying to ram a pseudo-Hartz down everybody's throats).
"They did mostly mass production by hand while german factories are mostly automated and people there do a lot of higher-value work that requires much more knowledge than the chinese kind of manufacturing."
This is simply an artefact of the Chinese being poorer while they first enacted this policy. They moved up the value chain and are now close to the top - they're building commercial airliners and designing and building phones every bit as good as an iPhone.
In spite of that this education system is still pretty poor and China has not engaged in any reforms similar to Hartz.
Since you used the phrase "trickle down economics" as if it were a formal economic theory, I discount every thing you stated because you don't understand the phrases you are using.
Two posts in violation of a policy regularly broken makes it so if I complain about this bad behavior someone else is using against me, such complaints are not relevant, but I may be banned from your website.
These types of selective moderation make HN seem like the typical hive-mind that shouts down and uses abusive moderative tactics to prevent any diversity of opinion from sticking around.
Not sure why you are down-voted.
It's obvious that this is part of the trick and many economist have pointed it.
It works the other way too, the currency of other countries in the Eurozone is above what it would be without Germany, and all that without a fiscal stabilizer between the countries, like it do happens in the United States between different states.
It's a recipe for disaster if the goal is an united Europe.
Now, if the goal is to make Germany richer then we are in the correct path.
He is right in some way, but he also misses that german workers had to take a lot of cuts in pay, benefits and working conditions. While french workers only have a 35 hours work week and greece workers get to enjoy a long pension, germans work till 67 (soon 69) getting a lower pension (as percentage of pay) and mostly work 40 hours (for full time workers. Statistics are heavily skewed by (mostly) female part time work which is tax-incentized). Many countries did not adjust as hard to a globalized world as germany did (real wage loss in the last ten years while lowering pension, pushing back retirement age, etc.)
Well, and that's part of the problem no? When the economy improves why is not the welfare of the Germans improving? If not that their people have a better life, what it means that an economy is going well then?
We read about micro-jobs and how some retired people have to work again in one of the richest countries in the world.
What is the point of a stronger economy if the life is harder for their inhabitants?
I think that part of the answer is that this is a fight between countries only in appearance (or only as an excuse).
The thing is that the conditions have changed considerably. In earlier times there were 3-4 people working for every retired person and the average retirement span was ~5 years. Now it's 2:1 and ~15 years in retirement. Something has to give, sadly...
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.
Daimler and Porsche have both had company wide 10000 EUR bonuses (this includes factory workers). It does not include ANÜ engineers and workers, who make up the major part of the workforce and are second class employees that have a lower base wage and no bonus.
Unions are hell bent on keeping it this way, to the detriment of ANÜs and the benefit of full employees.
There is nothing bad in being a large or the largest exporter. Germany exported a lot and imported a lot.
But recently this had led to the absurd situation, that Germany exports both, goods AND capital:
https://www.querschuesse.de/wp-content/uploads/2013/11/1a18....
Sure. The graphic is misleading, since it is not adjusted to GDP - thus it does not show the proportions of exports in relation to the size of the economy.
A further pillar of the Hidden Champions’ competitive strength is the unique German dual system of apprenticeship, which combines practical and theoretical training in non-academic trades. The Hidden Champions invest 50% more in vocational training than the average German company.
I think a 4 year college degree does not make sense for a lot of jobs. It just puts students with more debt, and sometimes skills that don't lead to a job.
We have similar educational system here in Czech Republic. There are numerous pros and cons. Basically at the age of 15 you have to choose what you want to do with your life as changing careers are not that simple. And lets be honest, most of 15 years old kids have no idea what they want to spend rest of their life doing.
I did take this technical route (focusing on electronics, computer networking and programming) and it give me some edge when I started my CS degree, but further study of medicine, law or even art is out of question as I don't had any theoretical basics for those majors. All I study during my high school was mathematics, physics and specialised subjects.
It's not true. At least for Germany. Take a friend of mine for example: He went to Hauptschule (Germany has a 3-tier school system where children are split up after primary school, Hauptschule is for the least skilled children). He left Hauptschule a year early with very bad grades to start an apprenticeship with a carpenter. After three years of school and practival training he graduated to journeyman with honors (i.e. all grades: A). This gives you a scholarship for master school or college (if you want). He chose master school and earned the master craftsman degree. He finished that with honors, too and got another scholarship. Now he actually went to university to get a bachelor in something called wood-technology.
In many academic traits it's actually beneficial to go for an apprenticeship first. Architects often become carpenters of masons before studying architecture, a friend of mine who's a nurse got her Dr. med. last week. The list could go on for a while.
But thats one track. Say you went carpenter route when you were 15 and now you want to study medicine or electronics or CS. You are going to lack basic background: even with master school it is really going to be tough to learn all the chemistry, mathematics, biology or physics that is required for those majors.
The system is build as a training for just one type of work and nothing more. (if we are not talking about gymnasiums) So changing tracks means starting from zero again. It is doable, but very few people want to start again in class full of 15 years old, second problem is money: there is nothing like student loans. Also society will view as a failure.
Thats case for gymnasiums, right? How about other type of schools? Are they still popular? Here in Czech rep. those vocational only schools are kind of dyin.
there are classes with older pupils (~19-30 years old), but they're the minority. most are, as you kindly noted before, between 15 and 18.
and i honestly can't agree on this constant praise for this system. i'm just finishing with my apprenticeship and the school part was a total joke. i think the highlight of my time there was me entering the class and saying 'good morning' to the teacher, who responded with 'shut up, i want to sleep'. which was followed by 270 minutes of "self study" on the internet.
and the payment for this exercise is a joke as well. you actually get less than our social security (hartz iv) would be giving you for doing nothing.
Same here. The concept is partially good, but it isn't done right. I'd prefer a more modular system with a lot more self studying. Nevertheless it's still better than what many other countries do.
>I think a 4 year college degree does not make sense for a lot of jobs. It just puts students with more debt, and sometimes skills that don't lead to a job.
Well, the thing is that college and university don't cost as much and there are various government and private funds you can take advantage off. Counting from personal anecdotes, I think only 1 student in my current semester group is actually on a credit debt and that not entirely related to university spending either.
This article grinds too many axes to be as insightful as it could be. E.g., "[T]he inheritance tax in the U.S. prevent the accumulation of capital necessary for the formation of a strong mid-sized sector." is just casually tossed in there.
Germany is a highly decentralized country. Maybe go and study in one of the metropolitan areas but then return to their beloved villages far away from the maddening crowds. In fact many of these hidden champions are in the "middle of nowhere" with often sub-par logistics (e.g. no immediate Autobahn or major train connection).
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 protestant. It would be interesting to have an explanation for this correlation.
In Baden-Württemberg (the South Western state), 37% are catholic and 33% are part of the official evangelical church, with likely a few in smaller protestant groups. Likewise for franconia, which is mostly within the state of Bavaria.
I doubt the effect of denomination would be very big, so not taking into account much stronger factors (e.g. West vs East), this map doesn't say anything.
Though I wonder how these changes have actually had effects on these sectors, as this basically just produced a low payment workforce that these days benefits low paying unicorns like Uber, etc.
All that Germany basically did was to change social law so that a higher amount of people would end up within the lower range of the work force and make it harder to get out.
E.g. effectively these days losing your job for longer term means you have to liquidate all your assets as a German until you have nothing left before social service would help you.
Coming back to the article, as a German I actually do not remember any larger structural reforms that would have had beneficial effects on mid to high skilled workers. Looking at my own 25 years of working I would say... I notice an increase in costs for maintaining the high skill level and income completely being almost irrelevant because of devaluation of currency and almost no increases in the market in the past two decades.
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 put into motion. Germany and the people of Germany should profit from peace. Part of this was the Marshall Plan, part the European Recovery Program.
This positioned Germany to have a couple of advantages, namely that the Victorian era mass production methods that had been pioneered could be discarded (but remained in place in a lot of the other European developed countries). In Germany these were fully replaced by WW2 era production methods as most of Germany's industrial capability had been destroyed or damaged.
Additional processes to limit industrial capabilities (the key method of which was limiting steel output of the Ruhr Valley, which acted to restrain all industry) meant that industry was incentivised to find a larger profit per unit rather than slimmer margins from more units.
Combined with not being able to maintain a military, Germany was able to invest in skilled manufacturing like no-one else were able to.
Over a course of 50 years this resulted in not just a modern manufacturing capability to be put in place, but for that to be at the very highly skilled end of manufacturing.
The reason so many of the mid-sized market leaders come from Germany can be traced back to post-WW2 policies to ensure that Europe could be at peace. Some of these policies were undoubtedly exploitative in the short term, but long term have achieved their goal.
> (most of Germany's industrial capability had been destroyed or damaged)
Tony Judt in Post War (https://www.goodreads.com/book/show/29658.Postwar) actually claims that this is patently false. That Germany actually came out of WW2 with most of its industry intact (it was away from the most bombed cities and majority of fighting actually happened in France/Poland/USSR) and was in significantly better shape than Frace and UK industry-wise. As an added bonus, the industrial lines were freshly retooled, significantly more modern than the ones in France and UK and its wartime focus could be rather rapidly converted into highly profitable peacetime industries that were highly sought after in 20th century economic boom (chemistry, car manufacturing, electronics, etc.)
The fact that BRD didn't have to support and invest into standing army also funneled investment into emerging industries - investment that was way slower to come in destroyed France and exausted UK.
Was he wrong? Are there any sources contradicting his research?
It's simplified Germany took a few years, policy changes, and loans to really get back into shape. https://en.m.wikipedia.org/wiki/Wirtschaftswunder Longer term it benefited from both good longer term policies and positive cultural influences, and the Korean War.
But yea, Germany had more intact industry than often portrayed.
if Germany had more intact pre-WWII industrial sites than is commonly portrayed, that makes the original question even more interesting. how did German industry become, and remain, so competitive in the first place?
the US also had intact industrial sites after WWII, but its middle class job base has not been so well preserved in the face of recent global competition.
May have something to do with taxes and maybe more effective use of public funds? Germans are taxed at higher rates (and more importantly, lower thresholds for higher rates) compared to the US or UK, so the distribution seems more even, allowing a larger middle class.
Okay, first things- first - no lessons where learned, nobody out of the good of their hearts did anything for anybody. The original plan after world war 2 was to turn Nazi Germany into a agrarian border stripe between the two emerging power blocks.
This plan was put into action, and some starvation resulted from the dismantling and moving of the factories. The reason this changed is because the cold war tensions, made it necessary to bind the former enemy as a useful puppet and ally to each corresponding site.
Thus west and east Germany got away with a blue eye for blundering and murdering east European countries and several minorities.
There is no moral here to be taken home with- maybe some tactical advice- if you want to stab and rob your neighbor - do it in the midst of a gang-shootout and then join in on the side nearby with the stolen goods and weapon.
You say that like every single German personally executed jews and other minorities.
Yes, a lot of Germans did. Yes, more Germans went along and didn't do anything against the Nazis.
But only a minority of Germans knew how bad it was. My grandmother told me that they knew about some labor camps were certain people were put. She said that she didn't know anything about the industrialized murder. If you look on the map, you will see that the extermination camps (the concentration camps constructed to kill people) were located outside of the German Reich so that the German public would not get to know about it. Hitler knew that the extermination camps could weaken his position and enrage the public.
Most Wehrmacht soldiers followed orders and marched against the enemy they were told to shoot at. Yes, this is also bad and "I just followed orders" should not be an excuse. But the recent 72 years showed that most Germans were peaceful and just wanted to live their live. Homecoming soldiers didn't jump on the next minority and beat them up. The overwhelming majority was just happy that everything is over. Hitler was never elected by a majority and he came to his final power through a coup d'état.
There is a program called "Stolpersteine"- they have put little bronze-bricks into the streets before houses where Jews and others who where "Transported" lived. There are little bronze bricks in nearly every street of the town i live nearby. Yet many of the old people there claim to never have known. And many claim they have helped the prisoners in some way.
The Wehrmacht shot and torched whole villages for partisan activity. And soldiers talk- they have convoys through the hinterland- they knew exactly what the SS was doing in the conquered territories.
They guarded millions of war-prisoners while not giving them food and shelter until they succumbed.
Im not singling out germany. Every country, and all people on the planet are capable of this. WorldWar2 or the holocaust where not something particular unique.
They where just humanity's worst behavior combined with organization skill and industrial capacity's.
Stalins Holdomor, the Archipel Gulag or Maos Killing spree are similar in dimension but lacked the cultural scenes echo chamber for sentimental political reasons.
These messy large scale crimes where not ended by education, a protest generation or self civilization of the species, but by the invention of the nuclear bomb, which limited the war like activities of larger, well organized nations.
Among non nuclear deterred groups or within country's, such breaks of civilization can happen anytime even today.
(See Yugoslawia, Iraq/Syria, The Hutu/Tutsi Genocide)
I also assume some dictators started to turn away from ethnic scape-goating, after in several countrys riled up masses turned against them and China showed that even a crony-corrupt-dictatorship can be economically functional.
"The reduction in steel production that resulted from the first and the second level of industry plans meant that a steel production bottleneck ensued which forced other parts of the German industry to fall below their own permitted production levels. The economy of the Bizone finally hit rock bottom early in 1948 as a consequence of this.[21]"
It might have looked like a swift turnaround on the politics, but if you influence economics, the system behaves very physical, meaning, bottlenecks propagate, and effects ripple.
For most Germans i guess, the contrast of the war economy (which always felt good, due to wealth of whole Europe being fed into Germany) - and the aftermath, with refugees and year long food shortages was quite stark.
I guess all other nations have a prolonged history of suffering with the start of WW2 and slow improvement after the end.
Spilled milk under blown up bridges over long dammed rivers.
Whats way more interesting is the question of prevention. I actually propose the idea of Extremism-Vacacination. Controlled Synthetic extremism is introduced, in a controlled environment and the lectures are really learned.
Its quite similar to the approach i always suggest to transmitting live-experience from generation to generation. Usually advice is not really taken or valued, until the same mistake has been repeated.
Take scam-prone investments, for which every generation falls again and again. Now imagine a service a father/mother (or grandmother/father) could hire, that would scam the kid, and retransfer the funds upon lesson learned. Such a lecture, though also painful, would be less prone to do all the damages the real scam would do.
This is just incorrectly attributing germanys success to the Marshall plan! Yes, the Marshall plan helped Germany recover. But the Marshall plan had absolutely nothing to do with the "Mittelstand" emerging as a predominant industry type. There is nothing in the Marshall plan that enabled this to happen.
More than anything, this has to do with German ability to unite goals of labour and market capitalism, commonly referred to as social capitalism in Germany. It majorly aligns labour and company ownerships goals. Labour wants to have reliable jobs, which you achieve by being highly skilled and thereby competitive. Owners want to be competitive and can do this via highly skilled labour. Labour representatives are by law required to be on a companies board. This is what forces labour and owners to work together. It has lead to a highly skilled and competitive workforce that enables the Mittelstand. There are other factors that help, but none of them are as important.
This has nothing as such to do with the Marshall plan. It's very ignorant to attribute this success to "americas help". it's borderline offensive and does not actually engage with the primary argument in the article. If you want to learn from germanys success, you should read up on labour represantatives being on the company board, rather than attributing it to something that is barely related.
>The reason so many of the mid-sized market leaders come from Germany can be traced back to post-WW2 policies to ensure that Europe could be at peace. Some of these policies were undoubtedly exploitative in the short term, but long term have achieved their goal.
Hilariously, the Volkswagen designs (The Type 1/Beetle), factories, etc. were actually offered as a free war reparation to both the US and to Britain. However, neither party was interested... in what would end up being the most profitable automotive concern on the planet. It is considered the single greatest blunder of the entire automotive industry.
Although I'd agree that the Volkswagen Group as a whole may not be the same as it is today if it were under different management...
...it remains that passing up a robust, reliable, and simple car design -- and the factories/tooling to produce it -- for an acquisition cost of zero is still a blunder.
> post-WW2 policies to ensure that Europe could be at peace
What do you mean by this? According to Wikipedia, the other Western European nations semm to have received more funds from the Marshall Plan than Germany did.
> most of Germany's industrial capability had been destroyed or damaged
Source? I remember my history teacher telling us the exact opposite.
Anyway, I don't understand how your points shed light on the differences in ecomomic structure to other Western nations, e.g. France.
Another geopolitical factor unaddressed is the more recent export growth of the other CE4 countries (Czech Republic, Hungary, Poland, and the Slovak Republic) in to Germany since 1990. The growth of these supply chains to the east play a big part in the German global export machine, largely at the expense of the competitiveness of southern European countries.
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?
Germany didn't really exist as a nation until 1815 so I'm not sure what you're arguing. Also the Eastern borders of Germany changed a lot until 1990.
Also the current economic situation of Eastern Europe has likely more to do with the failure of the Soviet Union than with whatever happened in the 1700s.
Not really as that only represents time since the Berlin Wall fell.
Whilst the flood of cheap labour is of course an important factor since then... the companies being talked about established themselves long before the borders were opened.
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 immigration system seems less broken for smart people to emigrate to Germany. Could probably get the best global talent as well.
No, it's not. With investment in military R&D, there's no "broken window." Claiming that destruction in one place (aka war) spurs growth is the broken window fallacy.
It's possible that investment "directly into the economy" might be more effective except for the fact that you have to take the money out of the economy and put it into a few peoples' hands to direct. The fewer hands means the easier it is to corrupt or hijack the process. I'd rather for "the economy" to invest on its own.
As Hayek said, I want "plans by the many not by the few."
But with the military, you are already taking that money out of the economy and putting it into a few people's hands directly.
I wasn't suggesting redistributing money from one company to another.
I was suggesting having some sort of government agency, that spends trillions of dollars a year on doing all those R&D things that the military does that have nothing to do with blowing people up.
Literally just "The military, minus the guns, bombs, fighter jets, and everything else that involves killing people".
That wouldn't be perfect, but for the purpose of making the economy/world a better place, such a "not killing people military" seems like it would be strictly better than our current military.
Trillions of dollars per year? The entire US Defense Budget for 2016 was $600B while the entire budget was $3.8T.[1]
Further, many large scale tech advancements have come from military R&D, originally with the goal of blowing people up, preventing them from getting blown up, or making them recover after the fact. Everything from the Internet to GPS to microwave to many synthetic fabrics to emergency medicine.
I agree that investing in things that don't kill people is great and should be encouraged. It's just outside the scope of government.
The military tech is actually useful - many of the things we use today as ubiquitous was an artifact of military. It's definitely not the same thing as digging down holes.
However, what i do not know is how much of US military spending is on R&D
Example: GPS was invented by the military. But you could have a different government organization work on all the useful stuff that comes out of the military that has nothing to do with blowing people up.
You could also argue that if you invest trillions of dollars into digging holes, that might result in useful technology. Taking the example of GPS, maybe you need to very accurately know what your position is, so that you can pinpoint exactly where you want the hole to be built.
My hole digging government department could have invented GPS too!
Military needs a way to position vehicles, you get gps, same goed for arpanet. A good chunk of military inventions are done by civilians on military funding.
I think it is the desire in US military to be always on the bleeding edge, and the accountability that it brings. There is also less pressure for profit, I guess.
You said digging holes, elon musk is doing that boring job :)
Sometimes space and military programs will produce technology that later becomes commercially very useful, eg, Raytheon and the microwave oven (First introduced Radarange 1946 - and Amana made a more generally consumable model in 1967). The whole "dig holes and fill them up again" was wonderfully covered in Orwell,1984.. The noble version of this would be Space Exploration, search for unlimited energy (eg, fusion), or cancer cures. The military industrial complex speech given by a sitting US president, Eisenhower, here - http://avalon.law.yale.edu/20th_century/eisenhower001.asp - more or less predicted that the 1984-style approach to perpetual state of war will be taken unless big changes were made.
"War, it will be seen, accomplishes the necessary destruction, but accomplishes it in a psychologically acceptable way. In principle it would be quite simple to waste the surplus labour of the world by building temples and pyramids, by digging holes and filling them up again, or even by producing vast quantities of goods and then setting fire to them. But this would provide only the economic and not the emotional basis for a hierarchical society. What is concerned here is not the morale of masses, whose attitude is unimportant so long as they are kept steadily at work, but the morale of the Party itself. Even the humblest Party member is expected to be competent, industrious, and even intelligent within narrow limits, but it is also necessary that he should be a credulous and ignorant fanatic whose prevailing moods are fear, hatred, adulation, and orgiastic triumph. In other words it is necessary that he should have the mentality appropriate to a state of war. It does not matter whether the war is actually happening, and, since no decisive victory is possible, it does not matter whether the war is going well or badly. All that is needed is that a state of war should exist. The splitting of the intelligence which the Party requires of its members, and which is more easily achieved in an atmosphere of war, is now almost universal, but the higher up the ranks one goes, the more marked it becomes. It is precisely in the Inner Party that war hysteria and hatred of the enemy are strongest. In his capacity as an administrator, it is often necessary for a member of the Inner Party to know that this or that item of war news is untruthful, and he may often be aware that the entire war is spurious and is either not happening or is being waged for purposes quite other than the declared ones: but such knowledge is easily neutralized by the technique of doublethink. Meanwhile no Inner Party member wavers for an instant in his mystical belief that the war is real, and that it is bound to end victoriously, with Oceania the undisputed master of the entire world. "
I don't think it's as much the fact that the US invested in the military sector as it is the fact that the US invested in something.
What I mean by that is that yes, the US likely benefited from investing trillions of dollars in the military. But it could've also benefited, perhaps even more so, if it had invested trillions of dollars in infrastructure. This would have made it easier and cheaper for businesses to ship their products across the states, as well as creating a lot of blue collar people jobs. Perhaps the same would be true if the US invested trillions of taxpayer dollars in other industries, too (healthcare, manufacturing, solar industry, etc).
I'm not saying the US shouldn't invest at all in maintaining its superior military status. I'm mainly saying that a lot of the money is being wasted (like say for buying more tanks, or just to keep certain military jobs, in the same way it's trying to keep coal jobs), and it could've been invested elsewhere with at least as many results (for the economy).
I would also say that a lot of the military budget is being wasted on unnecessary wars, so that money doesn't really go into "strengthening US military" either. It's being thrown away in the Middle East.
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 ;-)
_Selling_ weapons to nations not threatening you is a great business. You get to do some R&D, you employ quite a few people (often including manufacturing) and the buyer can't use the thing you sell them to advance their economy.
_Buying_ more weapons than you need to defend yourself on the other hand is a terrible investment. If they just sit around and aren't used against someone (or at least the threat of you using them gets you something) is a colossal waste of money.
Considering the German society is overall very pacifist, I don't see how buying more weapons (if even they build them within Germany) gets them much of anything.
Germany was strong before WK2, the buildings where gone, but the enterpreteneurs, scientists, developers, the workers morale and their experince were still there. Also obedience of the law, memories about how things should be organized etc.
If some money would help so much, more contries would be doing better.
If some money would help, more countries qould be soing better.
It's interesting, because many of the neighboring countries were in much better shape after the war, but since they were forced by the Soviets to reject the Marshall plan, Germany got ahead economically and Eastern Europe became the "poor part of Europe" again.
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 the founding team is likely to leave, budgets are controlled by, and, profits are sent to an external firm. Those three factors will reduce the company's ability to determine it's own fate.
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.
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)
>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 international studies are for an already overly rigorous education system.
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.
> 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?
I think this puts into light the fact that the article doesn't cite sources for its affirmations, thus making it worth as much as an opinion piece, and allowing other people to interject and oppose their own view points. I know this piece comes from HBR, and the author probably has done his share of research before writing, but still.
What people overlook, also this linked pieces is, that Germany also has the banking system for this. You can say, there are three types of banks, private, state and co-op banks. And while there are huge private banks, most state and co-op banks are organised locally. Almost every district has its own Sparkasse und many towns still have a Volksbank or Reifeisenbank.
This is an important feature of the economics in Germany I think. Yes, many of these banks might be too small today and many merge into bigger banks but they are still the most trusted banks in the country.
Perhaps this means Germany could suffer disproportionately as a result of automation. It's also worth pointing out that Germany is not immune to global trends that may erode the ability to sell based on quality - I recently bought a 2001 BMW E39, thought by many to be the best BMW ever made. In fixing up the E39 I've come across the same opinion over and over again: BMWs/German cars in general are not as well made as they used to be.
Edit: I'm not saying my E39 is thought to be the best BMW ever made of course :D
Many say the 1984-1994 Mercedes E-klasse was the last car that was built to last. Afterwards, they switched to cheaper parts, less overengineering, to keep up with competitors and profit more from planned obsolescence.
Personally, I've seen many of them break down, and they rust quite badly if not maintained :)
If anything Germany will suffer from the consequences of not investing in education for the past four decades as we are already seeing the lack of capable, well-trained, high skilled workers.
German education basically has been focussed on producing low level work forces and ignoring the rest, you can see that clearly while hiring.
This is not correct. We are quite over educated here in the high skilled workforce - nowadays much more students, meister and techniker everywhere, and sure we have created a low wage sector recently as well, but this is another story and represents a much smaller share of the entire workforce.
Have you tried checking out some of these students these days? Have you missed the shortage notes about classical Meister, etc. roles given out the past decade?
Also low wage sector is a few million people (last official numbers are about 8 million people). Compare that to high skilled workers.
I think our education system is pretty solid and well equipped to deal with tomorrows challenges and create competent employees (this is just briefly addressed in the article).
While our education system is pointlessly complicated, a typical product of german bureaucracy, it's surprisingly flexible. If you want a job in Germany, you have do get some form of a degree. Especially "hidden champions" don't hire unskilled labourers, ever. There are essentially 3 options:
1. the apprenticeship: Still popular it is the most practical of the three. It takes a few years where you learn to master all the basics, even if its in practice handled by a machine, but also all the necessary theoretic backgrounds so that you know what you are doing. All the practical skills are taught at the company and there are (mostly) special schools for the theoretic parts. Also important: The apprentice already earns something during his apprenticeship! For some, depending on the individual circumstances, this is very important. Also you apply your skills as soon as possible, since the company already pays you, it tries to get you productive as soon as possible. Apprenticeship are no joke, they produce hard working, competent and practical employees. There are A LOT of companies looking for apprentices right now and not enough applicants.
2. the "dual study system"(direct translation): This is getting more and more popular and for many it is the right choice. It's a mix between apprenticeship and a university study. Half of your time you spend at your company, the other half you study at special "applied university"-like institutions(legally, they are not universities in Germany). I think especially for CS, most would be in good hands in these programs. They don't focus on super-theoretical stuff, they are very practical while providing your with a valid bachelor-degree in the end. For some subjects, the dual is the better option. The applied universities are not super focused on research and staffed with professors coming from the industry. They will teach you real-world, relevant stuff without neglecting the theoretical basics. After the bachelor, you have the choice to delve deeper into research with a master, either at this institution or switching to a traditional university. Also, you get paid during your study.
3. the university study: Well, this is essentially the same compared to your universities beside that it's free ;) They are often way more theoretical then the dual-study system. You have to be motivated by your material, since it's not immediately useful. Also in germany as an university student you are very independent, nobody pushes you to go to your lectures, take the tests or do your weekly problem set. Many get too relaxed and perform better in a more controlled environment. But if you're interested in the theoretical side of your subject and you want get a more academically demanding degree, the university is the right choice.
As a CS-student in germany, automation and digitalisation of factories (industry 4.0, as we call it) is the buzzword heard everywhere and i think this system is equipped to handle the challenge. Don't underestimate the apprentices, they know their stuff. 2-3,5 years of training are separating him from unskilled labor.
Germany's real secret is that they don't pay their engineers.
An engineer, even with a PhD from a world class university, makes around 55k. Even in cities like Munich they will laugh about you if you request 60k.
Sure, if you have tons of experience, industry contacts etc., maybe more SOMETIMES. But let's get back to the 55k. A short internet search (www.nettolohn.de) tells us this is approximately 2600 Euro net pay per month. And this is for a full time job that is likely very stressful and comes with tons of responsibility. An English teacher in China (Shanghai, Beijing) can make 3000 Euro net a month.
Even if you claim my numbers are a bit off. It gives you an idea.
First of all, you have to adjust this for the cost of living and the fact that employers have to pay about half of the health insurance and retirement savings cost on top of the salary as well as three or four weeks of payed holidays etc. 55k Euros in Munich is easily worth more than $100k in the US.
Second, a CS graduate can certainly get 60k in Munich and a PhD will likely have 70k or more. At BMW this may be 80k or more.
Rarely mentioned is the fact that post-war Germany turned to free markets, hence the "German Miracle". This persisted until 1970 or so, when the German economy turned significantly towards socialism and big government.
Really? How?