Germany is recovering faster than is the USA or the UK. Though they're a high-wage country with strong unions, they remain a manufacturing powerhouse:
"(Angela)Merkel was once asked by then British Prime Minister Tony Blair what the secret was of her country’s economic success, which includes being the world’s largest exporter and running substantial trade surpluses in recent years. She famously replied, ‘Mr Blair, we still make things’. In Germany, manufacturing still dominates finance because Deutschland capitalism didn’t succumb to the financialisation of the economy that swept the United States and Britain in the 1980s under Reagan and Thatcher. In the US, this led to a tripling in the size of the financial sector as a percentage of both the overall economy and of corporate profits, as well as a loss of millions of manufacturing jobs. Werner Abelshauser, an economic historian at the University of Bielefeld in Germany, says the European way of running the economy ‘is fundamentally about a banking system based on patient capital and firms that emphasise high-quality products and long-term relationships between suppliers and customers’."
http://www.social-europe.eu/2010/08/angela-merkel-the-world%E2%80%99s-%E2%80%98most-valuable-leader%E2%80%99/
Let's see. They make cars, instruments, electronics, all sorts of stuff, and have a long-term outlook. We make derivative securities based on thin air, and reward those who trade in them if they can find a seat in the musical chairs game when the band stops playing, while worshipping at the altar of the next-quarterly report.
One of these strategies is wiser than the other...
4 comments:
Have heard some discussion of one of our weaknesses being that too many banks are allowed in this country, and their competition leads to some of the recklessness with our money system that has been part of the problem - in something of a parallel, manufacturers of cars cut back the number of dealerships, to keep them from putting each other, and their supplier out of business. Interesting theory, haven't gone far on it yet, though.
From what I've read, too many banks aren't the problem as much as too many big banks, without the old separation of banking and investment/securities trading mandated under Glass-Steagall, and the selling of loans and mortgages to secondary market players. If you can make lots of money securitizing loans into bonds and derivatives, you'll want lots and lots more loans to do that with. And if the loans are to dubious borrowers, or backed by dubiously valued assets, the originator could care less. It becomes someone else's problem.
Community banks, lending locally and tending to their knitting, are a whole 'nother thang...
Trouble is, if you're competing in the same market as the banksters who are creating the problems, you need to show the same stats to attract depositors/investors, so you have to pump up those stats to match. Something like the claim by Freddie and Fannie, that they needed to push up their numbers ... tho I don't totally accept that.
Of course, when you're making things all sorts of people are employed at a livable wage. Including people who have not completed a graduate degree. There needs to be a place in society for everyone to make a living.
Good post, Prof.
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