When Germany's economy, fueled by a massive trade surplus, grew nearly 9 percent (annualized) in the third quarter of 2010, it provoked envy on this side of the ocean. Why couldn't the United States, wallowing in one-percent growth, emulate the vaunted German model? Why were we exporting jobs and importing products while Germany was exporting products and keeping good jobs?
Germany's juggernaut is unique in ways the United States can't emulate easily. German consumers are as thrifty as Americans are ravenous. That means that German producers have to look overseas for big markets whereas American producers live in the world's biggest market, which makes exporting less natural or appealing for firms making new products and services. Indeed, 99 percent of US companies don't export at all. We might also mention currency imbalances that keep German goods artificially cheap, and American goods artificially expensive, due to Euro debt troubles and Chinese manipulation, respectively.
But Germany isn't unique in this way: Its companies are always looking to cut costs. That's why BMW, a firm synonymous with German engineering skill, is sending a thousand jobs to ... the United States.
You read a lot of stories about how the U.S. is losing jobs to globalization. But the deep recession has forced factory workers to accept lower wages. And cheaper labor attracts rich multinational companies, whether the cheap labor is in Delhi or Detroit. (As the article points out, US factories also help BMW mute the effects of currency changes.)
Seven years ago, German Chancellor Gerhard Schroeder responded to a recession by downsizing Germany's social system, reducing pensions, and forcing workers to take on more of their health care expenses. The infamous, and then famous, "Agenda 2010" paved the way for cheaper labor, which has helped German companies succeed in the global market.
Two years ago, it was the United States' turn to face a deep recession that threatened to destroy our manufacturing industry, particularly in Detroit. The White House took over General Motors, presided over deep compensation cuts for union workers (the average salary for new workers was cut in half to $14 an hour). Slack in the market has forced job-seekers to accept similar wages to work for the car companies.
It should surprise nobody that there is more demand for labor where workers are cheap. After all, that is the theory behind outsourcing jobs in the first place. But it might surprise people to hear what the Germans think about outsourcing their precious car jobs:
"From a German trade union perspective, we are not overly concerned," said Horst Mund, head of the international department at IG Metall, a large German union to which BMW workers belong. "The success of German carmakers depends on the ability to sell cars abroad. We cannot expect all the cars to be made in Germany."
Compared with the rhetoric you hear on the campaign trail, this is a remarkable statement. There is a sense among US policymakers that in order to have a successful export economy, we have to stop outsourcing jobs overseas. That is, we have to persuade our companies to ignore basic economics. But Germany
both sells to Europe and outsources to Europe; it both sells the United States and outsources to the United States. As Dr. Tim H. Stuchtey, director of the Business & Economics Program at American Institute For Contemporary German Studiess, told me: "There is only so much
German in a German car. The wheels come from Italy.
The motor comes from Hungary." And, increasingly, from South Carolina.
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