Monday, April 16, 2012

Germany: The Best Years Ahead

According to Dirk Heilmann, a German journalist for the Economist predicts "by 2030 Germany will become the world's richest large country in terms of income per head." Why would he predict this?

His conclusion can be drawn from the job creation market dual system that Germany's Chambers of Industry and Commerce has implemented in businesses. Spain's education minister has considered implementing the same vocational training that many German industries use that involves classroom instruction and direct experience in the parallel field. A specific case study can be shown below of the success of the training system during the 2008 global recession and why the entrance back into the world's economy was successful for Germany.

During the 2008 recession, the CEO of Herrenknect "watched as sales plummeted 40% in two years." However, by using the dual system vocational training this strategy allowed this specific business to restore confidence in their market by minimal labor losses which caused an increase in profits of 50% in one year according to the PBS News Hours.
Provided by The Economist

Watching PBS News Hour, about How Germany Became Europe's Richest Country states facts about their labor strategy of the large corporation, Herrenknecht, to decrease monetary losses during an economic atrocity but get a stable labor force avoiding maximum labor layoffs. The Herrenknecht corporation creates mechanical tunneling technology and equipment that is unique and requires highly skilled workers to create the products used globally.

Germany has only 1% of the labor force in the world but is responsible for 10% of the worlds exports according to Norbert Walter the former chief economist of Deutsche Bank. Germany's economy are concerned with international markets.

Below is an interactive map provided by the Economist of Europe in terms of currency, unemployment, and economic growth.

Not only does Germany's future economy mean good things for the Euro but also for America. The US and the European Union are the two most closely linked economic regions in the world. Since 2007, Germany began the Transatlantic Economic Partnership initiative to create a more stable international economic relationship. Their goal is "a barrier-free trans-Atlantic market" according to At the end of 2010, the bilateral investment between the two countries was at USD 317 billion.  Germany is the United Nations third largest financial contributor.

 Provided by The Economist
The US and EU are the two greatest linked regions in the world. Although German-US population can only account for 10% of the world's population they produce combined almost 50% of global economic output according to Federal Foreign Office of Germany. The US and German economic relations are heavily tied together. Germany is the fifth largest foreign investor in the United States.

The reliance on these two countries will have great implications for the economic security in the future. Some political discussion has arisen in regard to Germany assisting Greece and other countries in an economic bail out. What can the US and Germany do to prepare for the prevention of an equivalent financial crisis? According to German Council of Foreign Relations, "The US made it clear that it will reduce its commitment to international crisis management, redefine its strategic priorities, and expect the Europeans to assume greater international responsibilities particularly in Europe's own backyard." This statement means that in particular, Germany's policy makers will have to intervene more in the global market.

Referencing the 2008 global recession, the impact of the crisis is still relevant. The interdependence of Germany on America and America on Germany in terms of trade has greatly benefited the EU and America. However, what other factors must play a key role in Germany's economic stability and leadership in Europe in the future?


Linda Esch said...

I believe another important factor is the integration of immigrants into German society, something at which the US is certainly better.
Another interesting idea is a possible free trade agreement between the US and the EU, i read about that recently- think about the impact this could have for trade!

Greg Emery said...

Very interesting

Adetutu said...
This comment has been removed by the author.
Adetutu said...

Another possible factor is increase political governance of EU economic policies. This could help forge a common response to any future financial crisis that might affect economy stability within the EU.
@Linda do you think the "safe third countries" immigration policy makes the integration of immigrants into German society harder?