Crisis and Recovery in the German Economy: The Real Lessons

Servaas Storm and C.W.M. Naastepad
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Servaas Storm: Delft University of Technology, The Netherlands
C.W.M. Naastepad: Delft University of Technology, The Netherlands

No 10, Working Papers Series from Institute for New Economic Thinking

Abstract: Owing to its strong dependence on exports, Germany was among the economies hit hardest by the financial crisis. But unlike almost all other countries, Germany emerged from the crisis economic management, combining fiscal conservatism and structural reforms of welfare and the labour market. The latter, by reducing labour costs, fostered competitiveness, boosted growth, and increased employment. Progressive economists arguing that Germany beggared its Eurozone neighbours by squeezing workers' wages, share a similar view. However, this particular explanation of Germany's resilience is wrong and unhelpful. Germany's export success cannot be explained in terms of its (labour) cost competitiveness, but is caused by strong non-price competitiveness. This, in turn, is due much more than is normally recognized by the remaining distinctly non-neoliberal dimensions of Germany's economic model (including a Keynesian crisis response). German and European policymakers preaching austerity and structural labor-market changes as the model for other Eurozone countries, misunderstand Germany's rebound from crisis, with serious costs to Eurozone populations.

JEL-codes: E00 E02 E12 F02 F15 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2015-01
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (46)

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Persistent link: https://EconPapers.repec.org/RePEc:thk:wpaper:10

DOI: 10.2139/ssrn.2638053

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