Thomas Geohegan’s Germany

I remember once years ago when my friend George was telling a bunch of us what a wonderful vacation he had in Paris.  It was a great place to be, he said, but there was one problem with the French and with Europeans generally.  “They have it too good.”

That’s the impression many Americans have of the European welfare states.  Yes, it’s nice to have long vacations, universal health care, beautiful parks, generous old age pensions and so on – but how then can the Europeans compete with the Chinese, the Koreans, the Indians or, for that matter, us lean and mean Americans.

Thomas Geoghegan, a Chicago labor lawyer, has written a new book Were You Born on the Wrong Continent? How the European Model Can Help You Get a Life to argue that the reverse is true.  He wrote that what looks like socialism to us Americans is precisely what makes France, Germany and the other leading European countries competitive.

He concentrates on Germany, because it is Europe’s leading economic power and because he likes the German model better than that of France and some of the others.  Germany’s social democracy is based not so much on governmental power as on empowerment of workers, he writes.  They have strong unions, workplace councils, representation on boards of directors and regional collective bargaining (so that the German equivalents of Borders and Barnes & Noble have to pay the same wages.)

This works.  The European Union, unlike the United States, has a positive trade balance.  Germany has a positive trade balance with the world, and with China specifically.  In fact, Germany for years was the world’s leading exporting nation, and now is a close runner-up to China; the United States is a distant third – astonishing when you think Germany has a population of 83 million, the United States more than 300 million and China more than 1 billion. None of this would be true if the keys to success in the global economy were low wages, no benefits and union-busting.

Yes, Geoghegan admits, Germany isn’t perfect, Germany has problems, the German economic model is eroding a bit under global competition, but overall Germans are doing better under their system than we Americans are doing under ours.

In Germany, it is difficult (though not impossible) for corporations to shut down operations and shift production to poor countries, so they think about ways of making their domestic industry more efficient and productive.  And because workers have a voice in decisions, they accept what is decided.  In the United States, Geoghegan says, it is easy for corporate management to make a decision, but difficult to implement it; in Germany, it is difficult to come to a decision, but easier to carry it out once decided.

Geoghegan’s book is enjoyable to read.  He presents himself as a naive bumbling American who doesn’t know what to make of these zany Europeans, and, in among his anecdotes and personal reflections, he gets in a lot of good information.

In every measure of quality of life, except GDP (output) per person Germany outranks the United States, he says, and then goes on to make the case that GDP is not a good measure because (1) so much of its benefits go to the upper 1 percent or so on income earners and (2) it includes negative things such as spending on prisons.  He makes a cast that Germany is a better place not only for poor people and blue-collar workers, but for college-educated professionals such as the likely readers of his book.

Germany unlike the United States has preserved its manufacturing base.  It has not succumbed to the science fictional notion that we now live in a virtual world where the making of tangible things doesn’t matter. Germany also has recognized the importance of “human capital” – the accumulated knowledge and skills that make people productive.

Geoghegan goes on to say

You don’t care about industry? Fine. You don’t care about labor? I understand. But what about “character”? The existence of an industrial base and a labor movement may determine what that will be. Will people be independent and skill oriented, the way highly skilled industrial workers tend to be? Or will they be like our college grads: service oriented, dependent, trying to please, seducing us, giving us big smiles, and never registering to vote? Industry is destiny.

Thomas Geoghegan

Employers, committed to keeping their employees and knowing that they are likely to stay, have an incentive to invest in making them more skilled and productive.  Employees, having no reason to think of their employers as their enemies, have every reason to cooperate.

In the current recession, the German government paid employers to reduce the work week rather than lay workers off.  It’s a great contrast to the present situation in the United States, where nearly 10 percent of the work force is unemployed and, from what I hear, all the people that have jobs are putting in unpaid overtime and pushing themselves to the limit just to hang on.

Tyler Cowen, an economics professor at George Mason University, said this is a more effective economic stimulus than unemployment insurance.  One advantage is that workers keep their skills current. If you are looking for work, that is a full-time job.  You have little or no time for retraining or anything else.

While it is true that Germans pay higher taxes than Americans do, they nevertheless have less debt and higher savings.  Thomas Geoghegan writes that this results from another competitive advantage – the more efficient delivery of public services.  Germans have a universal health care system and spent 11 percent of national output (GDP) on health care; we Americans lack a universal system, and yet spend 17 percent.

Part of the reason for the difference is in the disdain we Americans, especially conservative Republicans, have for government.  If you think government itself is the problem, you won’t do a good job of administering government, for the same reason vegetarians wouldn’t cook good barbecue and the Socialist Workers Party wouldn’t do a good job of running Ford Motor Co.

Even long vacations can contribute to competitive advantage, Geoghegan writes.  Germans on average work 700 hours less a year than Americans do.  If you’re an ambitious workaholic, you can devote that time to learning a new computer skill, a new language or some other marketable skill.  If your job leaves you overstressed and exhausted, as so many Americans are, you might not have the energy to try.

The downfall of the German economic model has been predicted for a long time now, and maybe someday the prediction will come true. Perhaps the Germans in the end will be forced to join us in the race to the bottom.  If they are, it is not something for us Americans to take satisfaction in.

Click on Tom Geoghegan for his home page.

Click on Were You Born on the Wrong Continent? for a short summary of Thomas Geoghegan’s new book.

Click on The Continental Life for an interview with Thomas Geoghegan. [Added 9/15/10]

Click on Defying Others, Germany Finds Economic Success for a New York Times article on Germany’s recovery from the current recession.

Click on All the king’s horses and all the king’s men… for Tyler Cowen’s comment plus extended rebuttal from libertarian conservatives.

Click on Germany rustles up big business in China for a Washington Post article on Germany’s economic recovery and exporting success.  [Added 9/20/10]

Click on Germany as an economic role model for one of my earlier posts.

Click on Germany as an economic role model (2) for another one of my earlier posts.

In spite of everything in his book, Tom Geoghegan has no desire to leave Chicago and move to Europe.  For reasons I can’t quite articulate, I feel the same way.  While I, like Geoghegan, believe we can learn from the Germans, I wouldn’t want to be one.

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