Larry Elliot has an extremely interesting article in the Guardian today on the German economy. He describes how the economy has slowed down and that its growth is slumping. The the recession in the Eurozone has also hit German exports hard.
Greece has been chastised and vilified and sent through hell for the sin of consuming too much, not producing nearly enough and living beyond its means. On the other hand Germany’s woes derive from just the opposite. Its economy has relied on exports and investment, to the detriment of domestic consumption. In other words it produces far more than it can possibly consume.
And that’s not good either? Well, says Larry Elliot “Take away exports and investment and there is not a lot to sustain German growth.” So what do we do? Greece is all wrong and Germany is all wrong too? Well no. What is wrong is rigid unimaginative thinking over the economy. The German obsession with viewing the economy as a morality play.
A morality play, mind you, where everybody else is sinful and only Germany is virtuous. Which is the usual approach of bigots. So in this vein of superior morality having to punish delinquents, it managed to impose through its clout on the one hand and through the utter insipidness and ineffectiveness of the European leadership on the other, a policy of debilitating austerity with absolutely no provision for growth whatsoever.
As a result it shot itself in the foot and lost its best customers. That is Europe. So the problem is not that there is one and only economic policy that must be followed by everybody, as the pea brained German government has decided. The problem is one of balance. And having said that I hasten to qualify it. The economy is a problem of common sense.
If you squeeze an economy to death (such as the Greek economy) you have not helped it recover. You have ruined it. And by ruining the economy of your customers you end up hanging yourself with the same rope. What is needed is imagination, an open mind, a refocusing of what is really important, that is realising that the purpose of an economy is to provide a good life, for the peoples, not just the 1% milking the system now.
Of course Greece should improve its production and rely less on imports. But then so should Germany concentrate on improving domestic consumption and cutting down her reliance on exports. There is need for austerity in economies, but not the German version which throws everything out of kilter.
As Larry Elliot says: “…it would be preferable ? for German citizens, for the eurozone and for the rest of the world ? if consumer spending and domestic investment constituted a bigger slug of [the expected future] growth [of Germany]. For that to happen, though, there would need to be a change in the way Germany thinks about economics and its role in the world, and that looks some way off.”
Which is the main, if not the major problem for Europe and the global economy.