Genuinely curious as to why you say Europe has handicapped its business? They are just more regulated. If the businesses are handicapped why is Germany still a giant in manufacturing?
The German and French industries have bought their respective countries a significant amount of wealth. Specifically the German industry always had a far better relationship to their labor compared to many other places.
Since WW2 those industries have practically guaranteed piece of mind and an enjoyable life for the populations at large, even paying for the social safety nets available to all.
The EU has done many things to make those industries less competitive, some of those I don't even disagree with (e.g. data protection, some repairability stuff, etc.), but they absolutely do need to be careful not to overstep it. And this care is not something I have ever seen from the EU.
German products arent as high quality ad they used to be and most if them are pretty stale in terms of innovation. Sure they change the shape of cars and add new leds and interior eye candy but that is not progress. Imo german cars are low quality and lack diversity, and same goes for most machinery made in that country. US, Japanese, South Korean or other EU made products can be of similar or higher quality. Germany has such an economic power because the EU is heavily biased towards its needs. Just have a walk around east Europe and you will see how it has become junkyard for german cars. Suddenly the environment doesnt matter. Furthermore Germany is pretty socialist, both corporate and personal and has plenty of ways to subsidise industries and prevent too much innovation from rocking the boat.
1. You are correct that German industrial exports are highly respected. The issue is manufacturers in other countries (eg. Poland, Czechia, Hungary, Türkiye, China, Romania, Spain, Mexico) have caught up. And oftentimes those manufacturers are themselves German companies. This has in turn commodified a major portion of the German industrial base.
2. France has a similarly ossified financial culture, but has a much more robust tech industry compared to Germany (eg. Ubisoft, Datadog, Capgemeni, Dassault Systemes, Dataiku, Alcatel-Lucent, Thales, Orange, etc)
Germany has a strong base, but some reform is absolutely needed to upskill their economy.
Germany - the only country that still makes things in Europe really - is making decisions to jeopardise its industry and place in the world. It will surely end up as a basket case country if it carries on like this!
Essentially all your points have "always" been true for Germany, so trying to paint them as causes for Germany's economy "going down the drain" (also a very much debatable assessment) is very reductive.
The points you are making sound a lot more like what you would find as political campaigning talking points for deregulation than what's actually transpiring with the German economy.
To 1): Entrepreneurship has always been a lot lower in Germany as in many other countries, as it's not seen as e.g. a capitalist virtue as in the US. The German economic model with it's widespread Mittelstand works well with few entrepeneurs and a large portion of the population working in those enterprises. Not everyone has to be a small entrepeneur and hustle all the time.
To 2): Again, basically the same as it has always been. For the typical company there isn't any more "government interference in the most minute details of running a business" than 20-30 years ago. One also has to keep in mind that (as in most countries) that as long as you are making money and act in good faith according to the spirit of the law, the regulatory bodies are a lot more bendy than one might assume according to the letter of the law.
To 5): You can very much scale your workforce up and down. Limited time contracts and long trial periods are very common. On a larger scale that is typically done via subcontractor structures. Also the typical reasons for wanting to scale down (economic non-viability) are permissible reasons for letting people go. It's also very much possible to fire people for under-performance (you just have to go through the motions of tracking their performance and comparing it to peers or documenting their non-compliance). The only stories I'm actually still hearing in the wild of people not being able to be fired is about "Beamte" (public servants).
Germany's strategy has been to offer higher quality products at a huge markup. Just using the auto industry as an example, in the past twenty years the difference in quality between a mass market vehicle and a luxury vehicle has compressed. Competing on quality seems to be getting harder.
The Anglophone economies, whose shift to services away from manufacturing has been ballyhooed and decried in many quarters, embraced competing on novelty. By being the first mover in many industries.
The Anglophone strategy led to greater internal inequality but seems to be better from an aggregate standpoint. I'd like to see Germany's manufacturing strategy work since it preserves mid-skill jobs, but this is casting doubt.
15-20 years ago Germany was the sick man of Europe. Labour market reforms in line with an industrialization boom in Asia restored the competitiveness of her industrial economy.
The real problem with this argument is that they are too short-sighted. Germany cannot artificially reduce its competitiveness to appease other EU countries, because competition happens on a global stage and so the EU would simply lose out further to North America and Asia.
Your are correct that Germany should spend more on infrastructure.
People cant afford buying cars made outside europe because they are heavily taxed. So instead the whole continent is polluted to prop up the german economy. When the rest of the continent needs propping, germany starts name calling and forcing there governments to tax people and businesses to death. Not to mention over regulation in the name of “safety” or “insert populist mantra” that are usually met by german companies and are a burden to most other economies. Germans wont buy Lithuanian products because those are “low quality” but they buy chinese. So instead of allowing the eu to deregulate, to relax “standards”, and to enable innovation, germany does the opposite so you, in lithuania, cant compete and always lag - therefore only live on a 1500 eur budget. Fortunately end of game for the eu is in sight and if your country stays democratic it will grow to afford more.
That’s only because of political entrenchment. If Europe loosened their labor laws and made other reforms to bring them in line with American business law, they would probably catch up to American GDP per capita pretty quickly. As it stands, US GDP per capita is 40% higher then even Germany. Do you think the Germans aren’t capable of producing at the same level as the US?
At this points it looks like Germany is almost allergic to innovation.
Their government introduces more bureaucracy for companies, discouraging investments there. Berlin had a chance to take #1 spot as the tech capital of Europe post-Brexit, instead we rarely see any new unicorns coming from there.
Auto industry is another example - Volkswagen and Volvo groups are #4 and #5 when it comes to battery-only electric cars, and they're behind Tesla, BYD and SAIC (both Chinese). They're not innovators, they're still behind and I don't know if they'll catch up.
As an EU citizen I feel more and more negative about the economic future here, with UK having left and the biggest countries (Germany, France, Italy, Spain) struggling to stay relevant, especially in tech industry where AI can soon turn cause a major power shift.
And that's why Germany is riding on its legacy manufacturing industry's coattails and its political position in Europe instead of cranking out real innovations like the US.
It's not too surprising. Yes, Germany is slow to adapt to new tech, but they are a car manufacturing powerhouse and are the biggest country in Europe. The whole country is in an everlasting debate about its dependency on car manufacturing, and cars are _very_ important. It would be surprising if they weren't no 1 producer (and probably consumer) in Europe.
Maybe there's a simpler explanation, in Germany businesses are run quite conservatively in comparison. Nice for stability but probably bad for innovation.
By the way, Germany is one of the top 5 exporting countries since decades, so this has little to do with the Euro:
If we limit this claim to _just_ German manufacturing competitiveness (which is often synonymous with "European manufacturing" in the context of these discussions -- and I will assume this is true of your comment as well, given the nuclear energy remark), this really isn't true.
What changed my view on this was one of Adam Tooze's newsletters from last year.[1] The relevant points here are:
- Germany manufacturing is less gas-intensive than the global average.
- Energy costs only constitute a small and decreasing share of total industrial costs -- about 5.8% for the German manufacturing industry as a whole, and 3% for leading export sectors (namely the auto industry).
- Most German manufacturing -- and this is true of European manufacturing more broadly -- is primarily in high-margin, value-added sectors where quality, rather than cost, are the competitive factor.
Another important detail lost in the invocation of "cheap gas" is that Europe as a whole, and German in particular, has never had particularly "cheap gas." European natural gas prices have long been well above those in the US, and Germany's have been above the European average for the last 15 years or so.
I agree with both Tooze and the majority view that, notwithstanding the above points, Germany's post-war energy policy has been a catastrophe. It has certainly limited its manufacturing potential. But the effect of the Ukrainian war on its _already_ limited manufacturing sector, due to _already_ not-so-cheap energy, tends to be exaggerated.
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