I'm not sure that selling physical goods provides much of a moat in itself, you can see that from how much manufacturing has moved to China.
I suspect Germany has been able to buck the trend in Europe because it is particularly well run and the UK has been struggling because it is so poorly governed.
Europe in general (perhaps with the exception of the UK) is much less saturated with Made in China goods than the rest of the world, perhaps due to more stringent adherence to standards and quality, or perhaps as a result of its trade laws that still somewhat protect European-made goods.
Germany has benefited greatly from the expansion of the European internal market, and has always had, and still does have, a very good name. Everything from cars to electronics, down to appliances and kitchenware, Made in Germany still speaks volume on the continent.
Despite the somewhat higher prices of German goods (and they are actually kept quite low due to various work-sharing labour arrangements), weighing things on a quality-price scale, they still come out better value than a lot of alternatives. So it's really no surprise that the country is running such a huge trade surplus against the rest of the continent.
From the market's point of view selling to Germany distributes the goods more efficiently. Germans don't freeze in the Winter, while you don't keep office buildings lit up at night just because electricity is cheap. It feels like you're losing here, but on average everyone wins.
(also, there's the whole invasion of Ukraine going on, which has caused a massive disruption to the market)
This is a valid point but at the same time - can every country make a lot of money selling extremely high end luxury goods? It seems to me (but I'm very open to information that would change this view) that Germany occupies a rather special position that doesn't scale out world-wide.
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.
Germany exports an absurd amount of goods. However, many of the goods exported are from older technology value chains - cars for example. It’s dangerous for an exporting country to not be exporting in an entire crucial sector of modern tech: computers.
Perhaps. But re-industrialization might not be the answer.
Looking at GDP figures, Germany was hit much harder by the global downturn so far than the US. And we do produce things you can touch with your hands here.
(Ironically, a few years ago Germans were worried about the heavy reliance on industry. Pundits worried about how Germany might close the gap to more modern service economies in the UK and US. They imagined a ladder of value adding that starts with agriculture, goes to industry, and then to services.)
This! Germany's manufacturing supremacy can't last forever with lower cost countries catching up fast. UK realized earlier it can't be competitive in manufacturing anymore. Knowledge work is the future in the West, not volume manufacturing.
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?
Germany is about as different a market as one could get in the "advanced" economies. Drawing any conclusions from the effect it has or hasn't had on German retail is essentially and fundamentally flawed
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.
West Germany was competitive with the Deutsche Mark before. It ran trade surpluses then, too.
Many German goods are not competing based on price. A luxury car like BMW, Mercedes, Porsche and others doesn't compete (much) on price. Many smaller companies also are market leader not on price, but on service and product quality. China buys German machines and tools not because they are cheap. The US bought offshore wind turbines from Siemens for the Cape Cod wind farm not because they are competitive on price, but because they are the best available turbines for offshore wind farms.
For much of the German export industry it makes no difference where they export. If the Euro makes it easy, then many exports go to Eurozone countries. If not then more exports go to other countries outside the Euro zone. The Euro was overvalued in the last year - with the Euro going down, exports to other countries will strengthen.
While certainly Germany has done a lot right and deserve credit for their current economic strength, we have to recognize that they've both chosen a very different path: i.e. stability over growth, and also have a very different culture than we Anglo-Saxons - which I would argue are quite inter-related.
When it comes to quality manufactured goods, Germany is legendary and has strongly biased its economy over the past 100 years to take advantage.
The US & Briton on the other hand, have always been first movers to adopt breakthrough tech - often at the expense of quality, stability of investments, etc, and are seemingly always better at the "soft" side of business: sales & marketing.
The world needs both the Teutonic and Anglo-Saxon models, and seemingly they both are still going to head down the same paths as before will little change in overall direction - with the exception of America trying to get better educated the Germans trying to become better sales/marketers.
1. Made in Germany for consumer products might be worth less today but the export of industrial supplies like machines, chemicals and materials are much more important to the economy as a whole. Outside of Germany it is still quite respected - to the point where foreign companies give themselves and their products German sounding names while slapping German flags on their boxes to sell more.
2. Why software Made in Germany doesn't work well has a number of reasons but I'd say that it is primarily because it is much harder to raise capital for things that only might work 1 out of 50 times. People who start businesses are much more risk-averse and most try to be profitable or self-financed from year 1. This makes them uncompetitive in innovative sectors.
Having lived in UK and Germany for some time, although I'm a big fan of the British culture, I keep maintaining that Germany is much much better country overall simply because it's not centralised as UK is centralised in London.
Germany is prosperous, maybe there are not as many Unicorns as in USA or even UK, the country works like a clockwork and everyone is very active in very wide range of stuff.
All those charts showing how Europe is behind because top 100 largest companies are mostly American tech giants, some petrol companies and some construction and bank stuff from China? Those are so so misleading into making people believe that Germany or mainland Europe is a wasteland that missed out on technology.
Especially Germany, they have very well educated and healthy population and even if they don't make the most trendy consumer products right now, they still have wast infrastructure and people who can produce things.
Of course not everything is rosy, but Germany's and mainland Europe's core problems all come down to cheap energy availability and that's solvable. It's much easier to solve than stuff like widespread social problems like decline due to drug use or political instability.
They tend to rely on paperwork a bit too much maybe, they don't use credit cards that much etc. all these stereotypes are true but technology is not limited to computers, other stuff is also important and they are still pretty good in these things.
History has given us an image of crazy-efficient labour-soldiers and (evil) thinkers, which is passed on with articles like this.
In reality Germany is just an export nation with solid centuries-old world-known brands, a currency of an emerging country [0] and stagnating wages [1], producing luxury and investment goods, while Asia's growth creates demand for these like crazy.
That makes sense that people in Asia would feel that way. With the tariffs China is being hit the worst, and it's probably rippling to that general region.
Also, it makes sense Germany is slowing. Germany's economy is strongly based on higher end exports, but with the drama with Brexit, and US tariffs, Germany is going to be mildly hit, but in the long run, asia has slowly been exporting higher end products. Anecdotal but, 5 years ago I'd buy German made speakers, but today the same companies are manufacturing them in China. Germany is trying to transition to white collar and has been for a few years now, trying to offer good incentives for software engineers to move to Germany.
I suspect Germany has been able to buck the trend in Europe because it is particularly well run and the UK has been struggling because it is so poorly governed.
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