How Germany dealt with the recession

[Usui Takumi 1,562]

We all know what happened in the United States during the Great Recession: Millions of Americans lost their jobs, the unemployment rate skyrocketed and we’re still suffering the consequences.

Here’s something that’s less well known: In Germany between 2007 and 2009, the opposite happened and the unemployment rate actually fell, according to a report released last week by the Center for Economic and Policy Research, a liberal-leaning economic think tank.

Germany’s economy, which is heavily dependent on world trade, did suffer during the recession, said John Schmitt, an economist with the CEPR who prepared the report. What differed was how the two countries responded to that economic weakness.

In the United States, most employers cut jobs. In Germany, they cut hours.

“There was widespread shift from full-time to fewer hours,” Schmitt said.

Germany has a much more highly unionized workforce than the United States, and some of those cutbacks came from negotiating over things like overtime and work hours, Schmitt said. Strong employee protections also made it more costly for some companies to lay off workers than to reduce hours, the report noted.

But Schmitt said another difference was that when employers cut back on hours, the government provided those employees with partial unemployment benefits. That compensated somewhat for the smaller paychecks, leaving consumers less cash-strapped than in the United States.

In the U.S., some employers reduced their workers’ hours, and there are currently about 8 million Americans who are working part-time but would like to be working full-time.

It was far more typical for employers to cut jobs completely when work slowed, and there are still 14 million unemployed Americans. The employment situation has left many Americans tight on cash and unwilling to spend freely, hampering the economic recovery further.

Schmitt said there are some states that allow workers to collect partial unemployment if their hours are cut back, but few Americans actually use it.

http://lifeinc.today.com/_news/2011/06/06/6797433-how-germany-dealt-with-the-recession-jobs-conundrum

Edited June 8, 2011 by Sousuke

[Usui Takumi 1,562]

Its interesting that Austria was also involved in Kurzarbeit and had one of the smallest changes as well.

[Bad_Daddy 2,209]

The Germans along with the Japs have always been one step ahead of the rest of the world. When other country's crash and burn, those two nations put their noses to the grind stone and turn on the after burners. Not all are created equal, and those two country's have proved it time and again. If the US had half a brain they would travel over there and take notes to see what makes those people tick. I think we could learn a lot from those two peoples/nations.

[Mr. Big Dog 10,747]

The Germans along with the Japs have always been one step ahead of the rest of the world. When other country's crash and burn, those two nations put their noses to the grind stone and turn on the after burners. Not all are created equal, and those two country's have proved it time and again. If the US had half a brain they would travel over there and take notes to see what makes those people tick. I think we could learn a lot from those two peoples/nations.

Now are you suggesting that the free US can learn something from socialist Germany?

[one...two...tree 2,762]

Its interesting that Austria was also involved in Kurzarbeit and had one of the smallest changes as well.

Yep. Example after example throughout the last 70 years, Keynesian Economic principles have been proven sound. It's just too bad that there's just enough naysayers in this country to tie the hands of progress.

[scandal 951]

On an absolute scale, the US $14 trillion economy is double Japan + Germany combined. We're still easily the world's #1 economy.

From a growth perspective, US GDP growth has been stronger than either Japan or Germany throughout the past two decades. That was true during the go-go nineties when we were ~4% growth and Japan was in and out of recessions and Germany had ~2% growth. And it was true during the 2001 recession and following recovery. Japan has not seen 4% growth since the early 90s. The great fear of many economists is that we're about to see Japanese-style stagnation because we're following their example too closely and too timidly trying to coax ourselves out of the hole we're in. Emulate the Japanese? Please, no.

Back to the OP, here are some comments from Fareed Zakaria last night with Jon Stewart on the Daily Show. He specifically mentioned Germany as a contrast to the US, and what they're doing to actively have a public/private collaboration on reviving the economy:

“The measure should be a country like Germany,” he said. “...Because they view government in a positive way, which is government invests in technology, in science, in technical institutes and apprenticeship programs. It tries to figure out what is it you can do positively to grow the economy.”

He also had some choice comments about the history of Silicon Valley as private/public collaboration:

Asked whether he was suggesting that the United States didn’t have a “coherent domestic manufacturing or labor policy,” Zakaria responded quickly, “We don’t.”

“If you think about what made Silicon Valley,” Zakaria said, “Silicon Valley was made by a great state education system, you know, these amazing U-Cal campuses, a great public education system. It was made by Defense Department demand for engineers. ... U.S. government used to buy every computer chip that was manufactured.”

[Bad_Daddy 2,209]

Now are you suggesting that the free US can learn something from socialist Germany?

I voted for Obama and most likely will again. So ya, anything is possible. The US doesn't have all the answers like it thinks it does.