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Why Germany And China Are Largely Unaffected In This Recession

Why Germany And China Are Largely Unaffected In This Recession
Innovation

Could manufacturing resolve America's economic woes?

Naresh Kumar
  • 7 july 2010

As the economic downturn continues across the world, two nations have come out unscathed: China and Germany. Harold Meyerson of the Washington Post reasons that its their robust manufacturing sector and predominantly industrial economies that have helped them to not only survive the recession but also thrive in it. In contrast, he says, America’s transition from a manufacturing to a post-industrial economy has resulted in its most productive jobs being offshored and wages getting stagnated since the manufacturing sector began to contract.

Meyerson says that America is losing manufacturing not because of cheap labor elsewhere but because they have neglected this sector. He compares Germany’s rise in manufacturing to that of the US:

Most Americans, I suspect, believe we’re losing manufacturing because we can’t compete against cheap Chinese labor. But Germany has remained a manufacturing giant notwithstanding the rise of East Asia, making high-end products with a workforce that is more unionized and better paid than ours. German exports came to $1.1 trillion in 2009 — roughly $125 billion more than we exported, though there are just 82 million Germans to our 310 million Americans. Germany’s yearly trade balance went from a deficit of $6 billion in 1998 to a surplus of $267 billion in 2008 — the same year the United States ran a trade deficit of $569 billion. Over those same 10 years, Germany’s annual growth rate per capita exceeded ours.

So even as Germany and China have been busily building, and selling us, high-speed trains, photovoltaic cells and lithium-ion batteries, we’ve spent the past decade, at the direction of our CEOs and bankers, shuttering 50,000 factories and springing credit-default swaps on an unsuspecting world.

WashingtonPost: “In recession battle, Germany and China are winners”

[via Neatorama]

Image by Werner Kunz (werkunz1)

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