Poland's economy is now a European star performer. A new trend suggests further momentum, with more and more Polish firms acquiring foreign companies, including in Germany.
Latest study on Immigration in Germany that I read came to the conclusion that (fiscally speaking) recent migration has a net-zero effect on the German economy. The desired economic stimulus that came with migration in the past is smaller than expected and roughly covers the states expanses. So I doubt that polands strict Migration Rules have anything to do with that.
I think the problem lays here: Germany is a rich country, but its people dont usually have much money to spend. Our wealth comes from export and is not driven by domestic purchasing power. Or in other words: Germans are underpaying themselves.
This created quite strong of a chokehold where we are highly dependent on other countries buying our stuff. How is that going, now that every state drives a protectionist agenda? All, while China is flodding the market with cheap alternative goods. Germany simply failed to diversify it’s economy a long time ago.
Germany took in a lot of refugees from very different cultures, which is fiscally speaking pretty bad. For economic migrants, countries filter out for higher income, who then pay a lot of taxes. Naturally that does not happen with migrants. Then refugees did not choose to leave their country and therefore probably want to go back. That means they have much less reason to try to get a job, as it is only for a short time anyway. The cultural and especially language differences make that even harder, as some say native Arab speaker first has to learn German, before taking a lot of jobs. That at best takes more time and courses, which cost money, and at worst means they do not work at all.
Compare that with an economic migrant, who has to have a well paying job before getting their visa and you can see the massive fiscal difference between the two.
You make a good point, and I wouldn’t disagree with it. However, your argument doesn’t really contradict what I said earlier. I still think it was a good thing that Germany took in so many refugees. Perhaps not primarily from an economic perspective, but from a humanitarian one.
Germany has one of the most diversified economies in the world, see Atlas of Economic Complexity.
Since the second Trump administration, its federal and state governments have been pushing firms to move towards producing higher value added services (“deep tech”) and diversify into other areas than automotive.
True words. But those are two different kinds of diversification. Germany is highly diversified in terms of what it produces and exports, which is what the Atlas of Economic Complexity is all about. My point refers to how economic growth is generated. Germany relies heavily on external demand, meaning exports drive a large share of growth while domestic consumption plays a comparatively smaller role. So the economy is diversified in its industrial structure, but less diversified in its demand structure.
The goal should not be to reduce exports, but to make growth less dependent on them. If you want to diversify demand, you would aim to strengthen domestic demand components. Meaning: higher household purchasing power, stronger private domestic investment, public infrastructure spending.
This needs a bit of context.
One reason Germany is where it is today is how wages developed in the early 2000s. In Germany, wages grew much more slowly than productivity, which kept labor costs low. This helped German companies compete internationally but also limited how much money many people had to spend domestically. At the same time, the Agenda 2010 (Set by former chancellor Gerhard Schröder, right before the Merkel era) reformed the labor market in favour of the employer’s side. This expanded flexible and low-paid jobs. As a result, Germany became very competitive in exports while also developing a relatively large low-wage sector. Basically: Germany followed a “keep your own people poor, so that the factories they are working in have lower production costs and can export their stuff cheaper”-doctrine.
This could (maybe?) be reversed by increasing the role of domestic demand. That would mean stronger wage growth, lower taxes on lower and middle incomes, and stronger collective bargaining coverage. Governments should also expand public investment in infrastructure, housing, and education. But I also think that it will be very hard to reverse that trend.
What’s your opinion on increasing domestic demand via careful import taxes where germany is highly dependent on external suppliers? And by careful I don’t mean the hot mess trump administration is doing currently.
I’m not an expert on tariffs, and I am also not a big fan of them. Our economy is deeply intertwined with other economies, so tariffing will immediately raise production costs, leading to higher prices and less competitive exports. As a policy maker, I would be afraid that such a move would be the nail in the coffin for our economy.
Furthermore, being part of the EU single market means trade policy is largely set on EU level.
I agree with you except for the timeline. To my knowledge, Germany’s firms and governments were export oriented since WWII. The current permanent reduction in demand from abroad (due to Chinese and American policy amongst others) is wholly novel and never happened before to Germany, from what I understand. One good thing is that the policies you mention have already been launched a few years ago, so the federal and state governments are adapting fast.
Latest study on Immigration in Germany that I read came to the conclusion that (fiscally speaking) recent migration has a net-zero effect on the German economy. The desired economic stimulus that came with migration in the past is smaller than expected and roughly covers the states expanses. So I doubt that polands strict Migration Rules have anything to do with that.
I think the problem lays here: Germany is a rich country, but its people dont usually have much money to spend. Our wealth comes from export and is not driven by domestic purchasing power. Or in other words: Germans are underpaying themselves. This created quite strong of a chokehold where we are highly dependent on other countries buying our stuff. How is that going, now that every state drives a protectionist agenda? All, while China is flodding the market with cheap alternative goods. Germany simply failed to diversify it’s economy a long time ago.
Germany took in a lot of refugees from very different cultures, which is fiscally speaking pretty bad. For economic migrants, countries filter out for higher income, who then pay a lot of taxes. Naturally that does not happen with migrants. Then refugees did not choose to leave their country and therefore probably want to go back. That means they have much less reason to try to get a job, as it is only for a short time anyway. The cultural and especially language differences make that even harder, as some say native Arab speaker first has to learn German, before taking a lot of jobs. That at best takes more time and courses, which cost money, and at worst means they do not work at all.
Compare that with an economic migrant, who has to have a well paying job before getting their visa and you can see the massive fiscal difference between the two.
You make a good point, and I wouldn’t disagree with it. However, your argument doesn’t really contradict what I said earlier. I still think it was a good thing that Germany took in so many refugees. Perhaps not primarily from an economic perspective, but from a humanitarian one.
The reason I posted this is to say that Germany is a bad case to look at the advantages of immigration.
Ah, I get you. Agreed
Germany has one of the most diversified economies in the world, see Atlas of Economic Complexity.
Since the second Trump administration, its federal and state governments have been pushing firms to move towards producing higher value added services (“deep tech”) and diversify into other areas than automotive.
True words. But those are two different kinds of diversification. Germany is highly diversified in terms of what it produces and exports, which is what the Atlas of Economic Complexity is all about. My point refers to how economic growth is generated. Germany relies heavily on external demand, meaning exports drive a large share of growth while domestic consumption plays a comparatively smaller role. So the economy is diversified in its industrial structure, but less diversified in its demand structure.
Oh okay, got it! Which kinds of policies aim to diversify a country’s demand structure? Like, how would that work?
The goal should not be to reduce exports, but to make growth less dependent on them. If you want to diversify demand, you would aim to strengthen domestic demand components. Meaning: higher household purchasing power, stronger private domestic investment, public infrastructure spending.
This needs a bit of context.
One reason Germany is where it is today is how wages developed in the early 2000s. In Germany, wages grew much more slowly than productivity, which kept labor costs low. This helped German companies compete internationally but also limited how much money many people had to spend domestically. At the same time, the Agenda 2010 (Set by former chancellor Gerhard Schröder, right before the Merkel era) reformed the labor market in favour of the employer’s side. This expanded flexible and low-paid jobs. As a result, Germany became very competitive in exports while also developing a relatively large low-wage sector. Basically: Germany followed a “keep your own people poor, so that the factories they are working in have lower production costs and can export their stuff cheaper”-doctrine.
This could (maybe?) be reversed by increasing the role of domestic demand. That would mean stronger wage growth, lower taxes on lower and middle incomes, and stronger collective bargaining coverage. Governments should also expand public investment in infrastructure, housing, and education. But I also think that it will be very hard to reverse that trend.
What’s your opinion on increasing domestic demand via careful import taxes where germany is highly dependent on external suppliers? And by careful I don’t mean the hot mess trump administration is doing currently.
I’m not an expert on tariffs, and I am also not a big fan of them. Our economy is deeply intertwined with other economies, so tariffing will immediately raise production costs, leading to higher prices and less competitive exports. As a policy maker, I would be afraid that such a move would be the nail in the coffin for our economy.
Furthermore, being part of the EU single market means trade policy is largely set on EU level.
I agree with you except for the timeline. To my knowledge, Germany’s firms and governments were export oriented since WWII. The current permanent reduction in demand from abroad (due to Chinese and American policy amongst others) is wholly novel and never happened before to Germany, from what I understand. One good thing is that the policies you mention have already been launched a few years ago, so the federal and state governments are adapting fast.
Let’s hope that the current efforts turn out to be effective. And thank you for the lively exchange :)