The world has turned upside down. For decades, one of Germany’s proudest moments each year is when the national statistics office announces another record-beating number for the country’s exports. Coming just behind the national soccer team’s victories as a source of pride are our great products that all the world wants to buy, from precision machines to luxury cars and gummy bears. In 2016, the world bought €1.21 trillion worth of them.
But 2016 was also the year in which many more Germans became aware that our legendary export strength is also our greatest economic weakness. Exporting almost half our entire GDP, we’re dependent on access to foreign markets like no other major economy in the world. First, Britain’s vote to leave the European Union cast doubt on future easy access to one of our most important markets. Now, Donald Trump and his new trade advisor, Peter Navarro, accuse us of “exploiting” America by exporting more to the U.S. than we buy. They talk of new tariffs and restrictions.
Strength has become weakness, and economic power has turned into vulnerability.
If selling too much abroad makes us vulnerable, Germany’s options for becoming more economically secure are an even bigger challenge to what we’ve long considered our virtues. If we don’t want to be a victim of the global anti-trade backlash, we must use more of the goods we produce ourselves. That means more spending power for citizens, higher outlays by our government, or more investing by our companies. Perhaps a combination of all three.
We did our homework and we reformed. We got our sky-high wages under control, which helped our companies become globally competitive. Now, even the Bundesbank – surely no hotbed of socialism – has exhorted German unions and employers to agree on higher pay.
We also stopped living above our means. Since 2014, our government budget has been in surplus. Our middle class dutifully pays some of the world’s highest taxes so our finance minister can retire the national debt. But in the process of becoming the champions of fiscal discipline, we have also let too many roads and bridges fall into disrepair. We are falling behind in digital infrastructure, and could do worse than invest more money in our schools. There are many public investments that are anything but wasteful spending.
We find ourselves in a world where strength has become weakness, economic power has turned into vulnerability and the good may turn out to be bad. It will take a while to find a new balance. But in a time of shocks, the rethinking has begun.
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