David Shorr writes from Seoul, South Korea that we should pay more attention to Germany’s trade surplus:
Germany is one of those countries that sells stuff rather than buying. Here’s the point about Chancellor Merkel’s statements: she talks a lot about Germany’s exports as a a success of their competitiveness and not very much about needing Germans to buy more. As with China, Germany is quite happy to chug along with export-led growth, thankyouverymuch. This begs the question — if Americans become less profligate (and households have already shown they can reduce consumer debt — then who will pick up consumer demand where we left off?
I think it’s wrong to put China and Germany in the same box here. The reason is that if you look at the Eurozone as a whole (or the EU-27 as a whole, or various other broader metrics) the overall surplus is pretty small as a share of GDP. Germany is (along with Sweden and the Netherlands) the export-oriented part of Europe sort of like how the Seattle or New York City areas of the United States are the export-oriented parts of our country.
That’s not to say the relationship between Germany, the Eurozone, and the world is unproblematic. On the contrary, it’s a total disaster. The Irish situation is a mess, and the Eurozone-wide growth rate is abysmal which means there’ll be more trouble ahead for Greece, Portugal, Spain, and Italy soon too. When the Euro was proposed, skeptics posited that the labor market wasn’t nearly integrated enough to make it work, but most European leaders forged ahead anyway. The result is an urgent problem, but it’s a very different one from the China situation.