FES International Policy Analysis: Germany’s Economy – Domestic Laggard and Export Miracle
At first sight, Germany’s economy has benefited from globalisation in general and from the global recovery since 2010 in particular. It offers a range of products, capital and luxury goods for which, thanks to the inequality of global growth, demand abroad is strong. Germany has internationalised its production processes, as a result of which it has a strong and relatively large industrial sector, but a relatively small service sector.
On closer examination, a number of problematic developments can be discerned in
Germany. For example, because of its strong dependency on its export industry the German economy is extremely prone to crises abroad. At around minus 5 per cent the collapse of growth in Germany in 2009 was among the worst, by international comparison. Although unemployment increased only moderately this concealed a massive fall in hours worked.
In a longer-term perspective, too, Germany’s growth and employment dynamic has
been disappointing by international comparison.Unemployment in Germany was high for a considerable period. Thanks to the advance of financial market capitalism and a labour market policy that promotes precarious employment, real wages stagnated. Inequality of income and wealth increased more rapidly than in almost any other OECD country. Opportunities for economic and social mobility have deteriorated and the risk of poverty has risen. These serious social problems threaten not only further economic development, but also social cohesion.
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