How germany came out of this financial crisis
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Owing to its strong dependence on exports, Germany was among the economies hit hardest by
the financial crisis. But unlike almost all other countries, Germany emerged from the crisis
quickly and stronger than before. What lies behind this success story, if at all it is one? The
commonplace—neoliberal—answer is that Germany’s success is the hard-won reward for strict
economic management, combining fiscal conservatism and structural reforms of welfare and the
labour market. The latter, by reducing labour costs, fostered competitiveness, boosted growth,
and increased employment. “Progressive” economists arguing that Germany beggared its
Eurozone neighbours by squeezing workers’ wages, share a similar view. However, this
particular explanation of Germany’s resilience is wrong and unhelpful. Germany’s export
success cannot be explained in terms of its (labour) cost competitiveness, but is caused by
strong non-price competitiveness. This, in turn, is due—much more than is normally
recognized—by the remaining distinctly non-neoliberal dimensions of Germany’s economic
model (including a Keynesian crisis response). German and European policymakers preaching
austerity and structural labor-market changes as the model for other Eurozone countries,
misunderstand Germany’s rebound from crisis, with serious costs to Eurozone populations.
the financial crisis. But unlike almost all other countries, Germany emerged from the crisis
quickly and stronger than before. What lies behind this success story, if at all it is one? The
commonplace—neoliberal—answer is that Germany’s success is the hard-won reward for strict
economic management, combining fiscal conservatism and structural reforms of welfare and the
labour market. The latter, by reducing labour costs, fostered competitiveness, boosted growth,
and increased employment. “Progressive” economists arguing that Germany beggared its
Eurozone neighbours by squeezing workers’ wages, share a similar view. However, this
particular explanation of Germany’s resilience is wrong and unhelpful. Germany’s export
success cannot be explained in terms of its (labour) cost competitiveness, but is caused by
strong non-price competitiveness. This, in turn, is due—much more than is normally
recognized—by the remaining distinctly non-neoliberal dimensions of Germany’s economic
model (including a Keynesian crisis response). German and European policymakers preaching
austerity and structural labor-market changes as the model for other Eurozone countries,
misunderstand Germany’s rebound from crisis, with serious costs to Eurozone populations.
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