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A term becomes a myth; the myth becomes a religion. That the German economy has long been too competitive is completely denied. We are all conditioned by the misguided use of terms and connections so a way of looking at things seems absurd. The German economy acts like a bulldozer that flattens foreign economies instead of an economic locomotive.
By Lutz Hausstein
[This article published on June 5, 2014 is translated from the German on the Internet, http://www.nachdenkseiten.de/?p=21911.]
No term has dominated the media landscape of past years as strongly as “competitiveness.” There is hardly a speech, talk show or interview that does not include the term “competitiveness” with an admonishing or demanding undertone. German chancellors from Schroeder to Merkel, economic ministers with changing names from the SPD, CSU and FDP, labor ministers, chairpersons, CEOs and even union bosses and journalists all use the word security or increased competitiveness. Seldom was a term so loaded with myths and false associations as this one. False distortions basically distort understanding and actions.
A TERM BECOMES A MYTH
Poor international competitiveness was one of the most frequently named reasons for Agenda 2010 that former chancellor Schroeder did not tire citing again and again. This assertion is regularly repeated like a prayer wheel although the facts speak another language. The German trade balance surpluses (i.e. a positive balance between exports and imports) prove the exact opposite of a deficient competitiveness – even during the introduction of Agenda 2010 – at 59 billion Euro (2000), 95 billion Euro (2001), 133 billion Euro (2002), 130 billion Euro (2003) or 156 billion Euro (2004) (source German Statistical Office).
German surpluses rose continually. There is not the least trace of deficient competitiveness. If Germany had not been competitive or inadequately competitive, import countries would have purchased their goods from other countries or from their own economy and simultaneously exported more of their own products to Germany. Instead goods are increasingly imported from Germany. Germany continuously realized a steadily higher export excess. Thus deficient competitiveness was an unverifiable assertion at that time. People did not grow weary of spreading this myth to broad parts of the population under the cloak of the supposedly indispensable increase of competitiveness as without alternative.
The underlying subliminal message of a threatened competitiveness resonates in nearly every other public declaration of the German government, opposition or economic- and media representatives up to the present day. The super-joker – competitiveness – trump[s other playing cards contrary to all logic – whether the theme is economic crisis, state spending, social security, pensions, wages, energy policy or taxes. This argument is applied to give a justification to dismissals despite glittering business profits, to put a touch of no alternative on precarious working conditions or to further undermine the social security systems. A perfect phraseology was created to sweep aside all objective counterarguments in combination with the slogan “creating/securing jobs.”
THE MYTH BECOMES A RELIGION
The German chancellor uses this killer argument. “Competitiveness” is one of her favorite words to justify all exactions. That the German economy has long been much too competitive is completely denied. The description of an “excessive competitiveness” may seem irritating at first. The reason is we are all conditioned in a certain way by the misguided use of terms and connections so such a way of looking at things may seem absurd. Mental structures are formed and strengthened through the constant repetition of false associations. These connections are recalled as soon as a certain keyword is uttered. This Pavlovian reflex works on account of the constant repetition in naming “competitiveness” like the jubilation over “export world championship” – only effective through language manipulation. This double conditioning is very powerful. Who does not remember the euphoria over the soccer world champion of ’54, ’74 or ’90?
However the German economy acts rather like a bulldozer that flattens foreign economies with its sheer massiveness instead of acting as an “economic locomotive” in the domestic European market as represented in a graphic way distorting reality. The economies of European states do not hang on the German locomotive as this picture suggests. If they did, a greater speed of the locomotive – in the form of Germany’s ever higher export surplus – would give them a higher speed. The opposite is the case. False associations with people are produced with the selection of this completely misguided image whose confirmation can only be sought apart from economic connections.
DEMYSTIFICATION OF THE MYTH
“Competitiveness” is not a term that describes an absolute value. This is constantly ignored in the public statements. Competitiveness represents a relation. If one increases one’s competitiveness, the competitiveness of the other automatically falls through no fault of his own. When German chancellor Merkel urged southern European states to raise their competitiveness by lowering production costs through wage cuts, the competitiveness of everyone else simultaneously declines including German businesses without their being able to change this. The absurdity of the economic locomotive is revealed here.
However the way of realizing a cost reduction and increased competitiveness through wage cuts brings about very different consequences. That wages have a dual function from a politico-economic perspective is ignored again and again. Thus wages (and the wage level or sum) is an important element of the internal cost structure. Wages are also the income of wage-earning employees on the other hand and represent the essential backbone of aggregate social demand. If wages are lowered to increase competitiveness, domestic demand is also lowered at the same time.
Only the way of securing sales through increased exports now remains. Germany has continuously taken and developed this path. Thus the German balance of trade surplus, the difference between Germany’s exports and imports, set a new all-time record in 2013 at 198 billion Euros which was acclaimed generally uncritically. Hardly anyone asked how such an export excess will be paid for. These exports increasingly edge out goods produced on foreign markets and the financial possibilities of paying for these imports elude the national economies there. Goods exported from Germany (and other surplus countries) reduce the sales of local products as well as the jobs there, the work incomes and business- and tax revenues. Thus a bulldozer very quickly comes out of the much-cited economic locomotive.
COMPETITIVENESS WITH A BIT OF COMMON SENSE
A proper competitiveness in itself is not negative. However the right measure is the point as is so often true in life. A competitive national economy withy a balance of trade surplus can be temporarily tolerated in the short-term. But ensuring a balance of imports and exports to give the partners enough air to breathe is urgently necessary in the medium-term. If Germany would reflect on increasing indigenous demand by means of higher domestic mass purchasing power, the extreme export orientation could be abandoned without harming the German economy.
Parallel to that, foreign economies would be able to see from the standpoint of producing assets in their countries to be permanently stabilized. Under these premises, a trade balance as an expression of an overpowering competitiveness would give advantages to both Germany and the countries of the European domestic market. On the other hand the present way – the dogma of the increased competitiveness of German businesses on one side and the austerity policy with catastrophic impoverishment and record unemployment in Southern Europe on the other side – is like a rat-race on a constantly declining level. No side can profit from this, neither the populations in Germany and the other surplus countries nor the people in the deficit countries in southern Europe.