What makes Germany tick?

Date posted: November 18, 2010

Germany suffered through the recession like most countries, but its recovery has been stronger. Years ago Germany was thought of as being noncompetitive because of high labor costs and sluggish production. N.C. State University extension economist Mike Walden takes a look at what changed.

“What changed is that Germany confronted those issues, … and they have turned around. In fact they have addressed their labor costs by cutting labor contracts, lowering their labor costs per unit of production. Now none of this was easy. It was very controversial — very controversial politically.

“But as a result, the modern Germany is now much more competitive on cost. And they are still considered to be some of the best in terms of producing machinery and technology. The technical quality if you will of the machinery and technology is still considered very good.

“So you combine that with the fact that cost and price is very good, and this is where you get the modern Germany. … They have been growing much faster than other European countries. They are on an export boom. And I think what this shows you is the old adage that you can teach an old dog, if I can use that term, new tricks. That is in the case of Germany. We are taking an aging relatively expensive country and turning it in to a new competitive country.”

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