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by aschreyer
3981 days ago
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> In Germany, it is thanks to European monetary policy that artificially depresses the Deutsche Mark, allowing for cheaper exports and lower costs for German companies, as well as a captive market whose currency is overvalued in exactly the same way destroying local industry (i.e. German loans pay for German cars to be sold to the Europeans but the other way round is much harder). Hello VW, goodbye Rover. On top of this Germany is absorbing East Germany which is a handy source of incredibly cheap labour (in the same way that illegal labour is in the US food and farm industry) AND massive subsidies for whoever wants to go take advantage of it (I know a company that opened a very, very expensive plant 200km from Berlin because the subsidy was such that they came out profitable even if the plant lost money for 20 years). Fascinating story, if only Germany had started producing cars in 2000 with the introduction of the Euro. How do you think VW, Audi etc. fared in the 70's and 80's (and the rest of the German economy in general)? In addition, the Euro is pretty much irrelevant because the cars are mostly produced in the region where there are sold - do you think the exchange rate is relevant for the VW factories in Mexico, Tennessee and Pennsylvania for the north American market? How does a cheap Euro make the import of resources from outside the Eurozone cheaper, steel, aluminium etc.? |
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Second, I did not claim that macroeconomics of the Euro period were sole responsible for the success of German companies. I said that one large contributing factor to the success or even survivability of German companies in export markets, versus other countries (such as the Koreans) was the fact that the euro allowed for de facto currency devaluation without any of the durable disadvantages associated (either the structural breakdown of the country that implies the devaluation, or the impact of inflation on savings, etc.)
I worded it in long form because it is a complex, high dimensional subject not suited for one sentence summaries. As is most of economics and politics.
[1] https://en.wikipedia.org/wiki/List_of_Volkswagen_Group_facto...