The Strange Case of Germany

Germany is an enigma for Americans. Several articles published in the mainstream media in recent months have contained references to German inability “to address the problems of Socialism” and deal with the “economic threats of labor unions and environmental activism”. When an average American looks at Germany (an indeed most of the member nations of the E.U.) they see a political atmosphere that would scare the heck out of Glenn Beck’s cardiologist.

Professional level individuals in Germany take home about 50% of their pay after taxes. That is half of their check. Some of that comes from the German version of the VAT (value-added tax); this tax is essentially a sales tax added at every level of production. Corporations are not able to get away from the heavy taxes either.

German companies have already agreed to the carbon reductions that the United States is starting to debate…sort of. Rather than individual companies reducing outputs, we in the United States are going to beg our corporate masters to play with the pollution they produce like a dog bone at an auction. This at least, is how I perceive “cap and trade”. Germany and the rest of the European Union nations are a decade ahead or more in every area of environmental management; from clean energy, to environmental managerial accounting procedures, to total resource management, to the gas taxes.

That’s right folks…gas taxes. Taxes that are similar to our average price per gallon here in the US of A. Not our taxes per gallon, our TOTAL price per gallon.

German companies have another headache to deal with…labor unions. Powerful unions. Like baseball player union powerful. These unions literally pushed Wal-Mart out of Germany after the Arkansas firm had already made an enormous investment.

So with all of these factors, the U.S. mindset would expect huge, systemic economic problems. U.S. journalists project this impression on German politics, and it would be reasonable to project an economy devoid of competition, innovation, and jobs. It would be reasonable, but it would also be wrong, which is what defies U.S. logic.

Germany is the world’s leading per-capita exporter. They make more stuff per person to be sold around the world than any other country in the world. If you are a big total fan, and think averages are for the little guy, they export more outright than the U.S., which is almost 4 times more populous, and are close to number one China, which is almost 15 times as populous. German companies are world leaders in innovation across a huge array of fields. German unemployment rates have always run a little higher than the U.S., but there is something deceptive in those numbers. Germany counts people employed in part-time jobs who desire full-time labor among the unemployed. The United States does not follow this practise, functionally making the two nations unemployment numbers the same.

All of this is written with a simple idea in mind; the best companies in the world benchmark their competitors, so why shouldn’t the best nation in the world follow suit? There are many policies in Germany that would simply not translate well, but they are doing something correct. They treat healthcare as a public utility, so individuals and corporations are not burdened with the budgeting issues the subject creates in the U.S. To wit, when GM went belly up, its investors held some $28 billion in bonds which were the residue of decades of poor capital decisions and bad strategy. The firm was also on the hook for $15 billion to the UAW, most of that allocated for, you guessed it, healthcare. There are many, many techniques that a nation can use to handle healthcare as a public utility. Unfortunately for us, the debate in this country on which technique to settle on was hijacked by the pro-insurance/status-quo lobby’s $400 million “stimulus” plan for ad agencies and lawmakers.

German firms also have those pesky environmental regs to deal with. The trick there is that they actually do deal with them, rather than using all of their energy trying to cheat or get the regs cancelled. Management guru Michael Porter wrote that companies in markets with tough environmental regulations were pushed to innovate and become more efficient, better competitors. Porter’s proof can be found throughout Europe, including the continent’s industrial heart in Germany. The math is fairly simple on this point; if more of the stuff your factory buys is turned into saleable product than waste and pollution, then your factory will make more money.

It seems like Germany isn’t such a strange case after all…they just haven’t given up trying to get better. As an American chauvinist, it irritates me that ANY European nation can look better on ANY scorecard than the U.S.A. Currently, I am irritated a lot. Surely we Americans can get back on top, if only we could hold OUR business community accountable.

We love our kids here in this country, and we love to make them happy. We also, however, know that sometimes we have to make them mad at us to do what is best for them. In that spirit, we should continue to be pro-business…we just can’t forget to do those important things that “…they may not like, but someday they will understand.”

The rational middle is listening…