by Jerome a Paris
Wed May 31st, 2006 at 09:54:07 AM EST
Company prowess 'hurts Germany'
German companies' rising competitiveness over the past decade has contributed to the country's economic weakness, the Organisation for Economic Co-operation and Development said yesterday.
In its first survey of Germany since 2004, the organisation said wage moderation, not productivity gains, had been the main factor behind its industry's growing global market share and had weakened demand and economic growth at home.
So, let's see. Germany has done textbook "reforms", keeping wages in check, improving its competitiveness, boosting company profits... and yet the economy has not profited as announced - because workers are spending less (and, unlike their colleagues in other countries, they are not splurging on debt to compensate for lower income).
My conclusion is that "reform" is not good for the economy. "Reform" is good for company profits, and shareholders, so it is legitimate for some to push for it, but it is not good for the economy.
The OECD's conclusion, of course, is that "reform" has not gone far enough.
Overregulated products markets and high barriers to competition in turn constituted the single biggest obstacle to job creation and investment in Germany. Dismantling such regulations and cutting red tape, said Mr Wurzel [the OECD's chief economist on Germany], would help boost real wages, employment creation and productivity gains.
Devices aimed at protecting small businesses - subsidised loans, bans on large hypermarkets, strict regulations for crafts and professions - were in fact protecting insiders from competition and should be dismantled, the report said.
The OECD also slammed the lack of openness in markets ranging from telecommunications to rail and energy.
"Reform" does not work, so let's do more "reform". When will we stop listening to such silliness?
