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Europe.Is.Doomed. (3) - poor Germany

by Jerome a Paris Mon May 5th, 2008 at 01:18:05 PM EST

This could quickly become a pretty regular new feature of the site!

Slow German growth sounds poverty alert

More than 10m Germans could fall into poverty by 2020 because of insufficient economic growth, McKinsey, the consultancy, warned in a study yesterday.

No reward for guessing how this terrible fate can be avoided:

Economists fear higher benefits and wages, both of which raise the cost of labour, could halt the sharp fall in unemployment of the past two years. Labour market statistics for April, published last week, showed job creation could be flattening.

McKinsey also warns the government against short-term measures aimed at boosting income and consumption. Only structural steps, the study says, can raise annual GDP growth to 3 per cent - the level it says is required for standards of living to stabilise.

You see, Europeans, poor things, still don't understand that in order to increase living standards, you have to decrease them

Series numbering corrected; see link-list of whole series.


Display:
How clever, I remember the Economist saying just a few years ago how all you Europeans were in trouble because the ferocious US economy was going to put all you welfare queens to shame.  Always it is the same, if you don't enthrall yourselves you will be overtaken and spurned.  I wish we only had 10 million in poverty here.

"I said, 'Wait a minute, Chester, You know I'm a peaceful man...'" Robbie Robertson
by NearlyNormal on Mon May 5th, 2008 at 01:37:51 PM EST
So McKinsey predicts the decline of the middle-class and the emergence of a two-class society, playing on deep-seated fears to put pressure on politicians to actually do the things that would make their prediction true. Define irony.

"If you know your enemies and know yourself, you will not be imperiled in a hundred battles." Sun Tzu
by Turambar (sersguenda at hotmail com) on Mon May 5th, 2008 at 01:59:51 PM EST
Didn't James McKinsey actually leave the company to put his management ideas into practice....and went bust. Just like most of the companies the consultants "helped".

If McKinsey advise, do the opposite.

keep to the Fen Causeway

by Helen (lareinagal at yahoo dot co dot uk) on Mon May 5th, 2008 at 02:21:46 PM EST
[ Parent ]
is invert the implied causality. They effectively say: there was low growth, thus people are getting poorer. Low growth appears to be endogenous - or caused by things like high taxes and regulation.

We need to say louder: low growth is caused by empoverished middle classes. It's the lack of wage increases that leads to low growth, not the other way round.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Mon May 5th, 2008 at 02:30:49 PM EST
[ Parent ]
I'd rather low growth was caused by effective taxation of high earners....whatever multiple of median that is determined to be.

keep to the Fen Causeway
by Helen (lareinagal at yahoo dot co dot uk) on Mon May 5th, 2008 at 02:43:10 PM EST
[ Parent ]
With 3% GDP growth per year it will be impossible to reach climate protection goals, decrease oil consumption etc.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers
by Martin (weiser.mensch(at)googlemail.com) on Mon May 5th, 2008 at 02:21:24 PM EST
a new word - moronomics

You can't be me, I'm taken
by Sven Triloqvist on Mon May 5th, 2008 at 02:22:39 PM EST
Appropriate in many different ways (the cult of growth might want us to add: "ever moronomics"

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Mon May 5th, 2008 at 02:31:58 PM EST
[ Parent ]
I find it astonishing that supposedly intelligent people are so blinded by their talking points that, as you deftly pointed out, they are unable to see the ridiculousness of what they are saying.

Moronomics - 'can you credit it?'

You can't be me, I'm taken

by Sven Triloqvist on Mon May 5th, 2008 at 03:16:43 PM EST
[ Parent ]
by gioele (gioele(daught)sandler(aaaattttt)gmail(daught)kom) on Mon May 5th, 2008 at 06:28:13 PM EST
[ Parent ]
Thanks for pointing that out - I thought I'd just invented it - but it was probably in my memory from earlier magpie reading ;-)

You can't be me, I'm taken
by Sven Triloqvist on Tue May 6th, 2008 at 02:21:04 AM EST
[ Parent ]
Google is your friend!   :-)

At least until they turn over your/my search data to the (in)appropriate authorities they are....   ;-(

by gioele (gioele(daught)sandler(aaaattttt)gmail(daught)kom) on Tue May 6th, 2008 at 03:14:29 AM EST
[ Parent ]
It was a throwaway line. Comedy with built-in obsolesence. But at least I'm in touch with the zeitgeist ;-)

You can't be me, I'm taken
by Sven Triloqvist on Tue May 6th, 2008 at 03:36:48 AM EST
[ Parent ]
Or you co-invented it...

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet
by Melanchthon on Tue May 6th, 2008 at 03:27:32 AM EST
[ Parent ]
Yes, like who first discovered gold ;-)

You can't be me, I'm taken
by Sven Triloqvist on Tue May 6th, 2008 at 03:37:58 AM EST
[ Parent ]
Nitpick: this is part 3, not 2 (Part 1 was on April 19). Europe.Is.Doomed is copyrighted to TBG :-)

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Mon May 5th, 2008 at 02:48:16 PM EST
Can't successfully count to 3.

Doomed, youse guys is clearly doomed, cause you aint got the sophistication to understand how cutting living standards is the path to improved standards of living.

See, its simple: because that McKinsey guy said so, is why. Anyone who knows as much about sex as him, he's gotta be a real wise guy.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Mon May 5th, 2008 at 03:05:13 PM EST
[ Parent ]
We need to get an Occasional Series started.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Mon May 5th, 2008 at 03:26:34 PM EST
[ Parent ]
Jerome a Paris: We need to get an Occasional Series started.

then don't forget to throw in this one as well:

[Auf Wiedersehen, la dolce vitaTM Alert]

"In France, when you can't afford a baguette anymore, you know you're in trouble," Ms. Renard said one recent evening in her kitchen, as her partner measured powdered milk for their 13-month-old son, Vincent. "The French Revolution started with bread riots."

The European dream is under assault, as the wave of inflation sweeping the globe mixes with this continent's long-stagnant wages. Families that once enjoyed Europe's vaunted quality of life are pinching pennies to buy necessities, and cutting back on extras like movies and vacations abroad.

Potentially more disturbing -- especially to the political and social order -- are the millions across the continent grappling with the realization that they may have lives worse, not better, than their parents.

For Europe's Middle-Class, Stagnant Wages Stunt Lifestyle - New York Times



A language is a dialect with an army and navy.
by marco on Mon May 5th, 2008 at 06:22:35 PM EST
[ Parent ]
Done. Will dig up some older pieces fitting into it.

Are you okay with changing the title of both your previous diaries (Europe.Is.Doomed -> Europe.Is.Doomed (2), and this one to (3) )?

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Tue May 6th, 2008 at 03:27:15 AM EST
[ Parent ]
yes, sure.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Wed May 7th, 2008 at 09:53:25 AM EST
[ Parent ]
I should probably write a [Europe.Is.Doomed™ Alert] Spanish edition diary around this.

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
by Migeru (migeru at eurotrib dot com) on Wed May 7th, 2008 at 10:05:31 AM EST
[ Parent ]
Could we push kcurie into doing it (the diarising)? He deserves the glory.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Wed May 7th, 2008 at 05:10:54 PM EST
[ Parent ]
I don't know, could we?

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
by Migeru (migeru at eurotrib dot com) on Wed May 7th, 2008 at 05:36:53 PM EST
[ Parent ]
the only thing that takes that bitter taste away.....more koolaide!

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty
by melo (melometa4(at)gmail.com) on Mon May 5th, 2008 at 04:12:18 PM EST
Higher wages -> poverty = <head explodes>

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Mon May 5th, 2008 at 05:36:50 PM EST
There is a growing inequity in pay in the United States. From 1976 to 2006, the average salary of workers in the bottom 90 percent of the income distribution - nearly everybody - rose by only 2.3 percent, to $38,800, tax data show. Among the top 10 percent, average salaries rose 57 percent, to $195,000.

How fantastic only 10-15 % of Germans risk falling into poverty, compared to 90 % of Americans...

Seriously, those numbers are so beyond insane, so fantastically perverse that we must trumpet them from every hill and every rooftop every day to create change.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Mon May 5th, 2008 at 05:48:43 PM EST
[ Parent ]
http://www.iht.com/articles/2008/04/27/opinion/edtrade.php

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Mon May 5th, 2008 at 05:49:09 PM EST
[ Parent ]
Yes, but remember that a poll conducted in 2000 by Time Magazine found that 19% of those surveyed believed themselves to be among the richest 1% of Americans and that another 20% said they expected to one day be among the richest 1%...


"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet
by Melanchthon on Mon May 5th, 2008 at 07:02:39 PM EST
[ Parent ]
European Tribune - Community, Politics & Progress.
Only structural steps, the study says, can raise annual GDP growth to 3 per cent - the level it says is required for standards of living to stabilise.

I.e we will stabilise (i.e. keep the same) your income if you allow us to cream the 3% growth off the top.  Any less growth than that, and the only way we can get our 3% of the top is by gouging into your share and reducing your living standards.  It's the math stupid!  

"It's a mystery to me - the game commences, For the usual fee - plus expenses, Confidential information - it's in my diary..."

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon May 5th, 2008 at 06:02:07 PM EST
... those earning between 70 per cent and 150 per cent of the average income - the standard definition of the middle-class ...

By this definition and the above reasoning, 90% of the German workforce earning €250,000 a year would lower the German middle class to a vanishingly small percentage of the total population thus destroying the German economy.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Tue May 6th, 2008 at 11:55:18 AM EST
?

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Tue May 6th, 2008 at 01:35:23 PM EST
[ Parent ]
No. Anyhow I guess that median is meant, not average. If 90% of the workforce will earn a specific amount, this amount will exactly be the median.

However, the study which is cited is actually already known on ET for longer. Dodo has shown a picture which showed the eroding middle class (and the study is about 10m new people which fall out of the definition). Nobody can really deny that there is happening such a development, especially not the German left. The question is, what would halt or soften it. The DIW thinks, that lower wages and lower taxes for rich people and some other measures will do it. As there has been real wage increases in some branches recently the DIW fears Germany is losing its capability to compete.
Others deny that, because inside the Eurozone Germany is highly competitive, and outside the Eurozone exchange rate is much more important than some percent wage increase or decrease. In the "Zeit"-Blog Herdentrieb, one of the bloggers was betting, that the trade unions of Italy and France would come to Germany this year and striking for higher wages in Germany, because the wage moderation in Germany is partially reason for the strong Euro, which kills their businesses.

z = +/- sqrt[.25 - c] + .5


Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Tue May 6th, 2008 at 03:31:55 PM EST
[ Parent ]
The World Socialist Web Site is the only other place I found this definition, and they use median, which seems to make more sense.

Like a lot of people here, I'm not too impressed by mainstream economists, but the fact that the FT can't tell the difference between average and median, while the WSWS can, is something even I would never have expected.

by gk (gk (gk quattro due due sette @gmail.com)) on Tue May 6th, 2008 at 04:41:28 PM EST
[ Parent ]
This definition is a standard used by DIW for years (see my diary Martin referred to), and all the news articles in the FT, the WSWS reference that study. The FT apparently can't translate.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Tue May 6th, 2008 at 04:46:10 PM EST
[ Parent ]


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