Tuesday, June 7, 2011

Economic Recovery: Follow the German Model?

There is no doubt that Germany's economy has been fairing a lot better than most other countries since the recession. In recent years Germany has emerged as the export juggernaut of Europe in a time when many economies are struggling with vast trade imbalances.
     I had come across a great NY Times article about how German governmental policies reflect this newfound rise in economic power, and how strict regulation helped avoid a major collapse of major markets, including the housing market, for example: German banks demanded a 40% down payment for a new home loan. This would largely avoid any collapse, because with a house already almost half paid, failure to pay the rest is less likely; a risk is largely avoided. Capitalism is a very rewarding economic model, but unregulated, it could have devastating effects when risk on home loans is committed on a large scale.
     Due to the large conservative presence in America, many think that cutting poverty/social security policies from the budget will further plunge us into chaos; to the contrary as proven in Germany. These policies keep the economy flowing by providing consumer markets with income, therefore jobs are kept. The problem isn't social security and unemployment; it is the incentives attached to them. A large part of American unemployment incentives don't encourage returning to work, whereas Germany's entire structure is based on this.
       Germany's economic model isn't conservative nor liberal; its simply practical and encourages incentives of individuals, controls incentives of corporations and industries, and neatly aligns these policies with a common national goal for rapid growth.

Source:

No comments:

Post a Comment