- Jun 4, 2018
Germany has one of the most protectionist economies in the world. Look at the duty to import an American made car to germany.Manufacturing is very important shitty job that business owners and workers tend to avoid.
From a business owner point of view, why make stuffs when you can flip properties? Suppliers disruption, rental increase and difficult unions, anything those goes wrong can crush your margins which is not high to begin with. From a worker’s pov, why work in assembly line when you can work as an analyst in a major corporation? That’s why you took up the student loan and get the degree right.
There is a reason why manufacturing Center moved from Uk, then to U.S. then to Japan, transited with dragon and tiger Asian economies (Singapore, Korea, Taiwan, Malaysia, Thailand...) and eventually to China now. Germany maintained their manufacturing but thats exception rather norm.
This isn’t because manufacturing is lucrative. Manufacturing is the shitty job that no one wants to do. But you are willing to do it, there will be enormous long term advantage as a nation.
1) Trade, debt and wealth accumulation. Because most service cannot be traded, only small countries can make a living through service, eg financial centers. If you have to buy what you use, and cannot sell what other can use, you will accumulate debt and deficit. After one to two generations it will be on road to wealth depletion.
2) National security. Weapons and ability to wage wars. Saudi Arabia can sell oil for a living but they cannot produce a pistol. In war time you need factories to produce none stop. Just look at this virus episode to see who can ramp up the mask and ventilators production quickly?
Rivoli, you are right on the problem. But just trade war and subsidy wont work. Even Latin Americans tried protectionist policy to grow their infant manufacturing industries. Yes they have manufacturing but that is hardly competitive. It never lifted their living standard like the manufacturing powerhouses used to experience. They have tariffs like 50-100 percent. Good luck trying with U.S. where wages are multiples higher..which would require much more sacrifice with others which is an indirect tax. A 500 percent tariffs on oversea made products? Are the consumers ready for such a sacrifice?
German took a different approach. High emphasis on vocational training in education. Union reforms to cut benefits. Focus on only high tech manufacturing areas. Germany is much smaller then U.S. You cannot have such a big economy like U.S. with focus on high tech areas only. You wont have enough customers. You need those assembly lines packing mobiles phones and computer parts.
Look at China, they are also a protectionist.
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