The German Example

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There is an article I read the other day in the New York Times, The German Example.  It’s in the Business and Finance section, and it mostly focuses on what the United States, and the world, can learn from the way that Germany has handled its economy.

Of course, I was drawn to the article because it was about Germany, but even from a political and financial perspective, I agree with most of what this article has to say, and would even were it any other country referred to.

With the current economic situation in the US, many are looking to lay the blame somewhere, usually as far from themselves as possible.  Both parties blame the other for policies and practices that have destroyed our economy, neither willing to compromise or work together toward a mutually beneficial solution.  I think that is where Germany has succeeded.

Now, I have watched some news footage of German Parliament, and they are much more vocal than our Congress; there are five main parties who have to agree on things, as opposed to our two who can’t see eye to eye.  But, I think it is that multi-party system that helps Germany more than it hurts.  With five parties, no one party has a majority on its own, and so they form coalitions.  There are deals and compromises made among several parties in order to form a coalition that has a majority.    So, a small party that only has about 10% of the national vote, can still have influence on policy, if one of the other parties needs their votes and promises to work with them.

It is this fundamental difference in politics that explains why our two countries have had very different experiences with the current economic situation. As David Leonhardt says in his article:

“In the last decade, Germany has succeeded in some important ways that the United States has not. The lessons aren’t simply liberal or conservative. They are both.”

Germany has used both liberal and conservative ideas in the shaping of its policies.  They have done multiple things to grow their economy.  There is not one single answer.

“The current deficit-reduction plan includes about 60 percent spending cuts and 40 percent tax increases, Mr. Hüfner (of the Organization for Economic Co-operation and Development) says. It’s like trying to lose weight by both eating less and exercising more.”

Germany has also worked to improve its welfare system.  Yes, Germany is in Europe; it is much more liberal, it has many more social programs.  And the German welfare program, Hartz IV, as it is known, is notoriously lenient and generous to those who do not want to work.  But Germany has been working to fix this program.  It used to be that many people found they could make more money by being unemployed and collecting benefits from the government, than if they went out and got a job, so there was no incentive to go to work.  But, with new reforms, the government can now reduce someone’s benefits if they refuse to work.  And they can still receive a portion of their benefits if they do take a low-paying job.

And one final thing that Leonhardt mentions in his article, is the hot-button topic of taxes.  As I quoted earlier, Germany’s current deficit reduction plan includes both spending cuts and the raising of taxes.  Both policies, together, will reduce the deficit.  But there was an interesting sentence in this article that I enjoyed, “[Germany] has a smaller deficit because it is more willing to match the benefits it wants with the needed taxes.”  Germany is willing to pay the taxes necessary to have the government programs that they want, which is something I find lacking in the US right now.

I hear people yelling all the time about how our taxes are too high, but they don’t want their benefits reduced in any way.  They want to pay the government less, but enjoy the same level of luxury.  I will admit, I don’t like paying taxes, but I like having police and fire and hospitals and roads and schools and all of the infrastructure that government provides. I pay my taxes because I understand the purpose of it.  Now, I do also believe that there are some government programs that my tax dollars are paying for that I don’t agree with, but the proper procedure to fix that is to tell my congressman, and if he doesn’t do anything about it, I’ll vote for someone else.  That is the way the system works.

The bottom line is, Germany has succeeded because they have worked together to find solutions that work for the nation as a whole.  Their politicians, though they may yell and scream at each other in the Bundestag, do compromise and negotiate.  I wish we could see more intelligent debate and discussion, more finding of common ground, more working toward common goals in American politics.  This is a great country, and it is by disagreeing, but being willing to listen to the other side that we can become greater.

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