Monday, February 14, 2011
Germany as a role model Economy?
The German Economy has bounced back from its recession in a way that makes us wonder if the German economy is a role model economy. Even though the there are many things about the German Economic System that have always worked well, the reason why they bounced back to well from the recession is partially luck. It just so happens that Germany is the number 1 producer of some of the items that the Chinese currently want like luxury cars for example. Having said that, the government succeeded in subsidizing some industries which payed-off which means that the German bounce back was not entirely based on luck. It must be said that Germany is currently too dependent on foreign demand and if they are unable to increase the domestic demand the country could face another economic downturn in the near future.
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There is no doubt that the recent growth in German GDP is driven by the country's exports. The article states that "German companies have excelled at seeking out unglamorous but profitable niches, and then focusing relentlessy on being the best". Many German companies that are not big names are the best in the world. So the Germans have found their niche in the world market with many of these small companies and has realized the profitability that can be attained by pursuing more investment in these small niche markets. To agree with you Diego, globalization is currently growing at a rapid pace and if the German's do not find a way to increase domestic demand, then German companies will find it more profitable to outsource production in order to remain competitive in the future, which would be harmful to the German economy.
This is also a problem for many Asian countries whose economy is totally reliant on exports. Getting domestic consumption up is the only way they will be able to maintain their impressive growth rates.
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