Over the last decades Germany has been able to maintain the title of "Exportweltmeister" (World Champion of Exports) among the World's major economies. According to the table on page 114 of the Economist, June 4th 2011, Germany has a trade surplus (Merchandise trade only) of USD 209billion. China's trade surplus is slightly smaller at USD 179billion. The same table shows that during the last year the euro appreciated against the USD from EUR 0.82 to EUR 0.69. The figures for Britain are a deficit of 151billion and a much smaller appreciation vis a vis the US Dollar from EUR 0.69 to EUR 0.61.
Switzerland is a small country with the reputation of being totally dependent on its banking sector. In Switzerland's currency the Swiss Franc went from CHF 1.16 to the US Dollar a year a go to CHF 0.84 to the US Dollar now, nonetheless its exports of merchandise trade (i.e. excluding banking or any other financial or non-financial services related items) exceeded its imports by USD 19.1 Billion during the last year.
Germany's gross Domestic Product is growing at 5.4% per annum, Switzerland at 2.5%, Britain at 1.8%.
The conventional wisdom of economists is that a depreciating currency boosts exports. Why is it then that over many years countries that have been known for their insistence on keeping their currency hard seem to be highly successful not only in terms of GDP growth (nominal and real), but also Trade Balance surplus. Countries that have deliberately allowed their currencies to weaken, like the US and Great Britain, seem to do badly both in terms of GDP growth and balance of trade.
How come Germany and Switzerland (as well as other Northern European countries) have been able to maintain a strong industrial base and been successful exporters? They have managed to maintain high exports and a positive trade balance despite the strong competition they face from China, India , Brazil and other up and coming economies with much lower labour costs.
Can economists offer a convincing, evidence based explanation why these countries have remained competitive when others, which have tried to achieve competitiveness by devaluing their currencies just seem to import inflation and do not achieve nominal GDP growth to speak of (let alone real GDP growth)? I certainly would be interested to see one.
My observations from travelling in this countries are that compared to the UK, ordinary people seem to be a lot more interested in engineering and technological innovation in their everyday lives. How is my house built, how is it heated. What technologies are available to make it energy efficient. Similar news paper articles in the mainstream press and everyday discussions concern other technical innovations for example with regard to cars and bicycles. Is there such a thing as an engineering culture the strength of which varies from country to country?
When it comes to economic questions discussions seem to be more about certain industries and regions rather than the macroeconomic questions (such as the country's budget deficit) that seem to dominate these type of discussions in the UK. Finally, I have noticed that the benefits of a hard currency and very low inflation seem to be widely understood and accepted as something the broad population does not want to give up or put at risk, even if it means harder work and wage restraint.
Could it be that such behavioural factors would differ so widely from country to country that similar macroeconomic and monetary policies implemented on a national scale would lead to widely differing effects?
Switzerland is a small country with the reputation of being totally dependent on its banking sector. In Switzerland's currency the Swiss Franc went from CHF 1.16 to the US Dollar a year a go to CHF 0.84 to the US Dollar now, nonetheless its exports of merchandise trade (i.e. excluding banking or any other financial or non-financial services related items) exceeded its imports by USD 19.1 Billion during the last year.
Germany's gross Domestic Product is growing at 5.4% per annum, Switzerland at 2.5%, Britain at 1.8%.
The conventional wisdom of economists is that a depreciating currency boosts exports. Why is it then that over many years countries that have been known for their insistence on keeping their currency hard seem to be highly successful not only in terms of GDP growth (nominal and real), but also Trade Balance surplus. Countries that have deliberately allowed their currencies to weaken, like the US and Great Britain, seem to do badly both in terms of GDP growth and balance of trade.
How come Germany and Switzerland (as well as other Northern European countries) have been able to maintain a strong industrial base and been successful exporters? They have managed to maintain high exports and a positive trade balance despite the strong competition they face from China, India , Brazil and other up and coming economies with much lower labour costs.
Can economists offer a convincing, evidence based explanation why these countries have remained competitive when others, which have tried to achieve competitiveness by devaluing their currencies just seem to import inflation and do not achieve nominal GDP growth to speak of (let alone real GDP growth)? I certainly would be interested to see one.
My observations from travelling in this countries are that compared to the UK, ordinary people seem to be a lot more interested in engineering and technological innovation in their everyday lives. How is my house built, how is it heated. What technologies are available to make it energy efficient. Similar news paper articles in the mainstream press and everyday discussions concern other technical innovations for example with regard to cars and bicycles. Is there such a thing as an engineering culture the strength of which varies from country to country?
When it comes to economic questions discussions seem to be more about certain industries and regions rather than the macroeconomic questions (such as the country's budget deficit) that seem to dominate these type of discussions in the UK. Finally, I have noticed that the benefits of a hard currency and very low inflation seem to be widely understood and accepted as something the broad population does not want to give up or put at risk, even if it means harder work and wage restraint.
Could it be that such behavioural factors would differ so widely from country to country that similar macroeconomic and monetary policies implemented on a national scale would lead to widely differing effects?
