The LA Times profiles an ordinary German middle-class couple who enjoy various benefits that most Americans making a similar salary could only dream of [h/t LMGP]:
Every summer, Volkmar and Vera Kruger spend three weeks vacationing in the south of France or at a cool getaway in Denmark. For the other three weeks of their annual vacation, they garden or travel a few hours away to root for their favorite team in Germany's biggest soccer stadium.
The couple, in their early 50s, aren't retired or well off. They live in a small Tudor-style house in this middle-class town about 30 miles northwest of Frankfurt. He's a foreman at a glass factory; she works part time for a company that tracks inventories for retailers. Their combined income is a modest $40,000.
Yet the Krugers have a higher standard of living than many Americans who have twice that income.
Their secret: little debt, frugal habits and a government that is intensely focused on high production, low inflation and extensive social services.
That has given them job security and good medical care as well as well-maintained roads, trains and bike paths. Both of their adult children are out on their own, thanks in part to Germany's job-training system and heavy subsidies for university education.
For instance, Volkmar's out-of-pocket costs for stomach surgery and 10 days in a hospital totaled just $13 a day. College tuition for their son runs about $260 a semester.
Germany, with its manufacturing base and export prowess, is the America of yesteryear, an economic power unlike any of its European neighbors. As the world's fourth-largest economy, it has thrived on principles that the United States seems to have gradually lost.
[One of those, the article points out, is a profound aversion to debt, both on the personal and governmental level].
...
Germany's lower unemployment rate also reflects its orientation toward formal vocational training.
The Krugers' older child, Thorsten, was interested in books from an early age, and prepared for a university education. Their daughter, Nadine, got a vocational diploma in social work that included three years of schooling after high school, with the final year being on-the-job training at half pay.
About one-fourth of all German businesses take part in this apprenticeship program; six of 10 apprentices end up getting hired permanently, said Dirk Werner of the Cologne Institute for Economic Research.
...
The practice, he said, is a key reason why Germany has one of the lowest unemployment rates for 15- to 24-year-olds, about 9.7%, according to the Organization for Economic Cooperation and Development in Paris. In the U.S., the comparable rate is about twice that.
Volkmar and others attribute part of the lower unemployment rate to the German work ethic. Yet Germans, on average, work far fewer hours a year than Americans, thanks partly to five or six weeks of vacation.
The article does a fine job of summarizing why the standard of living of ordinary middle-class Germans is so much higher than that of Americans, despite Americans' higher incomes: government policies consciously reduce the cost of living for the ordinary incidents of life (health care, higher education). German earn less than Americans, but also can spend less on basic necessities of life. Government policy also guarantees everyone enough time off to truly relax and recover. Further, those who don't go to college -- about 75% of the population in developed countries -- are channeled into solid middle-class jobs through internship programs run by public-private partnerships. That is, they are trained to do a job some company needs them to do, without being forced to incur thousands of dollars in debt to get that training.
German frugality, as an explanation for the difference in economic conditions between it and other Euro countries, is a canard of grand proportions, as is the idea that American (and other countries') households -- those making less than twice the median income, that is -- are profligate.
As is well known, Germany did not have a housing bubble; it also has independent, enormously powerful financial institutions, which are nearly as dominant on the Continent as its basic industries. They also fueled housing bubbles in other countries. Here's some figures for changes in EU housing prices. Germany's figures are in the second column: a flat line.
Residential property prices for EU countries, New and existing houses and flats
1996 4.5 –1.1 – 9.9 1.4 2.4 –
1997 3.6 –1.9 – 8.2 2.8 3.4 0.1
1998 6.7 –1.6 22.6 14.4 5.8 –1.4 1.9
1999 7.8 1.4 22.5 8.9 7.7 0.8 7.1
2000 7.1 0.2 20.5 10.6 8.6 3.9 8.8
2001 6.2 0.2 14.0 14.4 9.9 6.0 7.9
2002 7.8 –1.9 6.1 13.9 15.7 12.6 8.3
2003 7.1 –1.2 14.3 5.4 17.6 7.2 11.7
2004 12.0 –1.4 11.5 2.3 17.4 7.0 15.2
2005 16.7 –1.5 7.2 10.9 13.9 8.6 15.3
2006 11.1 0.3 13.4 12.2 10.4 5.8 12.1
2007 9.2 0.3 0.9 . 5.8 5.0 6.6
No I would venture that this does NOT have to do with personal virtues of frugality, but with domestic housing policy, which, like the US used to, apparently requires down payments and restrains so called securitization of home loans. (And because the US does not guarantee health or retirement, buying a house was not considered an extravagance but propagandized as the best, most secure investment; it's what you were supposed to retire in and on).
How enormous is German finance? Here's an interesting tidbit:
"PIMCO was the lead asset manager of the Fed's $738 billion program to bolster the commercial paper market by snapping up notes from corporations, providing them with short-term financing. PIMCO is a unit of Allianz SE, the German insurer, which bought the firm in 2000." http://en.wikipedia.org/wiki/PIMCO
Posted by: jgrytting | February 12, 2012 at 06:39 PM
I love Germany, my Mom is German and I still have many relatives living there. Unfortunately their high living standard has caused them to rack up a lot of external debt which is causing a strain on their economy. Read this CNBC article which is eye opening. The US, for the first time in recent history, now owes more than our GDP; however Germany owes significantly more from a percentage and per capita basis. Here's the link:
http://www.cnbc.com/id/30308959/The_World_s_Biggest_Debtor_Nations
Posted by: Chris Speer | February 04, 2012 at 11:59 AM
Eckeman: "What if the rest of Europe and the world were just as frugal?"
Than they would even more admire efficincy discount shops like Aldi and Lidl, selling cheap, but good and reliable proucts quite often made in Germany as well.
It is not just the making of expensive and luxury products like high class cars, its more beeing as efficient as possible in making good products for fair prices.
If there were no Globalization and we couldt not sell abroad anything, we also would not have to face chinese competition, what is the real challenge for all european and northern american societies - and the only reason Germany is shining actually is that it seem to be on a way answering that chinese challenge.
It wouldt be fine if other european and american countries will find a good answer as well.
Posted by: Roger | February 04, 2012 at 11:03 AM
Eckeman,
"...aging cheapskates who vacation at campgrounds in 25 year old camper vans..." but still expect to spend about $3000 over three weeks (according to the article).
Equals Euro 2300 for 2 adults. Sounds comfortable, not cheap.
Especially since the pair (without kids in school) can easily vacation before or after the main holiday season.
And concerning "beggaring the neighbors" and "structural imbalances".
Part of it is true but only a part.
Where do we compete with Greece? In tourism for example Greece is competing with Turkey not Germany.
Italy has/had a thriving textile and shoe making industry. They compete with Asia here not Germany.
Before the Euro they could devalue and stay competitive. Now they have problems. Because of the Euro not because of Germany.
And I wonder about the "if Germans would spend more it´d wonders for the Eurozone" topic. It certainly would help a bit (that´s me partly agreeing).
But if you buy consumer electronics ... produced in Asia. Clothing, shoes ... mostly produced in Asia too. A longer, more exotic, more luxurious vacation ... partly benefiting Eurozone countries.
Just trying to say that even if we would spend more, quite a bit of it wouldn´t go to Eurozone countries.
A bit like our exports? Roughly 60% going to countries outside the Eurozone?
Posted by: Detlef | February 04, 2012 at 01:03 AM
There is a deep paradox of all that thrift. Imagine if German industry had to rely on its own internal market of aging cheapskates who vacation at campgrounds in 25 year old camper vans whose idea of Christmastime splurging is a “breakfast tray, cutting board and sleeping gown.” German economic growth relies on foreigners buying all those new cars, machines and pharmaceuticals produced by Mr. and Mrs. Kruger, and in many cases these foreigners are going into debt and running trade deficits to do that. What if the rest of Europe and the world were just as frugal? Since Germans are so keen to see this all in moral terms, Germany’s economic model violates the Kantian categorical imperative because it beggars its neighbors. The structural imbalances this had caused within Europe are the main reason for the current Euro crisis.
Posted by: Eckeman | February 03, 2012 at 11:52 PM
Isn't it amazing how those points that made Germany the sick man of Europe less than 10 years ago are now its strenths?
The strong welfare state was deemed the basic problem holding back the german economy. Health care was too generous and free higher education only encouraged long-time students frittering away their most productive years.
German public debt was too high, mainly due to spending for the welfare state (and reunification) and at the same time high taxes were strangling the german entrepreneur.
Now the public debt is admirably low, higher education is exemplary, and the welfare state is a big boon.
Tempora mutantur...
Posted by: miz | February 03, 2012 at 11:14 PM
The article only hints at two further points:
The fact that considerably fewer Germans do enjoy the relatively secure job positions described nowadays than until the early 2000s (not to speak of the '70ties).
And frugality and thrift. This may sound like a tired cliché, but especially for the older generation (growing up during the war or its aftermath) it holds true. For my mother (born immediately after the war) eating out is still to some extent a luxury, although she does it more often than 30 years ago when the kids were small. (Or buying a cake when she can far more cheaply (and in better quality) bake it herself.)
And, especially in rural regions, people save housing costs by having two or three generations living together in a large house with several flats or similar structures.
(In villages there are still older setups where a living house and several other buildings, formerly barns, stables or workshops are grouped around one yard.)
This is only possible, of course, if people don't have to move frequently for work and can commute. But this is still often possible, especially for lower middle class jobs.
Posted by: Johannes | February 03, 2012 at 07:38 PM
"Germany [...] is the America of yesteryear"? Since the German standard of living seems to be more desirably, wouldn't it be better to think of Germany as the "America of tomorrow", a goal to reach, rather than a dear reminiscence of better times? I know that Americans have a tendency to find us adorably antiquated, but maybe it's time to drop that attitude and to start looking and learning from other countries.
Posted by: sakasiru | February 03, 2012 at 12:58 PM