Tuesday, September 19, 2017

Dalia Marin — The China shock: Why Germany thrived while the US struggled

Previous research has shown that China's entry into the WTO in 2001 has had a profound impact on jobs and wages of low-skilled workers in the US in sectors exposed to Chinese imports. The same is not true for Germany. This column argues this is because the import-side trade adjustment to low-cost competition had already happened before the rise of China, because the rise of Eastern Europe offered new export opportunities for German firms, and because China’s love for product quality found a perfect match in German products.
Vox.eu
The China shock: Why Germany thrived while the US struggled
Dalia Marin | Chair in International Economics, University of Munich; CEPR Research Fellow

3 comments:

Dan Lynch said...

All true, but the author fails to mention how the Euro gives Germany a trade advantage. Without the Euro propping up German exports, Germany might well be in a depression.

To their credit, Germany has focused on quality and on high end specialty products. Those types of products are less impacted by foreign competition.

By contrast, America used to make commodity products like steel, and mediocre quality automobiles. American commodities struggle to compete on price with foreign commodities, and American products struggle to compete on quality.

However, that does not mean that America should have done like Germany and focused on high end specialty products. Just as it is not possible for every country to be an exporter, it is not possible for every country to specialize in high end specialty products. That market is only so big.

As someone who has spend most of his career in manufacturing, my take is that the American style of management has a lot to answer for. It is top heavy and authoritarian. Despite the lip service given to teamwork, the work environment is actually very competitive rather than cooperative. There is little employee loyalty to the company or visa versa.

I have also worked for one Japanese-owned manufacturer and one German-owned manufacturer. The Japanese company was the best I had ever worked for, with a flat organization, and every worker had some voice in how his area was run. The Japs had weaknesses, though. There was pressure to buy only from Japanese suppliers even if an American supplier was equal quality and better price. The Japs had no clear strategic vision for the company -- they tend to favor conglomerates rather than specialization.

The German management did not impress me that much -- they treated their workers well but were still very authoritarian. As with the Japanese, there was pressure to buy only German brands even if it cost more, though for different reasons. The Japanese did it out of loyalty to their suppliers, who they viewed as partners, while the Germans did it because they believed that everything German was superior. Master race and all that.

Kaivey said...

I had a pair of Sennheiser HD800 headphones which had phenomenal detail and sounded gorgeous but a little thin. So I did mod to them which was developed by some of the Sennheiser engineers which was unofficial and it helped a bit, but one day i put my Sennheiser HD650's on and they sounded like cotton wool compared but were so much fun to listen to that soon afterwards i sold the HD800's. Now they have the HD800S version where Sennhieser have carried out the mod i mentioned above and they are supposed to be better, but they cost £1200. They are special, though.

Matt Franko said...

Dan all of that racism you think you witnessed must of been a hallucination you were having....

Didn't you ever learn about rational expectations??