Some American business folk look at Germany’s industrial policy with a little envy. Germany, it seems, is willing to do just about anything to support its manufacturing industries and the benefits are plain to see. With a vibrant manufacturing sector exporting around the world, it doesn’t get any better than brand Germany when it comes to machine tools, manufacturing equipment, automotive technology, and much else.
At the same time Germany is often looked upon as one of the good guys, respecting intellectual property and international law, while leading Europe out of its mess of debt and incontinent tax collection with fiscal responsibility. But not all would agree.
Paul Krugman, the influential Professor of Economics and International Affairs at Princeton University, is well known for his liberal views on trade and international economics. His view of Germany is somewhat different from the above, as he recent opined in a NY Times article.
In Krugman’s view, Germany has taken the place of China as the current account running bogeyman of the world economy. For one, Germany has overtaken China as the running the world’s largest current account surplus; both in absolute terms and in terms of a share of GDP, it is twice China’s. That alone Krugman views as bad enough. One country’s surplus is another’s deficit, he says, and he notes that Germany has been running a surplus for a decade, but earlier these were offset by equally massive deficits in many European countries.
Europe as a whole ran a small surplus with the rest of the world. Germany remains dependent on its neighbors, with 69% of total exports going to European countries, including 57% to the member states of the European Union. Of course, not all neighbors are equal. In 2012, Germany ran a trade deficit of €27 billion ($36 billion) with Russia, Libya, and Norway, mainly for energy imports.