This post is about the recent article from the New York Times, "In Germany, Exports Mask Economic Weaknesses." This article highlights some of the strong and weak points of the German economy. The two main points that I will be focusing on are the how Germany relies on exports and what effects it has, and how government regulations and interference in their service sectors are creating a less than optimal business environment.
Exporting is a crucial factor in today's business world. It allows for increased domestic producer surplus to those who export and increased consumer surplus to those who import. According to this article, Germany's main strength is that their exports of such things such as automobiles and other machines. Being an "export juggernaut" could keep any economy afloat, because it significantly increases the producer surplus of those who export than if they weren’t. But, relying mainly on exports can leave a countries economy vulnerable to ups and downs in other major markets.
For this reason, Germany should try to improve the state of their current services economy. The regulations they currently have in place, although better than in the past, still hurt their country. An excellent example of this in the article is a man trying to keep his flower shop open on mother’s day from 9 a.m. to 4 p.m. Because it was a Sunday, he could not do this and had to keep his shop open for fewer hours. This would result in lost sales, which would leave the amount that he wanted to sell, and the amount consumers wanted to purchase unequal. This keeps that market from reaching equilibrium and creates deadweight loss.
According to the article, if Germany removed these barriers to competition and other inefficiencies, they could add about ten percent to growth. This would help their overall economy and better protect them from the flaws of primarily relying on exports.
No comments:
Post a Comment