The good and bad in Germany’s economic model are strongly linked
Germany is admired for its stability but derided for persistent trade surpluses
TALK to Germany’s policymakers in Berlin or Frankfurt and the chances are that somebody will invoke Goethe, the nation’s foremost literary figure, on the perils of inflation. In “Faust”, his masterpiece, an indebted emperor is persuaded by the devil to print “phantom money”, prices rise and economic disaster looms. Foreign interlocutors might counter with a quote of their own from the great poet. “The Germans”, he said, “make everything difficult, both for themselves and everyone else.”
For many years “everyone else” has complained that Germany’s economy causes difficulties for the rest of the world. They grumble that the country saves too much and spends too little and that Germany exports far more goods than it imports. In most years since 1950, Germany has run a surplus on its current account, a broad measure of the balance of trade (see chart 1). When in surplus, domestic savings exceed domestic investments, with the excess lent abroad.