Germany, as the export champion, was Obama’s economic model. However, now the country he needs is one in which the citizens are increasingly skeptical of free trade, because they paid the price for success.
The president announced implementation of the Transatlantic Trade and Investment Partnership. The auto industry just finished the “best year in its history” as Barack Obama announced recently in his last State of the Union address. That is only one aspect of the rebirth of U.S. industry, which has brought “nearly 900,000 new jobs.”
As early as 2010, the U.S. president launched a large-scale de-industrialization program. The model was clearly identified: Germany. America’s exports should be doubled, apprenticeships for young people should be created, and a technology network along the lines of the German Fraunhofer Society should be established.
America should ultimately produce more real things. A violent attack of “German-envy” has captured the Americans, as stated in The Atlantic magazine. The U.S. wants a strong manufacturing sector, many decent jobs, and a well-educated middle class.
Now Obama has arrived at the kick-off of the Hanover Fair, which opens its doors Monday, as this year the United States is the partner country. The president experienced a paradox: The Federal Republic is now a country in which prosperity is largely based on its strong export industry, an industry which generates growing surpluses throughout the rest of the world, and an industry with a population that in comparison with its international exchange looks increasingly critical.
It is quite strange. Only 56 percent of Germans think increased trade is a good thing, 27 percent think it is negative; a massive decrease from just two years ago when 88 percent positively viewed expansion of trade, and only 9 percent viewed it negatively, as shown in a recent study by the Bertelsmann Foundation. In particular, the Germans are reluctant about planned trade and investment through TTIP agreements between the European Union and the United States; more than 33 percent of respondents find this deal bad, only 17 percent good, according to the study.
After Obama, a Commercial Agreement Is More Difficult
The dispute over TTIP currently engages Europe’s best. While the experts met on Monday for the next round of negotiations in New York, Obama, Merkel, David Cameron (United Kingdom), François Hollande (France) and Matteo Renzi (Italy) came together in Hanover to a hastily called transatlantic mini-summit. One of the issues: How can the agreement be considered finished before Obama retires? No matter who moves next to the White House, according to a primary campaign with clearly protectionist tones, it will be difficult in the future to bring together majorities for international trade deals in Washington.
For Germany there is much at stake. No other major economy in the world is as open as Germany’s. The export rate has doubled since the early ’90s. Accordingly, the economy is vulnerable to global economic turmoil (citing the Ifo Business Climate Index on Monday). Earlier, the economy was fixated on the rest of the eurozone in particular. Meanwhile, the results of the gigantic external surplus — currently more than 8 percent of the gross domestic product — was three-quarters of the exchange with the rest of the world, as was recently noted by the Organization for Economic Cooperation and Development. While the rest of Europe was stuck for years in a period of stagnation while major emerging economies faltered (China) or deep crises arose (Russia, Brazil), the demand from the United States was one of the few bright spots in the otherwise gloomy global scene. In 2015, America was Germany’s largest export market, larger than France. The export surplus in U.S. trade was a proud 55 billion euros. Obama’s resuscitation of American industry has particularly benefited German exporters, which would include specialty machinery and equipment.
These facts raise questions. If the Federal Republic benefited so much from the global exchange, why do the Germans see advancing globalization as so critical? Why do so many turn down an agreement with the United States, from which experience shows the German industry in particular would benefit? Are the Germans simply irrational?
Globalization has not brought promised prosperity gains to a majority of citizens. Although the situation has tremendously improved for the labor market since 2006 (on Thursday there will be new figures from Nuremberg), this is now taken for granted.
The Middle Class Is Paying the Price
However, income is developing unevenly. In particular, the wealthiest tenth of the population has noticeably more money than in 2000, as the German Institute for Economic Research shows. The middle class, however, experienced stagnation in its living standards; the huge German trade surpluses were bought with wage restraint.
At the same time, globalization is now rearing its ugly head. Terrorist attacks, difficulty in controlling migration, the now inflamed euro crisis (pay attention to the Greece negotiations) — the outside world increasingly looks unpredictable.
Neither governments nor business nor European intuitions seem to be making a substantial change, which in turn leads to the frustration toward the elite: 70 percent of Germans distrust political parties, 57 percent the federal government. Nor are the views about the European Central Bank or the European Commission much better, according to the latest in the euro barometer survey in the fall. Similarly these people are taking a critical look at civil companies, as identified by the U.S. communications agency Edelman.
The Germans are not alone on their road to skepticism. Elsewhere — especially in Obama’s U.S. — the loss of confidence is even more pronounced. However, this does not make the findings better. If this conviction is accepted, in the end only a minority will globalize, and the open economic order will not be able to be maintained. Clearly, without globalization the vast majority of Germany, materialistically speaking, would be noticeably worse. But this is not a particularly strong argument for further globalization.
And Now? Can Globalization Still Be Saved? What To Do?
First, the state must prove that it is still capable of action. The widespread impression that institutions are not allowed to not solve problems is devastating. Citizens experience the present as a chain of crises that cannot be solved, but should be postponed instead of a renationalization of policy that urgently requires innovation in national policy approaches, because there are no longer many fields that work on the national level.
Second, Germany has come down from its exorbitant current account surpluses. Instead, annual capital worth lent to the rest of the world is around a quarter-trillion euros. Should more money stay in the country, it should be in the form of higher wages (pay attention to the collective bargaining Monday and Thursday) and investment – so that the material blessings of globalization are more widely dispersed.