It's almost cute when neo-cons attempt economic analysis.

William McBeath, the one and only William McBeath, who has in all of his wisdom declared me to not be a real conservative, is crowing about the fact that the SDP Allowed Andrea Merkel to become chancellor in exchange for SDP control over key economic ministries. Says that the German economy is a mess. This is true. The deficit is expected to hit 3.7-4% of GDP. This is half again as large at the US deficit expressed as a % of GDP.

To put it in terms that a Conservative party member can understand, per capita on a budgetary level the Germans are the cost of one and three-quarter unjustified invasions of Iraq (in 2003 alone) behind the U.S. in terms of budgetary deficits. so the Germans will owe an additional 1.1-1.4% of thier income at the national level this year. This of course discounts the fact that the Germans spend far more as a percentage at the Federal level than does the United States, and thus are likely to overstate thier National deficits in comparison to the Americans (same goes for Canada's surpluses).

But I'm too damn lazy to determine the difference with the deficits of every level of German and American government, so I'll give Will the benefit of the doubt and keep everything (A declining American private savings rate, rising US interest rates, combined with a plummetting dollar, massive trade deficit, and a massive disparity on 'wasted' productivity, such as the Americans spending an additional 3% of GDP on litigation, 5% on healthcare, etc. than do the Germans) equal, or, as we people who actually kind of understand the economy like to say, ceteris paribus.

So that puts the Germans 1.4% behind. Then there's the massive difference in Per Capita GDP according to OECD $39,496 to $28,988 in the Americans' favour. Holy Crap! That's a lot of money. What would you do with an additional $10,508 US in your pocket? Why you'd probably take 415 hours off work. Because while the average American work year is 1777 hours, the average German work year is 1362 work hours. Yes you'd have the full time equivalent of 10 and one-third weeks extra work to net that 10 Grand. And that's if you're workig full time. So the difference in GDP per hour worked is actually about 4% in America's favour. Don't forget too that there are far fewer Gernam jobs that, even while working full time (defined by the Bureau of Labor Statistics [US] as 35 hours a week) would land you under the poverty line, as is the case in a lot of American employment.

But hey, at least there are lots of jobs in the States, right? The Americans have about a 6% unemployment rate in Sept of 2004, while the Germans have an 11% unemployment rate. Sharing the jobs, more gets done. Well, sadly not so. See the American Unempolyment rate discounts discouraged workers (those that aren't really looking for work), marginal workers, and those who are part time of economic necessity, like a temporary slowdown, which can become a great way to thin out the pay roll as those working part time often are motivated to find full-time employment, the working unemployed so to speak. The American rate climbs to 9.4% when all of these are factored in.

The Germans however have such generous unemployment benefits, that only those who are retired stop fulfilling the requirements for unemployment, which if memory serves reqires one apply for two jobs a month. And in addition subsidized part-time jobs (workfare without the starvation wages) are also provided giving German small businesses cheap unskilled labour. That's one thing about a subsidy, you'll get more of whatever you subsidize, in this case unskilled labour instead of skilled labour, thus causing part of the sluggish growth in German productivity. So essentially workfare, Mike Harris' pet parsimony, is one of the many 'regulations' slowing down the German economic machine.

So surely the rich German system of benefits will mean that that 4% gap can only get larger? The Americans have projected GDP growth of 3.5%, while the Germans are calling for 1.7%. This means that next year the Krauts will be 5 1/2% behind, and in three years 9% behind, and so on until they are but a distant third-world memory...





WRONG!!! The Germans have projected real GDP growth (Growth minus inflation) of 1.7% with inflation of about 2% according to Price Waterhouse Coopers. That's a nominal (ignoring the effect of inflation, which is kind of silly) Growth rate of 3.7% According to a Reuters story on October 9th, the Americans will post a Nominal growth rate of 3.5%, but what's this? Inflation for 2005 is expected to be 3.3% Well that means a real GDP growth rate of 0.2%. The American economy is bogged down in more ways than one. The Germans could expect to surpass the Americans in lifestyle enjoyment by 2008 at this rate.



So maybe William is wrong. Maybe a seller's market for labour has its advantages. Maybe a restained market which still allows for innovation in the production processes of goods is a veritable economic tiger. Maybe a generous welfare state and subsidised education does a lot more to encourage worker flexibility than fear and privation. Mayber the long work week results in diminishing returns for the American worker. Maybe, just maybe the Chicago School has got it wrong.

Stay tuned for our next episode, when I will try to explain how many angels can fit on the head of a pin. Here's a hint: It's 3,781 and one-half.