Not a word about the fact that Germany simply produces desirable products? Somehow that has to factor in. Financial policy and the education system favors a conservative manufacturing sector that incrementally improves upon what Germany has done for decades.
While I got my ME degree in Germany my dad, who is a solid state physicist, spent all his energy trying to accelerate the development of a German electronics sector. He was always ranting about the hurdles thrown up by politics in Germany, "We'll just continue building cars and machines for the next 100 years." Well, sounds like it's still working although the end of the cold war and the common market has distorted things in Germany's favor, an effect that probably won't last.
> the common market has distorted things in Germany's favor, an effect that probably won't last.
Quite by design. Having the whole Europe on Germany's monetary policy (i.e. Eurozone with EUR interest rates) while not sharing any other policy is heavily in Germany's favour and one of the main reasons the European debt crisis happened.
Not to say that being a well governed country with good policy and a culture that is conducive to high productivity and good quality did not help - it definitely did. And I'm not trying to redirect blame for the Eurozone crisis - Greece has mainly itself to blame.
That's a very simplistic view and doesn't at all cover the whole picture. The union benefits all countries in varying ways (eg without the union Italian and Spanish and French banks would long have gone bankrupt). At the same time it also has negative effects. But you have the same issue internally inside any larger country.
Excerpt: "French banks were not immune but proved relatively resilient to the global financial crisis reflecting
their business and supervision features".
A quick Google suggests 'cajas' is closer to a credit union, though I'd love to hear more about the difference between a 'cajas' and a bank and the cultural expectations for both. (I would have been surprised if that happened to a US credit union.)
> I'd love to hear more about the difference between a 'cajas' and a bank
I think that Credit Union would made a good definition of a caja de ahorros [1], More or less equivalent. We could say that some spanish credit unions poorly managed by politicians were rescued with the money from all spaniard's taxes, but not the banks (and not all credit unions).
[1] 'a Cajas' does not exist. The singular is 'Caja'
Economics in a nutshell: "There must be a single number that explains all of this!" It can't possibly be that Germany actually built its exports based on quality. That can't be replicated by tweaking some tax laws.
A few years back I worked for a large engineering services company (that nobody has ever heard of) and one of the senior managers from Germany described the quality of Mercedes-Benz cars as a "national disgrace" - he was genuinely upset about it.
For what it’s worth early 2000s Mercedes Benz models are not known for their reliability, and some of them were pretty prone to rust. Of course, Mercedes models built until the early-to-mid 1990s are a whole different thing.
Why is this downmodded? It's true, at least in America: the people who buy these cars new don't care if they still work 10 years later, because they don't keep them that long. The people who buy cars intending to keep them a long time don't buy expensive luxury cars here.
1. Most people want cars to run 10+ years, even in America (I live in California). Capital, environmental implications, not many new features etc. are valid reasons.
2. Higher quality cars are better to ride in 5 years than lesser quality cars. I would rather drive first 5 years of a car than the only 5 years of a car.
None of that applies to Merc buyers. These cars use an unusually high amount of plastic parts in critical areas that reliable vehicles don't ever attempt. Modern Mercedes is not the same as it was 30 years ago. Quality has been sacrificed on the altar of profit.
Exactly. I change cars every three years now. The last one I changed after 2 years. I really don't care how reliable they are after 5 years as long as they are comfortable, frugal and safe during my ownership. Technology today just moves too fast to see myself driving 50+ miles a day in a 5+ years old car.
I'm genuinely curious what sort of technical innovations of recent cars you feel make something like a 2012 Lexus IS-F an unreasonable automotive experience by comparison, let alone a used Mercedes S65 AMG.
Interesting, I call that stuff "nannies for people with poor situational awareness". I suppose they have utility as the size of the vehicle you drive increases (would have loved it when I drove a fuel truck in the Army[1]). In a mid-size sedan or smaller, with an attentive driver, they seem like a waste of resources to me. Side effects of living in a bubble of car modders and street racers, who almost never buy anything brand-new anyway.
I wonder how blind spot accidents in the US are affected by driver education? I'd love to see a comparison of data between the US, Germany, and Japan on incident rates of such accidents...
Well these new systems actually saved me at least once (probably more but it didn't feel as dangerous). It happened when van drove in front of me when I was in a runabout. Automatic brakes reacted immediately and halted the car.
Interesting that you call this stuff like you do. All these systems actually prevented many accidents around the world as cars are getting more and more safe all around.
As for blind spot system. I use it just as another data-point when driving around M25(London). Of course I look at the mirrors and those are perfectly aligned so I have no blind spots but when I look at the mirrors and see no blind spot warning I am sure all is good and I move to the other lane.
Well, yeah, it's widely accepted that the W124 was the last "quality" (i.e. long-lasting) car made by Mercedes. They switched to a more planned obsolescence production in the early 90's.
Many other euro companies export based on quality. I know this at least in Spain.
In Spain many companies just export with generic names, as it's believed that people associates spanish products with low quality, and this has been apparently confirmed with by Real Instituto Elcano surveys.
Sounds like Catalonia would be better off separating from Spain since then they could establish their own reputation instead of being dragged down by the rest of the country's poor reputation.
Catalonian reputation is heavily, and I'm saying heavily, based in the fact that 1) It played with different (more favourable) rules than other areas, and 2) it attracted talent and workers from all coins of Spain in the past. People from Madrid, Sevilla, Leon, Vigo and Granada is often what would be seen by strangers as "Catalonian talent", for no reason.
And I would add that the so called, "Catalonian reputation" has entered in a sinking phase in the last years. Madrid GDP is increasing faster (Madrid alone surpassed the GDP of the entire four Catalonian provinces in 2018 and this was not common in the past) and thousands of companies are slowly losing interest in the area tired from its permanent state of conflict.
Japan produces quality products. That even the revered companies here in the states e.g Apple via Jobs had to emulate them ? so yeah it ain't all about quality. Currency games have a strong role to play.
Japan is very successful if you look at their trade statistics and their products are often held in high esteem in regards to quality.
But the currency obviously helps Germany. Still, there are a lot of niche products where companies with around 300 employees can call themselves global market leaders. It is not just cars, although it is the largest industry and there are quite a few manufacturers.
A relative uses a particular medial device with parts that wear out. She purchases the regular replacement bits off Amazon which are made in China and only last 30 to 60 days. When she can afford it, she buys from the OEM's online store which has parts that are made in Germany or The Netherlands. They fit better, work better, and last up to six months.
The difference is the Chinese parts cost $10, while the European-made parts cost $25.
Speaking generally (not about this unnamed medical device):
Poor people can scrape up $15 if it means the difference between 6mo and 2mo. Sure there's some times when the purchase falls on a week between paydays and you buy the cheap (cheap up front, more expensive on a per day basis) version but the next time (or maybe the time after that) the purchase will need to be made at a more convenient time and you will have the extra $15 to spend on the one that has a lower overall cost.
Having experience with the $25 model is the barrier to entry, not the $15 difference in cost. It's not hard to justify $15 when the overall cost is lower and the expense is less than monthly. It's very hard to justify the $15 when you don't yet know if the product will last long enough to make the overall cost lower. And lets be honest here, products where +X% the cost gets you >X% the utility are microscopically rare compared to products where that is not the case.
They're poor, not stupid. They can do basic math and determine which product satisfies their needs more cheaply on an ongoing basis. For low dollar amounts
He does talk about Germany's 200 year manufacturing excellence. That doesn't explain why in 1992 Germany had a massive trade deficit and UK had an equally large trade surplus, or how they've been able to avoid the fate of Japan.
These were the years shortly after reunfication in 1990. The reunfication hit West-Germany during a econonmic boom, so the economy was already producing at capacity and the additional demand shock from East-Germany could not be covered by West-German production. As a result imports raised and exports products were diverted to East-Germany at the same time and for a short time the trade balance became negative and some of the trade balances of Germany's neighbours temporarily improved due to higher demand from East-Germany.
BTW: It is a misconception that a trade deficit and a poor economy are related.
Japans economy was much more government managed than completely free at that time. Specifically the Japans Ministry of International Trade and Industry ("MITI") was steering the economy, mainly be using a control called "windows guidance". By given "window guidance" the commercial banks the Bank of Japan controlled which segment of economy was allowed to get what amount of credit. This turned out to be highly competitve compared to the western model of a completely free market economy.
This system was later abandoned due to pressure of the US to make the banking system and the BoJ "independent". The result from this operation was that the commercial banks diverted more credit away from real investment to financial markets and assets investments, which in turn resulted in an unsustainable real estate boom in Japan.
From of this real estate boom Japan never recovered when the bubble burst.
BTW: The Bank of China uses nowadays window guidance as a system to steer the economy - and seems to be pretty successfull with it.
I think the current bleak estimates for Japan are quite exaggerated. Just recently economists proclaimed that their latest success must be a statistical fluke. Just look at the living conditions there... To be honest, I believe a lot of economists are a bit of the wrong side from time to time. Maybe analysts face a bleak economic future and got something mixed up?
> Not a word about the fact that Germany simply produces desirable products?
I dont think that's relevant though. Desirable products mean more countries buy your product, means the value of your currency changes, means your products are effectively "more expensive". Sharing a currency with other countries dilutes that effect, just like any prosperous region within a country sharing a currency with poorer regions.
I'm not an economist so I cant say how valid any of the points ARE, but from the logic presented I didnt think this was an attack on the quality of German products.
Nope, tradable goods don't just become "more expensive" because of currency shifts. The prices of tradables are set in a global market and tied together by cross-trading (arbitrage) considerations. What happens when supplying a desirable product is that the industry seeks to expand and that might increase costs overall. The Dutch Disease is an extreme version of this, in which having a single dominating industry sector leads to e.g. bad governance, etc. But these are real effects that are unrelated to currency shifts.
It sounds like you might be talking about commodities, but that's not every market. For goods manufactured and largely consumed in one country, currency shifts do quite mechanically make foreign prices cheaper or more expensive, assuming they are still sold for the same price domestically.
(Though, the price might not change right away depending on long-term contracts and whether the manufacturer decides to take profits or accept a lower profit margin.)
The important question is: Does Narnia have the money, or is it willing to spend, double the amount on your product? Maybe they will just buy half, because their budget is fixed. That's the point you are missing.
....I fail to understand the relevance of what you're saying.
A desirable good is still less value/money if the money cost increases. That's what we've been discussing in this thread. Now you're changing other variables?
You were making a point about what happens if the exchange rate changes and everything else stays the same. That's not particularly relevant to the real world because if the exchange rate of a freely traded currency significantly changes, then all the other relevant factors also are very much not the same; it has a lot of interlinked consequences, and it can't happen without a significant economic reason pushing for that change (artificially fixed currencies have their own intricacies).
The direct, immediate price effect is exactly as you describe but at least in the medium term it's also affected to a significant (and perhaps even larger) extent by (a) the major macroeconomic factors that caused the Narnian gold pieces to devaluate w.r.t USD; (b) the changes to the income and global purchasing power of Narnian people caused by that devaluation; (c) the long-term changes to the widget trade and competition; and a bunch of other ripple effects; so the effective price to them won't double; it might increase somewhat (but much less than double), and it might even decrease within a reasonable time if that devaluation fixes some underlying structural economic problem and thus their income; It's quite likely that the devaluation was caused by systematic factors that screwed (temporarily) their productivity and income; so large changes in exchange rate don't happen just because.
He was at the Max Planck Institute at the time but on a lot of state and federal commissions to figure out how to get German industry on a fast track to compete with silicon valley.
German products arent as high quality ad they used to be and most if them are pretty stale in terms of innovation. Sure they change the shape of cars and add new leds and interior eye candy but that is not progress. Imo german cars are low quality and lack diversity, and same goes for most machinery made in that country. US, Japanese, South Korean or other EU made products can be of similar or higher quality. Germany has such an economic power because the EU is heavily biased towards its needs. Just have a walk around east Europe and you will see how it has become junkyard for german cars. Suddenly the environment doesnt matter. Furthermore Germany is pretty socialist, both corporate and personal and has plenty of ways to subsidise industries and prevent too much innovation from rocking the boat.
I cannot agree with this assessment, because you're talking about a key industry from the 80s. Germany's strengths is not just in cars, but also in tangible b2b products that require a high degree of know-how and engineering. Southern Germany is plastered with such companies, they deliver products to the rest of the world you and I haven't even heard of unless you're working in some specific business. These companies are very competitive and innovative.
If you have a problem with a product and call them about it, sometimes you can talk to the people who designed and built it, it's quite nice. They will also work with you to build similar things not yet in their catalogue if you need them (sometimes inventing new processes on the way), even if you don't need a lot.
No pun intended, dude, but I think you speak mambo jumbo... :D
"German products arent as high quality ad they used to be and most if them are pretty stale in terms of innovation."
Germany just surpassed again South Korea as the most innovative country. News are just three days old. Where do you base your own assessment? Did your BMW break down?
Disclaimer: I'm from Germany and work in the automotive industry
I think he is partially right, at least when you define innovation as being mainly of digital nature. There have been lots of improvements on the mechanical side, cars have become a lot more efficient, and quieter (or louder if you prefer). But when it comes to making the cars smarter or even electric, there hasn't been a whole lot of innovation. Since connect everything is the major trend right now, people often consider innovation as being mainly digital. While digital technologies are a major infuence nowadays, the mechanical side should not be forgotten.
But the German automakers seem to really struggle with software becoming a major influence in peoples car-buying decision. BMW started with its "Conntected Drive" services, but since then, they haven't made a whole lot of progress, just a lot of completely unrealistic concept cars. The same is for Mercedes, they started their MBUX project a few years ago and at first, it really looked promising. Now, when I'm sitting in my friends MBUX Mercedes, its just a infotainment system as stupid as any other one. Volkswagen made big promises with its upcoming VW I.D platform and IMHO, this is the biggest single step a German automaker took since I'm alive.
I think that this was not exclusive from germany. It was a global change of paradigm
Every single big car brand experienced a period of very confused years (bordering panic for some of them) between 2000 and 2005 IMHO when faced the truth that the old trustable mechanics must either be replaced by mechatronica in a rush, or be overcomed and left behind by the new competitors.
Some so-so models were hurriedly launched in those years as result. Some of those soon started suffering lots of random errors and must be recalled and eventually replaced.
Cars now are computers with tires, all coated in plastic. Metal is ethernal, electronics not so much. Do not expect this soft and delicate matherials to last much more than your computer.
My VW just broke down. Manufactured in Frankfurt, and shipped to the US. It has known defects that were recently settled as part of a class action lawsuit, so this isn't just anecdotal.
The Fine German engineering required the removal of the front bumper to replace a headlight bulb (just the bulb, not the entire assembly). What kind of idiot designs a car that way? The fuel injectors on the 2.0t engine routinely clog up with low mileage, requiring either expensive cleaning, or more expensive replacement.
The suspension has a design flaw that results in tires cupping after only 2-3k miles. Tire rotation does nothing to solve the problem; purchasing expensive tires doesn't alleviate the issue, they just wear out as fast, costing $$. VW has known about this issue since this model was released but denies responsibility.
The number of recalls this car has had in a short 8 years is a joke. The number of repairs it has required outside of recalls in 8 short years is a joke. The VW that built the Bug, the Bus, the Rabbit/Golf, Sciracco and Jetta, that VW has died. Now VW is just trying to push up market and failing.
I've owned a VW for the entirety of my driving life. This will be the last one I buy since VW (at least in the US) doesn't give a shit about quality.
Disclaimer: I'm from Lithuania, little eastern Europe country.
There has been a lot of talk about eastern Europe being a junkyard for german cars (or old european cars in general) in recents times, not the least locally, especially by politicians trying to justify weird decisions. Most of the time one vital factor remains overlooked, people don't have money for anything else here. German cars are valued by most the people, whether that is deserved or not is a different question. There are plenty of mechanic shops for repairing those cars and cars itself are cheap. Public transport is mostly horrible, so a car is a must for most people. If a family has a budget of ~€1500 per month, how can you realistically choose anything else but an old imported car from western Europe (majority from germany).
There's a lot of controversy about eastern Europe becoming a junkyard for old German cars because those cars produce lots of pollution that affects the health of everyone in the country, which is the whole reason Germany and the other rich European countries don't want them anymore. Also, to add insult to injury, not only is the EU not allowing countries to block imports of those old polluting cars, they simultaneously expect all EU countries to meet stringent limits on how much of the pollutants they pump out is present in the air of their cities.
Well, it's a junkyard of German cars because they just last longer and are cheap to fix (parts are from in Germany/EU, too). Japanese cars are second, simply because the number of German cars is so high.
While I got my ME degree in Germany my dad, who is a solid state physicist, spent all his energy trying to accelerate the development of a German electronics sector. He was always ranting about the hurdles thrown up by politics in Germany, "We'll just continue building cars and machines for the next 100 years." Well, sounds like it's still working although the end of the cold war and the common market has distorted things in Germany's favor, an effect that probably won't last.