Germany estimate of the day the core problem is the investment shortfall

From 2004 until 2010, the 30 leading German blue-chip DAX firms created more than 400,000 additional jobs abroad, according to a Handelsblatt analysis. During the same period, they cut over 200,000 jobs within Germany.

Here is the link, via David Wessel.  And note that for all of its ostensible economic successes, real wages in Germany have barely risen since 2000.

I’ve long considered capital shortfall the “real problem,” rather than focusing on immigration or trade or for that matter consumer spending.  Do note however that much of the investment flows out of the home country because the produced goods later can be traded back in, so in that sense trade is connected indirectly.  Still, there is a big analytical difference between the notions of “capital shortfall at home” and “too many goods flowing in from abroad.”

By the way, here is a wee bit of good news:

Though the number of posts they’ve created overseas still far outweighs the total added within Germany, the imbalance is leveling out. Last year saw the net addition of more than 83,000 new posts abroad. Domestic positions grew by over 22,000 over the previous year.

I see overwhelming evidence for an “investment drought” in many of the countries with wage stagnation.  As time passes, I find talk of a “global savings glut” to be increasingly misleading and ignoring the core fact of capital market segmentation.

I thank Edward Conard for a useful discussion related to this post, and I am looking forward to his next book.


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