German Model III: from wage moderation to wage stagnation

In the September-5th post about the German Miracle (wage moderation + productivity improvement), in this blog here, I showed the comparative picture on competitiveness trends for six advanced economies – Usa, United Kingdom, Spain, Italy, Germany and France. For this purpose hourly labor compensation is measured in nominal terms (in national currencies and thus in current Us dollars, Uk pounds, and Euros ), as it should be when competitiveness is involved and labor costs are compared across countries. Now I present the same evidence of the first graph but considering real labor compensation (and thus real unit labor cost) in manufacturing.

German Model II

This is the english version of Yesterday column “Diario dei due economisti” – Il Foglio

Our feeling about Germany is dissociated. Once, Germany is perceived as the main responsible for the European crisis due obsession for fiscal discipline. Another is the example to follow because Germany made in due time structural reforms. But what then Germany, an opponent or a model? Neither the one nor the other, according to us. Obviously, the “German View” – the idea that fiscal consolidation has expansionary effects regardless of any condition and circumstance – is simply wrong. And having indulged in austerity helped cause the crisis in Europe. And it is also true that Germany is the main political obstacle to the creation of a fiscal union and the adoption of a synchronized monetary (quantitative easing) and fiscal (tax cut) stimulus, coordinated at the level of all countries in the Euro-area .

The German miracle (productivity gain + wage moderation)

This week Il Diario di due economisti (today on Il Foglio, pag. 2,  and tomorrow here) is about the German Model. For German Model is meant the way Germany made the structural reforms in the first half of last decade, which changed its institutions and above all labor market and industrial relations. The German Model is a mix of the German View – the fallacious idea that fiscal consolidation may be expansionary (or at least cyclically- neutral) in any case and circumstance – and the Social Market Economy (Soziale Marktwirtschaft) principles. These principles call for a corporatist solution of social conflict (once it would been called “class-struggle”), a way to make compatible or harmonize opposing interests through the active intervention of government, in the aim to minimize the negative effects of creative destruction.

Announcements and policy: the paradigm of soccer transfer market.

On Friday 29 the Diario column was about media style and Bce style. The market of news is increasingly borrowing from the transfer market of professional soccer. Phony information, strategic behavior of the agents, unlikely announcements…   The Bce strategy is firmly grounded on the power of announcements… Someone can observe that even the conduct of Matteo Renzi, the Italy’s President of Council of Ministers, shows a growing announcement-bias.