Saturday, 29 April 2017

Germany's trade unions and its export surplus: Streeck's mistake

In the latest LRB, Wolfgang Streeck asserts the following:
German prosperity has depended historically on the export of manufactured goods and, later, the non-export of manufacturing jobs. Appeals to German unions to help rectify the obscene trade imbalance between Germany and other euro countries – by demanding higher wages and thereby raising unit labour costs – therefore fall on deaf ears. For the unions the euro is an ideal solution to the employment problem that hit them in the 1990s with the return of price competition and the internationalisation of production. Monetary union gives German manufacturing a captive market in Europe, as well as an edge over European competitors that have to operate in more inflationary institutional settings. On top of that, it equips German firms with an undervalued currency in markets outside the Eurozone, especially at a time when the ECB’s quantitative easing keeps pumping up the bloc’s money supply. To restrain the competitiveness of German industries in order to save the single currency, as outsiders sometimes suggest, would from the perspective of the unions be committing suicide for fear of death. It would also break up their alliance with employers and the government, held together no longer by trade union power but by the constraints and opportunities of the Eurozone. And it isn’t only the unions for whom the competitiveness of German manufacturing is of paramount importance. Their priorities are shared by the government, currently a grand coalition of the centre-right, representing industry, and the centre-left, where the SPD is basically the political arm of IG Metall. 
While I quail a bit at contradicting a German leftist regarding German unions, the publicly available evidence suggests this is flatly wrong.  German unions would be very happy to see increased wages as part of a package to reduce the export surplus.  In fact, just yesterday the website of the German Trade Union Confederation (DGB), an organisation including the aforementioned pre-eminent German union IG Metall, had this to say:
Export surplus: We need more domestic demand!
Strengthen purchasing power, support imports 
[Despite its claims to the contrary] the German government can and must act: It can dry up the low-wage sector and support centralised wage bargaining [Tarifbindung] and thus contribute to ensuring that employees here have more money to demand products.  This supports imports and pushes enterprises to invest more domestically for a growing market.
Similarly, an economics think-tank that's part of the DGB-affiliated Hans-Bockler-Stiftung recently argued that the best policy against the export surplus would combine higher wages with increased government spending for investment purposes.

Hmm, maybe an exception? How about this, from a 2010 IG Metall analysis (page 12):
German wage policy has European responsibilities. In the sectors which in the past lagged behind, we need further wage rises that make use of the room for manoeuvre in distribution...
There's no doubt that German unions supports a high-value-added industrial model that relies on substantial exports. But the idea that they reject wage rises that would permit these exports to be matched better by substantial imports is just wrong. 

One could say a lot more about the wrong-headed supply-side economics in Streeck's piece, but it's certainly clear that German unions don't share this viewpoint.


Just one more piece of evidence, from the report adopted by the 485 delegates to IG Metall's 2015 congress ("Gewerkschaftstag"), as an authoritative a statement of official union policy as I can find (pp. 77-78):
The economy based essentially on exports exacerbates the trade imbalances in Europe. In Germany the unit wage costs over the last 15 years have risen much less than in other European countries. This leads to export surpluses, while other other countries are forced to finance their demand through credit. ...
Our struggle for a better Europe also means supporting the struggles for higher wages and against precarious employment domestically. Success in the struggle against the extremely unjust distribution domestically will help people in all of Europe. 

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