Ben Sahlmueller reviewed Trade Wars Are Class Wars by Matthew C. Klein
Countering German Myths
4 stars
It was a quite impactful, revelatory book for me in the last year and I will just be able to scratch the surface here. The book addresses global trade imbalances (especially China‘s and Germany‘s trade surpluses, think "Exportweltmeister"), arguing that they weaken overall global prosperity. This critique is not new and in the past I have often put it aside as simple envy. (Klein and Pettis too are Americans.) Yet, it is their detailed analysis of German economy that really made me think me. Klein and Pettis argue that Germany’s export strength is basically a compensation for a weak internal economy due to high inequality, a policy set up that favors capital over labor, historic reasons around the Euro, and the way profits are not distributed within German society. The book is very critical about common myths of "Made in Germany", German engineering ingenuity, and general narratives of cultural or …
It was a quite impactful, revelatory book for me in the last year and I will just be able to scratch the surface here. The book addresses global trade imbalances (especially China‘s and Germany‘s trade surpluses, think "Exportweltmeister"), arguing that they weaken overall global prosperity. This critique is not new and in the past I have often put it aside as simple envy. (Klein and Pettis too are Americans.) Yet, it is their detailed analysis of German economy that really made me think me. Klein and Pettis argue that Germany’s export strength is basically a compensation for a weak internal economy due to high inequality, a policy set up that favors capital over labor, historic reasons around the Euro, and the way profits are not distributed within German society. The book is very critical about common myths of "Made in Germany", German engineering ingenuity, and general narratives of cultural or moral superiority. These stories ignore how much of the competitive advantage can be explained by currency devaluation (in G’s case via the Euro) and hidden subsidies through wage suppression. What's worse, these story feed into nationalist tendencies while making positive change more difficult! (The same is even more true for China.)
I’m generally careful with strong shifts in how I see the world and it is important to not deduce conspiratorial intentions from broad systemic trends. This book is not about people or groups of people. Yet, it is a great, important, and certainly not wrong account of smoldering societal problems that interestingly run contra current trend lines of right vs. left, alt-right vs. woke, whatever. I am always happy about any explanation that doesn’t fall back to „the other side is wrong“. Surface conflicts like these have often hidden structural tensions that need to be addressed when you want to make progress in solving them. (That's the systemic coach in me speaking!)
A simple example how the book shifted my thinking is on the broad narrative around „Fachkräftemangel“. Why does this not seem to be a problem when building new car factories abroad (as happened much more than in Germany in the last 20 years)? Why is this a problem given that Germany is so proud of its dual education system? (It’s definitely not lack of migration, Germany has one of the highest share of immigrants globally!) More generally: why is it a problem at all given that companies "paying more" (and be it for education) should just lead to more people educating themselves in certain ways? It's the job "market" after all! This seems to be just another weird way how the proponents of boundary-less capitalism somehow seem to completely lack trust in the basic idea of supply and demand… "how weird indeed".
