Transcript Germany 3 - BYU Marriott School

Achtung…
A Brief History of Germany
1400 years in four slides
Retrieved from Wikipedia on 11-24-2006: http://en.wikipedia.org/wiki/History_of_Germany. Photos retrieved from Google images on 11-27-2006.
600-1700
• 600-800 A.D.
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Centralized Germanic tribal control
Spread of Christianity
Charlemagne
800: Holy Roman Empire
• 800-1300 A.D.
– Expansion of the Empire
– Vast colonization ensues
• 1300-1700
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The Black Death
Papal authority challenged
Money-based economy--Mercantilism emerges
1500s: Luther, the Reformation, and Counter-Reformation
1600s: The Thirty-Years’ War
The Holy Roman Empire stumbles
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1700-1900
• 1700-1900
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Revolution and war divide Europe
1806: Holy Roman Empire dissolves
1814: The German Confederation
Political controls
Customs unions begin to lower trade barriers
1848: The national German constitution is written
1867: The German Confederation is dissolved
1871: The German Empire is founded
Discrimination and suppression
Socialist Workers’ Party opposed
1870s: Initial alliances between nations
Retrieved on 11-27-2006 from http://en.wikipedia.org/wiki/Image:Flag_of_the_Holy_Roman_Empire_(1200-1350).svg
1900-1945
• 1900-1940
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The alliances change
German expansionist threats
1914: World War I begins
1919: Treaty of Versailles
German Communist Party and German Workers’ Party gain traction
Early 1920s: Hyperinflation
1925: Hindenburg elected President, Hitler emerges
1929-1932: The Great Depression
1933: Hitler is appointed as Chancellor
Totalitarian state is enacted
• 1940-1945
– World War II sees the rise and fall of Hitler’s regime and the effects of
the Holocaust
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1945-Present
• 1945-Present
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Germany nearly collapses
East and West Germany are created
U.S. aids reconstruction
East Germany joins Soviet Union
1950s: Currency reform, NATO, EEC
1970s: East and West Germany join the U.N.
1989: The Berlin wall falls, and Germany is reunited
1990s: Germany becomes a leader in the cause of
the European Union
Germany’s
Current
Situation
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The European Union
• Along with Belgium, France, Italy, Luxembourg and the
Netherlands, Germany founded the European Union in
1957.
• As it stands today, if the countries of the European Union
were combined, they would account for the largest GDP
in the world.
• Germany is the most powerful country in the EU in terms
of economic viability.
World Economic Standing
• Germany, alone, is the third largest country in terms of
USD exchange rate, fifth largest in terms of purchasing
power.
• Only the United States and Japan have more powerful
economies than Germany.
Retrieved on 11-27-2006 from http://www.piperreport.com/archives/Images/Dollar%20Squeezed.jpg
Domestic Markets and Policy
• Germany is a self-proclaimed social market
society.
– They enjoy the benefits of a free market and
competition, but it is regulated by government policy.
– Various social services are provided as well as many
subsidies to selected sectors of the economy.
• Heavily oriented towards exporting
– More than 1/3 of Germany’s GDP is from exports**
– France and the US
– Since 2003, Germany exports more than an other
country in the world.
• German policy makers encourage further
economic integration.
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Primary Sectors
• Energy:
– Fifth largest consumer of energy. However,
they import more than 2/3 of the energy
they use.**
• Industry:
– Accounts for 25% of GDP
– Employs 26.4% of the German workforce
• Services:
– Tourism, Financial Services, and
Media/Advertising accounts for around
70% of Germany’s GDP.
– Instead of having a financial economy
dominated by the stock market, Germany
is a bank oriented system.
Economic Trends
GDP growth rate from 2002 – 2005**
– 2002: +.2%
– 2003: -.3%
– 2004: +1.6%
– 2005: +.9%
** Variability is in large part due to the effort
to fuel the formerly Communist East
Germany**
•
Balance of payments and currency
– Trade balance: positive $54.9
billion.
– By recently changing from the
Deutschemark to the Euro, the
Bundesbank gave up much of its
power to the European Central
Bank which now conducts monetary
policy for the entire EU. **
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Tale of Two Cities
• Since the 1990’s, East and West Germany have been trying to
successfully integrate. However, the predicament is much like it was
before the union.
• Unemployment Rate: For West Germany it is approximately 12%.
For East Germany it is closer to 20%.
• Gross Domestic Product: West Germany produces around 70% of
the nation’s output, while East Germany produces only 30%.
** As a result of the disparity of wealth between West and East
Germany, many East Germans migrate to the west looking for work.
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International Aspects
Brief Overview
1.
International Organizations - Germany is a member of the EU,
WTO, and the OECD.
2.
U.S. Relations - The United States is Germany's second-largest
trading partner, and U.S.-German trade continues to grow.
3.
International Trade - Germany is the world’s leading merchandise
exporter. They are also committed to reducing trade restrictions.
4.
Foreign Investment - Germany follows a liberal policy toward
foreign investment.
European Union
• In 2003, Germany
conducted slightly more
than half of its trade
within the then 15member EU.
• Germany’s currency is
the euro. (The European
Central Bank is located in
Frankfurt, Germany.)
German-U.S. Relations
• Two-way trade in goods and
services totaled $88 billion in
2000. (U.S. exports to
Germany were $29.2 billion
while U.S. imports from
Germany were twice as high,
$58.7 billion.)
• At $29.5 billion, the U.S. trade
deficit with Germany is the
United States' fourth-largest
International Trade Facts
• German companies derive one-third of their revenues
from foreign trade to compensate for reduced domestic
demand.
• In 2003, Germany imported $601.4 billion of
merchandise, while imports of goods and services
totaled $773.4 billion.
• Also in 2003, Germany exported $748.4 billion of
merchandise, while exports of goods and services
totaled $873.3 billion.
Germany's main exports (Totaled $1.016 trillion in 2005) 1. Machinery
2. Vehicles
3. Chemicals
4. Metals and Manufactures
5. Foodstuffs
6. Consumer electronics
7. Textiles
8. Beer
Germany's main imports are (Totaled $801 billion in 2005) 1. Machinery
2. Vehicles
3. Chemicals
4. Foodstuffs
5. Textiles
6. Metals
Foreign Investment
• In 2003, net foreign direct investment was $11 billion.
• From 1995 to 1999, annual average flows of U.S. direct
investment in Germany were $3.4 billion, while those of
German investors in the United States reached $21
billion.
• Americans accounted for 18% of all foreign direct
investment in Germany during 1998-99, the third-largest
source after France and the UK.
Challenges and Obstacles
Unemployment
• Current unemployment is at
about 8 percent.
• Inflexible labor market is the
main cause.
• Increased cost of hiring makes
reducing unemployment
difficult
• Little to no incentive for
unemployed Germans to find a
job.
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National Trade Deficit
• GDP declined earlier this decade
• EU set a deficit limit at 3 percent
which Germany is fast
approaching
• Interest rates and money supply
growth are determined by the
European Central Bank rather
than German banks.
An Aging Population
• Because of the
increased number
of retirees,
German
government must
spend more on
social welfare
programs.
• This will result in
higher taxes and
fewer benefits for
the retired.
Special Problems
• Decreasing Quality of Education
– Free education
– University administrations share decisionmaking with businesses that are connected
with the university. This results in inflexible
decision-making.
Germany and the Future
Retrieved on 11-27-2006 from http://www.lsus.edu/ba/germany/photos/schloss_lg.jpg
Domestic Future
• This year Germany's economy is expected to
grow by less than 1%. Next year it might
manage about 1.5%
• Needs to decrease high unemployment rate and
increase the weak domestic demand
• As they tighten their belts, Germany's savings
rate has reached a staggering 11%.
• Germany’s seasonally adjusted national
unemployment rate increased to 12% (March
2005)
Ways to Improve the Domestic Future
• Reforms of product market regulation would boost consumer
confidence
– By making regulation of domestic goods and service markets more
competition-friendly
– Increasing real wages, employment and productivity growth
– Supporting small and medium-sized enterprises that are the backbone
of Germany's economy
• Government sector involvement in business sector activities needs
to be scaled down further
– Privatization of public sector enterprises should be accelerated
– Telecom, energy and railway industries provides an opportunity to
accelerate the pace at which genuine competition develops
Ways to Improve International
Competitiveness
• The complex tax system; restrictive
labor laws; rampant bureaucracy;
and high social security and
healthcare costs make an
entrepreneur's life very difficult
• Lessen administrative burden on
foreign market entrants
• Keep its export-oriented economy
• Do something with its stagnating
wages
Questions?