Transcript Germany 2 - BYU Marriott School

Germany (Deutschland)
Christopher Schmidt
Darci Child
James Cordell
Amir De la Vega
The Plan
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History & Demographics
Current Situation
International Aspects
Special Problems
The Future
History & Demographics
by: Christopher Schmidt
World War I (1914-1919)
• Germany part of unsuccessful Central
Powers
• Treaty of Versailles (1919)
– “The War Guild Clause” Article 231
• Germany held solely responsible for all “loss and
damage” suffered by Allies
• Large portions of Germany divided among Allies
• Reparations of 6.6 billion pounds
German Revolution & Weimar
Republic (1918-1933)
• November 1918:
German Revolution
breaks out & Republic
proclaimed
• August 11, 1919:
Weimar Constitution
in effect
• German Communist
Party established
same year
German Revolution & Weimar
Republic (1918-1933)
• January 1919: German
Workers Party (Nazis)
created
• 1920’s: Political unrest
caused by world-wide
depression & harsh
peace conditions
dictated by Treaty of
Versailles
• January 29, 1933: Adolf
Hitler named
Chancellor of Germany
World War II (1939-1945)
• Sept. 1, 1939: Germany
launches blitzkrieg on
Poland
• Sept. 3, 1939: Britain &
France declare war on
Germany
• June 22, 1941: Germany
breaks pact with Soviet
Union
• Dec. 11, 1941: Germany
declares war on the US
• May 8, 1945: Germany
surrenders
Division & Reunification
(1945-1990)
• Germany & Berlin
divided into 4 military
occupation zones
Division & Reunification
(1945-1990)
• May 23, 1949:
Federal Republic of
Germany (West
Germany) created
• October 7, 1949:
German Democratic
Republic created by
the Soviet Zone
Division & Reunification
(1945-1990)
• Nov. 1989: Border
restrictions
unexpectedly eased
• Oct. 3, 1990:
Germany reunified
Today
• Germany is a
democratic
parliamentary federal
republic made of 16
states
• Capital is Berlin
• Land Area of 357,000
km2
Demographics
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Population: 82.4 million
Ethnic Groups: Germans & Turks
Religions: Protestant & Roman Catholic
Language: Standard German & English
Literacy: over 99%
Current Economic Situation
by: Darci Child
Historic Development of Germany’s
Economic System
• Following WWII, Germany’s land, homes, and
property were ruined. Millions of people didn’t
have anything to eat or wear
• Economic and political leaders wanted to position
Germany on a new path. They wanted a new
economic system that would give everyone equal
opportunities as well as economic prosperity.
•
Ludwig Erhard took control over Germany’s postwar
opportunity. He was given his chance by the United States
officials.
• Ludwig Erhard’s first step was to create a new currency on
June 21, 1948
• the currency reform established the foundations of the Western
German economy
• Erhard put an end to most Nazi and occupation rules and
regulations in order to establish a free economy
• The Germans started calling their new economy a “social
market economy”
• The West German boom began in 1950.
• by 1960 industrial production had more than doubled
the levels in 1950
• GDP rose by two thirds during the same decade.
• The number of people employed rose from 13.8
million in 1950 to 19.8 million in 1960 and
unemployment fell
• During the 1960’s economic growth slowed down.
• In 1967 the Bundestag passed the Law for Promoting
Stability and Growth, known as the Magna Carter of
medium-term economic management.
• This law provided for coordination of federal, land,
and local budget plans in order to give fiscal policy a
stronger impact.
• During the next fifteen years, Germany faced
fluctuations in growth
• In 1982, the government began to implement
new policies to reduce the government role in
the economy
• The government’s objectives were
1) to reduce the federal deficit
2) to reduce government regulations
3) improve the flexibility and performance of the
labor market.
• Finally during the late 1980s West Germany’s
economy began to grow more rapidly.
Unification
• On July 1, 1990 the Western German economy
and the eastern Germany economy unified and
became one economic and political union
• During the first phase of unification, eastern
Germany went into a deep recession while
Western Germany experienced a boom in their
economy.
• Many easterners started going to the work in the West.
• By the end of 1990, about 250,000 people from the east
were commuting to the west.
• By the middle of 1991 this number grew to almost
400,000
• Western Germany’s capital also increased significantly
as eastern German deposits were placed in western
German banks
• This sudden boom in Western Germany brought
about the following problems
1) The financial shifts from eastern Germany to
western Germany caused an over supply of
money
2) Government deficits grew from large
expenditures in Eastern Germany
3) Inflationary effects of the rapid growth rate
• In response, the Bundesbank raised interest rates, and
after time the western German economy slowed down
• the 1992 depression continued into 1993 when the
economy reached a negative growth rate of -1.2%
• By 1994 German growth resumed at an annual rate of
about 2.4%
• In the last ten years, since the unification
process, progress has been made in raising the
standard of living in eastern Germany,
introducing a market economy and improving
infrastructure there.
• Eastern Germany still lags behind Western
Germany. Eastern Germany’s unemployment is
almost twice as high. Consumption and
productivity levels are lower in eastern Germany.
Germany’s Current Economic
System: Social Market Economy
• The model of the social market economy is designed to
allow market forces to reign free within certain limits and
to prevent unsocial outgrowths of market development.
The supply of goods is increased and diversified; the
providers are motivated to be innovative
• income and profits are distributed based on individual
performance.
• ensures participation by employees in basic economic
decisions and their participation in social achievements.
• Germany has the world’s third strongest national
economy
• leading position in terms of its total economic
output
• highest gross domestic product and the largest
number of inhabitants in European Union
• most important market in Europe.
• Germany has qualified and motivated
employees, an internationally recognized
education system, a well developed
infrastructure, and top achievements in
Research and Development
Industry
• Germany is one of the world’s leading industrial
nations. In the last few years, Germany’s
industry has boomed. Germany now holds a
leading position in the international markets.
• The 49,000 German industrial undertakings
employ nearly 6.4 million staff.
• the services sector in Germany is growing and is
almost as large as its industry
• Germany is the world’s third largest automobile
producer, with more than 70 percent of vehicles
produced intended for export.
• Germany is also a world leader in the chemical
industry
• The growth of information technology and biotechnology is above average
• The trade fair business is one of the leading service
sectors of the German economy.
• Germany is the world’s number one venue in hosting
international trade fairs
• About two thirds of the world’s leading trade fairs for
individual sectors take place in Germany
1) Hanover Trade Fair (the world’s largest industrial
trade fair)
2) Frankfurt Book Fair
3) Computer fair CeBIT
4) International Motor Show (IAA)
International Aspects
by: James Cordell
Exporting
• Germany is the world leader in exporting goods
• In 2003 Germany’s foreign trade surplus totalled
129 billion euros
• Its closest trade relations are with members of
the European Union
• Nearly 72 percent of German exports remain
within Europe
Exports
Export Partners
• France 10.2%
• U.S. 8.8%
• U.K. 7.9%
• Italy 6.9%
• Netherlands 6.1%
• Belgium 5.6%
• Austria 5.4%
• Spain 5.1%
Exports
Rank Country
Exports
Date of
Information
1
World
$10,330,000,000,000
2004 est.
2
European Union $1,318,000,000,000
2004
3
Germany
$1,016,000,000,000
2005 est.
4
U.S.
$927,500,000,000
2005 est.
5
China
$752,200,000,000
2005 est.
6
Japan
$550,500,000,000
2005 est.
7
France
$443,400,000,000
2005 est.
8
United Kingdom $372,700,000,000
2005 est.
9
Italy
$371,900,000,000
2005 est.
10
Netherlands
$365,100,000,000
2005 est.
Exports
Main Exports
• Machinery
• Vehicles
• Chemicals
• Metals and Manufactures
• Foodstuffs
• Consumer Electronics
• Textiles
• Beer
Imports
Import Partners
• France 8.7%
• Netherlands 8.5%
• U.S. 6.6%
• China 6.4%
• U.K. 6.3%
• Italy 5.7%
• Belgium 5%
• Austria 4%
Imports
Rank Country
Imports
Date of
Information
1
World
$10,330,000,000,000
2004 est.
2
United States
$1,727,000,000,000
2005 est.
3
European Union $1,402,000,000,000
2004
4
Germany
$801,000,000,000
2005 est.
5
China
$631,800,000,000
2005 est.
6
United Kingdom $483,700,000,000
2005 est.
7
France
$473,300,000,000
2005 est.
8
Japan
$451,100,000,000
2005 est.
9
Italy
$369,200,000,000
2005 est.
10
Netherlands
$326,600,000,000
2005 est.
Imports
Main Imports
• Machinery
• Vehicles
• Chemicals
• Foodstuffs
• Textiles
• Metals
International Trade Organizations
• G8
• European Union
G8
• “Group of Eight”
• Consists of Canada, France, Germany,
Italy, Japan, Russia, the United Kingdom
and the United States
• Represents about 65% of the world
economy
G8
• G8 Summit held once per year
• Rotating yearly presidency
• Discuss international trade and economics
European Union
• Consists of 25 member nations
• Germany a founding member
• Germany helped found European Coal
and Steel Community, a precursor to the
EU, in 1951
• Has total GDP of $13,539,374,000,000
• Free trade among member states
Special Problems & The Future
by: Amir De la Vega
Special Problems
• Socialist Labor/Consumer environment
– Weak Domestic Demand causes sluggish growth
– High Tax wedge on Labor Income
• Low incentive to work
– Extensive Social Protection
• Rigid Employment Protection causes a lack of demand for
labor
• Protection incurs high non-wage Labor Costs (high
unemployment rates)
Special Problems cont.
• After reunification a system of wage
negotiations was created
– Compressed wage scales for lower paying
jobs
• The difference in pay for workers is narrower in
Germany than in the US
• Reduced demand for low-skilled workers due to
their higher wages compared to worldwide wages
Unique Characteristics
• Manufacturing and Services are at the heart of the
German economy
• Geographical Location
– Germany serves as an interface to new markets such as
• Southern Europe
• Eastern Europe
• The new boundaries beyond the new European Union
Unique Characteristics
• Economic effect of leading the world in
exports
– 1 in 3 euros are generated through exports
and their revenues
– Almost 1 in 4 jobs depend on manufacturing
and servicing exports
Considerations
• Germany currently has closest trade relations with
– Members of the EU (Germany generates over half of its
turnover in foreign trade)
– France (In 2003 Germany’s strongest trade partner)
– USA
– Great Britain
Considerations
• Mercantilism
– Germany is a perfect example
• They thrive on increasing exports
• The decreasing domestic demand due to social markets
reduces imports thus increasing the trade surplus
The Future
• GDP growth is forecasted to decline from
2.2% in 2006 to 1.4% in 2007
– Part of this is due to an increase in valueadded tax rates
• 3% hike will start in 2007 to reduce Germany’s
budget deficit to under 3% of GDP (EU limit)
• 1/3 of VAT revenue will go to reduce employer
taxes hoping it will cause a reduction in the 11%
unemployment rate
• Tax hike may reduce recent consumption increase
– GDP may recover to 1.9% in 2008
The Future
• Outcomes on issues such as healthcare
financing will play a big role in Germany’s
economic future as well.
Germany (Deutschland)
Questions?