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Everybody's Got Problems, But..   (February 20, 2006)

As even occasional visitors here know, the economic headwinds building against the U.S. are formidable. Throw in a struggling education system, geopolitical and environmental woes and it's easy to be pessimistic about the U.S.'s future.

But after considering Germany's problems--this, the strongest economy in the E.U.--I'll take America's problems any day. The structural plights of Germany were recently explored in a multi-story feature in The Economist. At the risk of boring you with long excerpts, here is a precis of Germany's formidable structural challenges in education, immigration and integration.

First up is their education system, which funnels kids into either the working class or university track at an absurdly young age:
Like other European countries, Germany from the Middle Ages developed a school system based on class. But whereas most other European countries have since moved on to more inclusive systems, Germany has essentially stuck to a three-tier structure: the Hauptschule (for students who hope to go on to an apprenticeship), the Realschule (whose graduates typically take middling white-collar jobs) and the Gymnasium (awarding the Abitur that admits the holder to university). Only at the Grundschule (elementary school) are pupils from all ability groups taught together.
Then there's the German healthcare system, which is hardly a model of efficiency:

Mr Lauterbach's academic speciality is Germany's health-care system, and to him the health-care industry is proof that German-style corporatism can be at least as costly as backroom deals. Just like education, he says, it is a system that protects privileges without adding any value: “It is not only inefficient, but also creates injustice.”
Lastly, there's the structural discrimination against immigrants and appallingly low social mobility of the second and third generations:
The third generation of Turkish immigrants, in particular, is increasingly marginalised— and not just because of the school system and the labour market. The exclusion starts when they become teenagers, explains Mr Ersan: they often switch to a Turkish football club at that point because their old German club makes it clear to them that they do not really belong there. When they have finished school, they are rarely offered even an unpaid internship, let alone an apprenticeship.

That is if they manage to finish school at all. According to a 2001 study by Bamberg University, 15.6% of young foreigners in Frankfurt failed to do so, compared with 6.5% of Germans. Far too many left school at 14. For Germany as a whole, the numbers are even worse.

Add other immigrants, refugees and EU citizens (who can come and go as they please), and it is easy to see why the number of foreigners grew rapidly, from 500,000 after the second world war to 6.7m (8% of the population) today. Another 7m or so Germans are naturalised immigrants. In record time, all this has turned Germany into nearly as much of a nation of immigrants as America.

Unlike other countries, including France, Germany has never seriously discussed affirmative action for immigrants. Nor has it grasped that immigration policy today is no longer about keeping foreigners out or turning them into good Germans, but about competing actively in the global war for talent, says Thomas Straubhaar, president of the Hamburg Institute of International Economics, a think-tank. In a globalised knowledge economy, he argues, the wealth of a country will increasingly depend on highly skilled individuals. Yet such people are mobile and can choose where they want to live.

(The Mayor of Jena) had the foresight to protect what is perhaps Jena's most important asset: its network of highly skilled people. Former Carl Zeiss employees were allowed to use the firm's facilities to create their own companies, spawning many start-ups. This has given Jena an entrepreneurial ecosystem that is rare elsewhere in Germany.

Wolfgang Streeck at the Max Planck Institute for the Study of Societies, one of Germany's foremost social thinkers, reckons that things are getting worse rather than better. Back in 2003, he wrote: “There is little hope that the German political system will overcome its present immobility, making continued social and economic decline the most likely scenario for the future.” Today he goes further: he argues that even a grand coalition will have to face the fact that the German state, “has, perhaps irreversibly, exhausted its means”.

To make a real difference, the government would have to do a whole host of things at once: cut payroll and corporate taxes, balance the budget, reduce debt, invest more in education and infrastructure and integrate immigrants. Yet given that the state's coffers are empty and growth is likely to remain moderate, that is an impossible task.

German football, it seems, is more willing to embrace change than the country as a whole. “A monopoly that isn't capable of innovating from within will be swept away at some point,” says Theo Zwanziger, the Football Association's new vice-president. Germany would be well advised to heed his words.
On top of these problems, Germany is faced with a very low birthrate (1.3 vs. 2.1 for the U.S.), which guarantees a shrinking population, an ever-increasing need for more foreign workers to keep the social security system afloat, and thus ever-larger challenges in education, social mobility and discrimination. The "haves" in every society hold all the levers of power, but few other nations seem to cut their immigrants so thoroughly out of the economic and power pie as does Germany. The U.S. has all the same issues, plus an economy tottering on the edge of fiscal ruin, but the bottom line is: in which country would you rather be an immigrant? I think the choice is obvious.

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copyright © 2006 Charles Hugh Smith. All rights reserved in all media.

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