Japan on the Rhine

February 25, 2003

Free Market Foundation

“Germany’s long slide into becoming Japan on the Rhine” with stiflingly high taxes, glacially slow growth and labour rigidities that kill chances to reduce unemployment is likely to continue, say observers.

Reformers have long had remedies for Germany’s structural rigidities. Among them:

Relax job-protection laws especially for small companies and older workers to encourage hiring and stop the decline in workforce participation by people over 55.

Make it easier for individual companies to opt out of collective bargaining agreements, giving relief to struggling companies that can’t pay the prevailing wage.

Allow stores to stay open whenever they like, at least in downtown areas; this would create jobs, help stimulate consumption and make everyday life easier.

Limit the ability of workers’ councils to block or delay company plans, allowing companies to move more quickly and grow more competitive.

Germany’s problems affect more than the 82.5 million Germans. As Europe’s largest and richest nation and steward for the euro, Germany’s failures radiate across the Continent, say critics.

Source: Jack Ewing, The Decline of Germany, BusinessWeek, February 17, 2003.

For text (BusinessWeek subscription required) http://www.businessweek.com/@@BSYDFWUQAimORxAA/premium/content/03_07/b3820009.htm

For more on International Economic Growth http://www.ncpa.org/iss/eco/

FMF Policy Bulletin\18 February 2003