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German mercantilism and the European depression
Howard Richman, 6/10/2014

On May 30, John Weeks wrote a great commentary (Why did Europe Lurch right? Because the 'recovery' is a farce) about the current European depression. He explains why the European depression is not about to end and the reason why European voters are turning toward the right.

His graphs are worth looking at. They show just how deeply the Southern European countries are locked in a depression. It is every bit as deep as the Great Depression was in the United States.

The whole piece is worth reading. I especially found his discussion of German mercantilism to be interesting. He wrote:

And what about Germany, whizzing along to 4% above 2008? As I and many others have argued and documented, the German recovery represents the success of a mercantilist beggar-thy-neighbour policy.

At the end of the 1990s, Germany’s Social Democratic government and its mainstream trade unions reached a pact to freeze real wages. As a result, the country’s exporters – almost all larger corporations – cut export prices. Subsequent changes in VAT rules cut taxes on the part of production that companies exported, further enhancing German “competitiveness”. If mercantilism is your thing, then give German “competitiveness” a round of applause.

Followers of our work will note that we similarly attributed the European depression to trade imbalances in our American Thinker commentaries (see Saving Greece Europe and the United States and Deficit Spending Doesn't Work: Balancing Trade Does).