Worth noting

For some time now, we have been searching for ways to improve our economic performance. Many “solutions” have been put forth in our national discourse.

At one point it was suggested that the Soviet Union and its command economy could provide us with some answers, but that was in the 1950s, and subsequently that system collapsed with the demise of Communism.

Later the spectacular growth of the Japanese economy, which became the second largest in the world, led many to believe that some of their practices should be prototypes for us. For example, they originated work circles in place of assembly lines, and executive worked with others labourers on factory floors. That nation accumulated huge foreign currency reserves from its booming export trade, and many foreign assets were purchased, notably in the United States. However, in the 1990s the Japanese economy and its stock marked foundered, and more than a decade of economic stagnation ensued.

More recently, the amazing economic boom in China seemed to indicate that a semi-authoritarian economic direction would work better than our free enterprise policy. When China permits some private economic entrepreneurship, clearly our free market traditions preclude imitating that economic approach.

A recently published paper for the Council on Foreign Relations contained articles by New York University researcher Sandile Hlatshwavo and Nobel laureate economist Michael Spence, who noted that the thriving German manufacturing sector contributes about twice as much to its economy as the situation here. How is that accomplished?

The answer lies in part in its tripartite system, a consensus among business, labour, and government, to maintain wages in line with other nations, and to agree that high-value-production should remain in Germany, as much as possible.

There are other facets of the German model that are noteworthy, and to be copied here is possible. Most of the population live in rental accommodation, mainly high-rise apartment buildings. Germany pushes education and vocational training. Also, unions are strong so that their members’ pay has grown at approximately the same as top income earners, limiting wage disparities more than here.

Then too, manufacturers, particularly the midsize and smaller ones that are the important factors in specialized world markets, do not derive their funding from capital markets. Instead, they used local banks, thus avoiding the need to cater to shareholders and their demands for short-tern results.

Also, corporate boards are composed of strong union representation as well as in-house corporate officials.

Directors are not big names or formers politicians seeking soft births. Decision-making is more broadly based, seeking to benefit the general population, not just the few.

Hence, there is every reason that we should try to copy those successful ideas to ensure improved economic results.


Bruce Whitestone