Jonathan Krause's Rhineland Ubermenchen are, Statistically Speaking, Pretty Lazy

Jonathan Krause usually has a hard enough time trying to make sense of events that occur in his own back yard, let alone those that occur on the other side of the planet, so when he starts getting into the intricacies of global finance, it's usually a sign to whip out one's Bullshit Shovel and start digging.

And Tuesday's post was no exception.

Tucked into a lazy doom and gloom sermon on China's involvement as a potential Eurozone bailout Savior is this ode to his ancestoral homeland (assuming, of course, that Krause is, in fact, as German as it sounds):

The fact that China is entering into the Euro disaster zone must mean that Germany is tapped out in trying to help keep its neighbors afloat.  I know the German bailout of several other countries had to be approved by the nation's Supreme Court--as the conservative political minority was fed up with being the Continental ATM Machine.  And how could you blame them for having that attitude?  You don't see Germans taking the entire month of August off of work like Spain and Italy.  German seniors don't get full retirement benefits at 55 like in Greece and there is no acceptance of permanent unemployment for the younger generations like in Britain.  The term "German work ethic" didn't come about by accident--it was earned.

Le sigh ...

Well, let's take a look at this monstrosity line by line.

The fact that China is entering into the Euro disaster zone must mean that Germany is tapped out in trying to help keep its neighbors afloat.

Nope. Not at all, in fact. China is likely acting independently of Germany in an effort to expand it's global economic influence. It's a brilliant strategy, really; and who wouldn't buy that kind of influence when you have such a rapidly growing economy. Germany probably has the capital to at least partially fund another bailout here or another bailout there, but the primary issue with these things is rarely the availability of financial capital, but the political capital (recall the popularity of the U.S. bailout of Mexico is the early 1990s, for example); and in Germany no one's really amped about giving money away.

I know the German bailout of several other countries had to be approved by the nation's Supreme Court--as the conservative political minority was fed up with being the Continental ATM Machine.

This sentence is a hot mess for at least three reasons.

1.) The German Constitutional Court didn't approve of the bailouts, it found that the German parliament had the authority to spend that money. There's a considerable difference. In fact, the court made it easier on parliament to approve such bailouts:

Yes, the German parliament must have a say on every individual German payout into future euro zone bailout structures. But, conscious of the tension between market efficacy and democratic legitimacy, future payments need only the approval of the Bundestag’s budgetary committee and not the entire parliament.

This is essentially the same thing as the U.S. Supreme Court saying that some bills don't need to be voted on by the entire House of Representatives (or even the Senate), but as soon as it makes it out of a certain committee it becomes law. (The bigger philosophical issue here is how much aithority does the German Prime Minister has to unilaterally appropriate money for "foreign" bailouts -- foreign being something of a tricky word in the context of the Eurozone where every country has entered into a shared economic agreement. The German high court basically said the PM can't do alone, but doesn't need all that much approval from Parliament. That's right, folks: Germany is vesting more power in its executive.) Off hand, I can't think of any instance where the Supreme Court has dictated rules to the legislative branch of government and would imagine that the principle of the separation of powers would not allow it.  

2.) The ruling majority coalition in Germany is headed by the conservatives. Angela Merckel, Germany's prime minister, is head of the Christian Democratic Union. Now if that doesn't sound like a very conservative party name then consider that the opposition coalition is composed of the German Social Democrats, the Greens and a socialist party that simply calls itself The Left. Conservatives are not the minority as Krause claims.

3.) And, more to the point, the CDU has been pushing for the Greek bailout because it threatens to undermine the entire Eurozone (and, by extension, the Euro currency), something that Germany has been a principle backer of since Day One.

And how could you blame them for having that attitude?  You don't see Germans taking the entire month of August off of work like Spain and Italy.

Actually, they do. Here's an article that took me all of three seconds to find on Google:

It's typical for Germans to take off three consecutive weeks in August when "most of the country kind of closes down," Schimkat said. That's the time for big trips, perhaps to other parts of Europe, or to Australia or North America. Germans might also book a ski holiday in the winter and take a week off during Easter.

So just like the rest of Europe Germany closes for the month of August and Krause couldn't be more incorrect on that account. Or could he?

Here are the total number of mandatory paid vacation days, plus public holidays, per each of the countries Krause mentions:

Germany = 34
Greece = 37
Italy = 31
Spain = 36
United States = 25

So the mighty Teutonic laborers of the Black Forest actually do take as much time off as their lazy olive-skinned counterparts along the Mediterranean.

Boy, am I glad we got over those stereotypes 60 years ago...

And Krause is just getting started being wrong. When looking at the actual number of hours worked on an annual basis, Germans are blown away by other Europeans. In fact, they work fewer hours on average than just about anyone else in the industrialized world, including, wait for it ... Greece.

Korea = 2193
Greece = 2109
Russia = 1976
Italy = 1778
United States = 1778
Spain = 1663
Germany = 1419

If we ignore vacation time and assume a rigidly enforced eight hour work day, Germans work 30.5 cumulative fewer days than Spaniards, almost 45 days less than Italians and Americans, and a whopping 86.25 fewer days -- that's almost three months! -- than those good for nothing Greeks who got us into this mess in the first place. Viewed in these terms vacation days are almost negligible.

In fact, Greeks work 49% longer for 17% less than Germans (and 18% longer for 42% less than Americans). So you can see where Greeks might take offense to being called lazy.

German seniors don't get full retirement benefits at 55 like in Greece and there is no acceptance of permanent unemployment for the younger generations like in Britain.

Now here is the trickiest knot of Krause's bombast to untangle because there is an element of truth to his criticism that Greece has a messy and unseemly retirement system. There's no denying this, but the underlying truth that Krause ignores, or more likely is ignorant about, is how this came to be (which we'll get to in a moment).

First, it's important to note -- since Krause omits this detail -- that just because one can retire at a certain age, doesn't mean someone will do so. This chart, unfortunately based on OEDC data whose link is broken, seems to suggest that the average retirement ages in Greece and Germany are actually quite similar and are somewhere in the early to mid-60s. In fact, it almost looks like Greeks tend to retire later than Germans:

(Also worth pointing out here is that the average retirement age in Austria, which is basically a Junior Varsity Germany, is 59, to which I likely join the rest of the world in saying, "Huh?")

But let's keep on looking at Greek retirement using the numbers Krause wants us to see. If, as the OEDC numbers state, the average Greek worker spends about three more months than the average German worker does at the office over the course of the year, then that same Greek worker will work 8.4 years more than the average German worker during the course of a 35 year career between the ages of 20 and 55. That means the average Greek worker has put in just as much time at work by the age of 55 as the the average German worker does by the age of 63 and a half. So it's not exactly like Greeks are getting an extra ten years of lounging around the retirement home. Hour for hour, at least according to the figures Krause wants us to believe, they put in equal time.

Unfortunately, not all work hours are created equal, as we'll see later. 

The second, and more critical aspect that Krause ignores, is Greece's recent history and how those generous retirement packages came about.

Greece quietly had a very chaotic 20th Century. Here's as concise a history as it relates to the current economic troubles as you will find:

The late Andreas Papandreou’s [the former Greek prime minister] strategy in the 1980s was to give the disenfranchised, who formed the bulk of PASOK’s [the dominant socialist party in Greece] voters, a shot at living like the middle class. If this meant throwing European assistance and subsidies around like political favors and giving pensions to people who had never contributed to social security (such as farmers), then so be it. At last, all those who had been shut out by the right-wing establishment which triumphed in the Civil War in 1946-49 – and which was thoroughly discredited by the dictatorship of 1967-74 – would get to share in the wealth of the nation. The fact that this new middle class was founded on wealth that the country was not producing meant that the economy broke free from all logic and went into its own orbit. PASOK established the National Health System and poured money into education but it also undermined the gains by destroying any semblance of hierarchy, accountability and recognition of merit in the public sector. This meant that no one really knew how much money was being spent nor whether those who deserved it most were getting it. Costs rose while productivity plummeted. A wasteful public sector, in turn, condemned the private sector to inefficiency and lack of competitiveness. New Democracy [the Greek conservative party], especially in the 2004-09 period, made the situation worse by doing almost nothing to cut costs and increase revenues, allowing the economy to career out of control.

The Greek civil war, and the bloody score-settling that followed, is a living memory for many Greeks. Any consideration of Greek nepotism or clientelism needs to be seen in that light. So for example, it is not enough to say that Greek civil servants enjoy jobs for life, and that is a big problem. (Though it is a big problem, not least because many Greek civil servants are paid pitiful wages—partly because there are so many of them. That means they will resist austerity measures all the harder, because they feel like victims in this crisis, not fat cats.)

Emphasis added because it's an extremely perceptive point. The division in Greek society actually started a generation earlier, toward the end of WWI when between 1-1.5 million Greeks returned home after the end of Greek occupation of parts of the Ottoman Empire following the war for Turkish Independence. Reintegration of these folks back into the Greek economy was not easy. One of the reasons Greece is in this mess is because people who had been marginalized by Greek politics for between 30-60 years took power in the mid-1970's and spent the next 25 years trying to compensate for being shut out. (Michael Lewis goes into graphic detail over just how badly this has broken the legitimacy of any government in power in Greece in a breezy read here.)

The Greek retirement system is a mess, but solutions will take more than simply pointing to Germany and saying "Do that!" There are social and political considerations here that most Germans, understandability annoyed at their new relationship with Greece, probably aren't aware of, just like Krause.

(Just so we don't ignore the second part of Krause's contention: youth unemployment in Britain is not seen as "acceptable." It's a problem that frustrates both the Tory-led ruling coalition and the Labour shadow government, and has been given all the more attention since the recent riots in London. I simply don't know where he's getting this.)

Last, but not least, we get to the gist of Krause's piece:

The term "German work ethic" didn't come about by accident--it was earned.

Actually, the phrase "German work ethic" barely exists at all. "Work ethic" is too nebulous a term to describe German productivity, too poorly defined to be of any use for Germans. The phrases that people do hear with regard to our brave Bavarian overlords tend to be "German efficiency," "German punctuality," "German precision" and the like. There is a massive distinction that, generally speaking, Americans don't grasp: these phrases describe how Germans work hard, not merely that they work hard. They are, essentially, more "German" ways of speaking.

I don't think I need to explain why. As we noted above, Germans work significantly fewer hours than just about any industrialized country on earth, and yet they have the fifth highest GDP on Earth. This happens because when they are at the office, they work; and when it's time to leave, they leave.

Americans do not subscribe to this philosophy. We tend to judge a person's "work ethic" not by their productivity, but by total number of hours spent at the office. The last guy to leave the office at night is always called "a hard worker" and almost never "the guy who dicked around the break room for four hours this afternoon and is now trying to play catch-up." This is probably why Krause is under the illusion that Germans never seem to take vacations and work 16 hour days.

Which bring me back to the point about all work hours not being created equal. Germany's work hour is usually held up as the gold standard of employee productivity, but it's export to other countries is unlikely. Greece, where Krause clearly thinks German values will do good, is an ancient culture that is not likely to accept them. Nor, for that matter, is a place like the United States, which already has tens of millions of citizens of German heritage in her borders.

In fact, it's no small wonder that Krause praises his ancestral homeland so effusively. Germany, after all, was the birthplace of the welfare state. It also invented the idea of retirement in the first place. It continues to have a top-notch and universal health care system of the kind that Krause loathes. It not only participates in, but helped found, an unwieldy economic alliance with it's neighbors -- an act of multilateralism Krause frequently scoffs at. It has very strict labor laws that cap the number of hours someone can work during a week, which according to Krause's libertarian ideology is government control of income and a policy that stifles entrepreneurship.

And yet despite all of these "job killing policies" the unemployment rate, GDP growth rate and even social mobility are better in Germany than in the United States.

If you've gotten this far then I should perhaps remind you that Krause's original post was actually not about Germany, but China. Krause takes his usual pot shot at "Keynsian economists," a phrase he frequently demonstrates no understanding of, before launching into this rather bizarre conclusion:

My brother-in-law does a lot of business in China--and he strongly believes they will be the economic leaders of the 21st century.  Already, Chinese companies are farming out their work to countries like India and Vietnam--where the labor pool is even cheaper than in their own country--thereby increasing the profits they see in selling items to companies and retailers here in the US.    It's just a matter of time before they don't need Apple or Microsoft or Boeing to develop the new cutting edge (and most profitable) technology--they will have the resources to do it themselves.  And that is when the US will be pushed to the side--to join its European counterparts on the downward slide into secondary economic status.

Maybe it really was a good idea to start teaching our children Mandarin in elementary school.

That's some pretty lavish praise to be doting on Beijing, which is odd considering that China is the most rigidly state-controlled economy in the world. It's a bit ridiculous for Krause to be complaining about European countries running to a quasi-communist country for a bailout in one paragraph only to marvel at just how successful that socialist regime is in another.

BTW: I'm going to cast a skeptical eye on Krause's suggestion that Chinese manufacturing firms are farming out labor to places like Vietnam en masse. This sounds like something someone with very little knowledge of an issue would create out of whole clothe to make a situation sound worse than it actually is. Given how large and notoriously corrupt China is, it would not surprise me if a few companies did such business or, what's more likely, that American firms had manufacturing operations in both Vietnam and China, but usually the cost of doing business in China is paying Chinese labor, something most Western firms are more than happy to do.

China isn't necessarily interested in making it's wealthy citizens even more wealthy then they already are, but it does want to create the large and robust middle class that will take it into the 21st century. That means getting the peasants out of the countryside, where little has changed since the 19th century in many cases, and getting them into the cities. The best way to do this is thought manufacturing jobs that make subsistence farming look silly. To accomplish this China is undertaking the largest redistribution of wealth project ever conceived. It's essentially a gigantic New Deal program that being funded entirely with foreign cash; socialism integrated into the globalization created by capitalism.