The difference, say some experts, is that the German government has been unafraid to pursue policies that induce companies to preserve high-paying jobs and boost exports, embracing two words that can make lawmakers in Washington recoil: industrial policy.
In the United States, actively interfering in the affairs of big companies to save jobs is a line many politicians are unwilling to cross.
“There’s a pervasive sense in the United States that government and the economy are supposed to be completely distinct and separate realms,” said Jacob Kirkegaard, a research fellow at the Peter G. Peterson Institute For International Economics. “During a deep recession, the fact that you have a more activist government has some advantages.”
In 2009, the German government created a job-sharing program called “Kurzarbeit” in which companies agreed that instead of laying off workers, they would cut back their hours, with the government making up the difference in pay. Germany replaced lost income for at least 1.4 million workers. While they were off the job, many of them took training classes.
The program saved nearly 500,000 jobs, according to a report by the Organization for Economic Co-operation and Development. The result was that as the global economy began to pick up speed again last year, German companies were ready to ramp up with the right workforce in place. The government budgeted about $7.5 billion for the program.
“It is true that other countries are more comfortable with this thing called ‘industrial policy,’ ” said Jared Bernstein, a senior fellow at the Center for Budget and Policy Priorities and a former Obama administration economic adviser. “If you accuse Germans of practicing industrial policy, I’m not sure [Merkel] would automatically take it as an insult. Over here . . . we just don’t like the words.”
Volkswagen’s employment level in Germany last year was back to its 2008 level of 178,000 employees, after dipping by only 5,000 in 2009. Meanwhile, General Motors has 77,000 employees domestically, still down from the 92,000 it had in 2008. Ford has cut its North American workforce by half in the last five years. And many U.S. autoworkers had to take pay cuts.
“We didn’t subsidize companies so they didn’t have to lay off workers,” said Kirkegaard. “We have basically allowed ourselves to drop off into a bigger, deeper hole than was the case in Germany. That has meant we are not as well positioned to take advantage of the fact that the world economy is growing by four percent this year.”