Tuesday, February 21, 2012

Germany's supply-side policy victories

Why is Germany experiencing solid economic growth while America suffers stagnation? Donald Luskin and Lorcan Kelly, writing in the Wall Street Journal, explain:
Starting in 2003, Germany under then-Chancellor Gerhard Schroeder began to implement a program of long-term structural reform called "Agenda 2010." The idea was to transform Germany into an economy where business has an incentive to invest, and where labor has an incentive—and an opportunity—to work. This was pro-growth reform that would be very familiar to Ronald Reagan and Margaret Thatcher.

The centerpiece were labor-market reforms designed by a former human-resources executive at Volkswagen AG. The power of unions and craft guilds was curtailed, making it easier for unskilled youth to enter the job market and easier for employers to hire and fire at will. Germany's lavish unemployment benefits were sharply cut back. An unemployed person in social-democratic Germany today can draw benefits for only about half as long as his counterpart in capitalist America.

In addition, Germany rejected Obama's Keynesian stimulus ideas for a more sane fiscal policy.

It has come to this: European socialists know more about making free markets work than our American president.

PREVIOUSLY on Obamanomics:
The Obama first term debt: $70,000 per family
Obamanomics: maximize the uncertainty
Obamanomics: its intellectual foundations explained
Strangling business is no way to create jobs
CEOs to Obama: Get out of the way!
Survey of CEOs: Obamanomics is still the problem

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