Who Exports

Yglesias :

talking about the balance of trade with Germans. One thing you often hear from Germans on this issue is a kind of patronizing line about “oh, are you saying we should make our products worse? If America has a trade balance problem, you guys should make better stuff!

...This whole line of thought seems to me to be largely based around confusing exports with net exports. If you just look at aggregate exports then Germany and the United States are very closely packed. There’s only slightly more German-made stuff being purchased by non-Germans than there is American-made stuff being purchased by non-Americans. And if you look at adjacent countries, the combined GDP of Poland + Czech Republic + Austria + Switzerland + France + Belgium + Netherlands + Luxembourg + Denmark is wildly higher than Mexico + Canada. Indeed, France alone has a bigger economy than Canada and Mexico combined. Or to look at it in the most clear-cut way, the per capita output of the American economy is higher than the per capita output of Germany, whether measured at market exchange rates or with PPP adjustments.
Long story short, the issue here really and truly is one of German households engaging in a very high rate of savings and not one of Germany firms being somehow extra awesome at making desirable products. German firms are great, the German people make a lot of stuff, and on a per hour basis the German workforce is incredibly productive. And good for them! But they’re not actually not outproducing the United States of America, they’re buying less stuff. Which would be fine if when the world turned around to look at what’s happening with these savings we saw the world’s finest banking system financing highly productive investments all ’round the world. But is that actually what we see? I see German banks financing bum real estate developments in Ireland, Nevada, Spain, Florida, etc. ...The issue of the questionable prudence of the savers is a real one here. If I heard more people saying with a straight face “Matt, the reason our households save so much is our banks are uniquely skilled at channeling savings into profitable investments” I’d feel much happier about the whole thing.