An article in last week’s Sunday Telegraph highlighted Germany’s trade surplus as a threat to global stability, and must somehow be fixed. The author of the article claims it is something that gets only a fraction of the attention it deserves: Germany’s trade surplus. Hitting record highs with every month that passes, it now amounts to a massive 9% of GDP. In effect, he says Germany has become an economic rogue state, hollowing out the industry of its neighbours. Creating vast flows of foot loose capital and undermining the stability of the financial system. It is time the rest of the world stood up to it and demanded the Germans bring it under control. If they don’t, it may well be the cause of the next crash. He added with every month that passes, the German trade surplus just keeps growing and growing. This month, the country reported yet another increase, boasting a surplus of 18.5bn. euros for the month, as exports rose 0.8% and imports dropped 1.6%.
For 2016 as a whole, the surplus hit a record of 252bn. Euros – or 9% of GDP – the highest since records began. It shows every sign of beating that this year, which means Germany by itself accounts for virtually the entire Eurozone surplus with the rest of the world. In 2016, on IMF data, the zone ran an overall surplus of $400 bn. (£320 bn.). Germany ran up $300bn. of that – the other 18 countries only managed $100bn. between them.
Measured by capita it is roughly three times the size of the Chinese trade surplus and that is coming down. China actually ran a deficit in February and though it’s returned to surplus in March, imports were still growing faster than exports. As that country develops it looks as if it will roughly run a balance on the trade account, much like most others.
What does this say to us? In my view, the message is clear. The Germans are very disciplined. Their goods are highly in demand. Their exports continue to boom and their economic stability is a lesson for us all. In Britain, we spend more than we earn. Our deficit as a nation is one of the highest in the world, trailing only the USA, yet we behave as if we still have the great empire we once had.
There is no point in condemning Germany for its gigantic surplus and for the good management of their economy. Instead, we should aim to follow suit. We are endowed with expertise in every known field and there is no reason whatsoever why we should not compete with the best throughout the globe. Let’s help ourselves first as a nation and stop squandering our resources just to be seen on the world’s stage as a Good Samaritan.
In fact, I don’t believe for a moment that Germany’s trade surplus will create a global recession.