We need a New Brain Trust

While the U.S. economy sputters, France and Germany appear to have exited their recessions and returned to modest growth during the spring. There’s been a distinctly different approach to macroeconomic policy taken by Chancellor Angela Merkel and President Nicolas Sarkozy and their respective finance ministers that deserve elucidation.

The French and German economies both grew by 0.3% between April and June, bringing to an end year-long recessions in Europe’s largest economies.

Stronger exports and consumer spending, as well as government stimulus packages, contributed to the growth.

Germany is a manufacturer and exporter. Yes, that’s right. Germany has trade unions, good vacation packages, excellent schools, universal health care, lots of solar power and tough environmental regulations and they still have a manufacturing economy and they export. Their form of government is basically a type of democratic socialism. All the things we are taught to view with suspicion. Still, Germany manages to manufacture things and export to China the country to whom the U.S. has practically sold their collective soul so we can massively import junk on a rapidly decreasing credit line.

The latest figures showed German exports had grown at their fastest pace for nearly three years at 7%, with particularly strong growth in demand from rapidly-growing economies such as China.

The country’s Federal Statistics Office said that household and government expenditure had also boosted growth.

It added that imports had declined “far more sharply than exports, which had a positive effect on GDP growth”.

“These [GDP] figures should encourage us,” said Germany’s Economy Minister Karl-Theodor zu Guttenberg. “They show that the strongest decline in economic performance likely lies behind us.”

It’s the same story with France. Household consumption and export markets are improving. I don’t know if you’ve ever listened to Finance Minister Christine Lagarde but she’s undoubtedly one of the best in the world. Compare her to our Secretary of Treasury Timothy Geithner and you’ll see who comes up quite short. First, she’s a noted anti trust lawyer as compared to a noted monopoly enabler.

Ms Lagarde said that consumer spending and strong exports had helped to pull France out of recession.

“What we see is that consumption is holding up,” she said.

Official figures showed that household consumption rose by 0.4% in the second quarter.

She said government incentive schemes for trading in old cars, together with falling prices, were helping consumers.

Foreign trade contributed 0.9% to the GDP figure – a “very strong impact”, said Ms Lagarde.

We are daily fed this propaganda that other countries come up short when compared to the United States and our economic machine. We are told that countries with high union participation, with universal health care, with high standards for the work environment and tough regulations for business and standards for the environment come up short when compared to the U.S. These countries both undertook solid fiscal stimulus. Here is some information on the French package passed in February. The Obama stimulus package passed during February also.

France’s economic stimulus package encompasses a three-pronged plan: €11 billion ($14.5 billion) each to go to direct state investment and to inject capital into private-sector enterprises, plus €4 billion ($5.24 billion) for state-run companies to be applied toward improvements for the national postal service, energy supplies and the rail network. Of that amount, some €1.3 billion ($1.7 billion) is to go into refurbishment of higher educational institutions, prisons, monuments and court.

Here’s some information on the German package also passed in February.

Germany has approved a 50bn euro ($63bn, £44bn) stimulus plan aimed at boosting Europe’s largest economy.

The plan was approved by the upper house of parliament, which represents Germany’s 16 state governments.

It includes infrastructure investments, tax relief, reductions in health care contributions and money for families with children.

The package follows an earlier 23 bn-euro plan that was criticised for being too cautious.

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