Wednesday, November 24, 2010

Compare and contrast
1
One key to Germany's miracle is the mittelstand, as the family-owned small and mid-size manufacturing firms that dominate the economy are known. Last week, I visited AWS Achslagerwerk, a factory of one such firm, in the farmlands of Saxony-Anhalt, about two hours west of Berlin. As in many such companies, this factory turns out specialized products: axle-box housings for Chinese and German high-speed trains, machine tools requiring climate-controlled precision measurement. With annual revenue of 24 million euros, the factory has won a significant share of the world market, though it employs only 175 production workers.
2
Until Greece can find a way to disentangle the private sector from the family and find another way to allocate resources — free from the intergenerational, class and gender inequities of the family unit — no amount of reform will make a difference.

The European Union and the I.M.F. should forget about dismantling Greece’s (already puny) welfare state and increasing labor flexibility in the (already flexible) private sector. The public sector does need restructuring, but the resulting unemployment will only strengthen the dominance of the family. A better solution would be to create a real public safety net that would help free young Greeks from the supportive yet suffocating grip of their families.
Economics is an aspect of culture.

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