Latest Posts Opinions

Rebuttal: Fallacy of German “Socialist Model”

Written by Hill News Staff

This is a response to an article published last week called “Socialism and The American Dream: Analyzing the German Model.” The author of this article alleges that United States should follow Germany’s “socialist” economic model with one of his primary reasons being that Germany exports a greater nominal amount than the U.S. does. I will attempt to follow his reasoning step by step to clarify misconceptions behind what the author deems to be legitimate arguments for socialism. Before I begin, I would like to first point out that Germany is not a socialist country. “Socialism” means that the state owns the means of production. German capital is mostly privately owned, but the nation implements many socialist policies, not unlike the United States.

The author begins his article by supposedly unveiling the “true power” of socialism as exemplified by our local grocer: Price Chopper, as it is employee owned. He claims that an “employee-owned company” is a “uniquely socialist idea” and that more companies should follow suit. Perhaps I’m mistaken, but wouldn’t a socialist corporation be owned by the state? Perhaps the author means to say that this model of an employee-owned company is an abstract, romanticized form of socialism in action, where a group of people is gathered on an equal plane with the absence of hierarchies or the crummy “top 1 percent” stealing from the victimized working class.

What “employee-owned” really means in this context is that Price Chopper participates in a program called the Employee Stock Ownership Plan (ESOP). The idea behind this is that issuing shares in form of compensation to employees will incentivize them to work harder. This is a uniquely capitalist idea. According to the ESOP site, employees that participate must have been working for a year before the company management, to its discretion, decides to allot company shares to the employees. To this, I ask: how is this socialist?

The author then moves on to praise Germany as a socialist nation, as if Price Chopper is even somewhat remotely connected to the country. His empirical evidence is that Germany has far superior total exports, GDP, and national debt. He reports figures for exports as $1.32 trillion worth of goods for Germany and a “weak” $1.42 trillion for the United States. Is the per capita amount for the United States smaller? Yes. Is this demonstrable evidence that United States is economically subpar to Germany? No. First, the author fails to consider that the United States conducts internal trades within its 50 states. A more reasonable comparison for per capita net export would be the European Union and the United States. Second, U.S. is not as dependent on exports to support its economy. Third, the U.S. dollar is relatively stronger than other currencies, hence it is more expensive for people outside of the U.S. to purchase American-made goods. Finally, the author also willfully disregards innovation as a factor. A study published in the Am J Public Health journal reported that 36 percent of all new molecular entities (NME) were developed in the United States from 1992 to 2004, whereas Germany contributed 7.5 percent. There’s more to the story than just aggregate numbers. The author, still, somehow purports that exporting is some form of a game in which Germany clearly “wins.”

The author also demonstrates a clear lack of understanding of Germany’s economic policy. He claims that “Hartz IV” was a social aid program that improve quality of life for German workers. I don’t claim to be a German public policy expert, but with a quick Google search, I found that Hartz IV (2005) made significant cuts to unemployment benefits. This policy hoped to incentivize unemployed citizens to find jobs. From the implementation of the policy in 2005 to 2008, unemployment rate fell from 11 percent to 7.5 percent. Yes, the Hertz program helped the German economy, but it wasn’t socialism that did it.

The author finally suggests that Americans must prioritize manufacturing jobs to propel economic growth. “Because of Germany’s active social security net, citizens are free to pursue vocations with little financial anxiety.” To this I ask: who’s paying into the social security net if no one is making money? The author assumes that, just because Germany had success in its manufacturing sector, the United States, by default, must also gain from manufacturing! The author also asserts that the U.S. must regain its “economic excellence” by going back to the “golden years of the ‘40s, ‘50s and ‘60s.” The author promises to “Make America Great Again if we’re just willing to completely disregard the fact that during those times we were manufacturing tanks and artillery to fight against the National Socialist German Worker’s Party during WWII (Whoops!). Who needs higher education when we can just send everyone to canning factories? Will students willingly forgo their higher education to work in the manufacturing industry? After all, it is supposedly the crux of economic prosperity. See you in the assembly line, comrades!

About the author

Hill News Staff