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Go East Young Man
The Rise of Central Europe

Europe’s economic center of gravity has shifted, new statistics confirm, from heavily-regulated, high-wage markets like France and towards the cheaper, more freewheeling east. This has both in part been caused by and accelerated a German shift in investment. Reuters reports:

A quarter of a century later, the continent’s industrial geography has morphed. A more fitting image might be a golden soccer ball centered on southern Germany and reaching into Poland, Hungary, the Czech Republic, Slovakia, Austria and Romania.

“We have seen a huge relocation and concentration into a central European manufacturing core,” says Michael Landesmann, scientific director of the Vienna Institute for International Economic Studies.

Former-communist countries that joined the European Union in 2004 and 2007 have become the extended production line of German industry, no longer just supplying raw materials and components but assembling cars and some industrial machinery.

The report also raised some interesting points on other important European regions. The UK is losing manufacturing jobs but picking up other service jobs to grow employment; France, on the other hand, is losing manufacturing jobs and not replacing them.

Similarly, the southern periphery of the eurozone is nowhere: no sign (yet) that despite massive unemployment, industrial investment is moving south. The perceived north-south split (with France caught in the middle) is real.

No pattern lasts forever and this one could also shift, but as long as it holds, the focus of German foreign policy is likely to keep shifting east—as countries like Poland and the Czech republic matter more to German manufacturing, they will matter more to German politicians.

This underlines the need for countries like France, Italy and others to ask themselves what reforms will attract more investment—from Germany as well as from outside the Union. As the French and Italian governments move to deregulate their labor markets (often in the face of fierce opposition from their own people), Greece digs in its heels, and Spain wavers in the middle, these questions are especially pointed.

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  • WigWag

    The only two nations in Europe worthy of any respect at all are Poland, the Czech Republic (and maybe Slovenia). The rest of our NATO “allies” are useless. Poland in particular has done a magnificent job and rehabilitating itself. Savaged first by Nazi Germany and then by the Soviets, the speed with which Poland has modernized is mind boggling. It’s too bad we can’t bottle whatever it is that animates the Polish spirit and drop it in the water supply of the Germans, French, British, Dutch and the rest of our erstwhile European allies who are self-immolating.

    It is disgraceful how poorly the Obama Administration and, before that the Bush Administration, treats Poland. French, British, German and even Hungarian tourists can waltz in and out of the United States without a visa. Poles on the other hand have to wait on long lines (for up to ten hours in some cases) at U.S. Consulates in Poland to obtain a visa.

    Once they reach the front of those lines they are subject to interviews by the most junior consular officials who decide whether or not a visa will be issued. There is something particularly humiliating about making a 75 year old grandmother wait for hours for a ten minute interview by a twenty-something incompetent brat (a fair if somewhat over-generalized description of the U.S. Government employees in question) just so she can visit her children and grandchildren who are legal residents of the United States. This isn’t atypical; it happens all the time.

    Polish college students who want to tour the United States just as American students tour Europe all the time, have almost no chance of obtaining a visa. The rationale is that some will overstay their visas and work illegally in the United States. Of course the same thing is true of young people from nations where visas to enter the United States are not needed. Besides, if anyone is going to work illegally in the United States, we would be a lot better off with undocumented Polish workers than the undocumented workers who pour into our country from so many other nations where people are less educated, less willing to work hard and far more inclined to take advantage of our safety net programs.

    Few nations in the world are more Pro-America than Poland and few have participated so enthusiastically in the military conflicts that we’ve undertaken (for better or for worse) since the beginning of the new century. We’ve repaid Poland for its friendship by treating it like garbage. We know that in the time of Obama treating allies like dirt and adversaries like dear friends is the new normal, but the way Obama has treated the Poles is particularly offensive.

    It’s time to make the Germans, British and French wait on long lines to get visas to enter our nation; whatever humiliation and inconvenience goes with that will be richly deserved.

    The Poles on the other hand should be treated like cherished allies because that’s what their behavior on the international stage warrants.

    • Andrew Allison

      I agree that Poland doesn’t get enough credit for its “rehabilitation”. The country is an example of what could, and should, have been done by other peripheral countries joining the EU. That said, I think that you are a bit hard on the Germans — they too made an astonishing recovery from WW-II — including managing the reunification — and, as the post suggests, southern Germany is the center of what, for want of a better description, I’ll call productive Europe. I appears to me that NATO, and especially the failure of the European members to carry their weight, important as it is, is a distraction from the issue raised in the post, namely the rapid development of Central Europe and the decay of the rest of it.

      • WigWag

        I agree with you in part, Andrew. Germany’s ability to recover from the devastation of two world wars is a remarkable achievement that should not be underrated. Successfully integrating East Germany was no easy fear either; yet Germany succeeded with no whining and little outside help. The German proclivity towards hard work, thrift and good management practices works very well in a capitalist world; good for the Germans.

        But in another sense, the Germans are the biggest welfare recipients on the planet; they are large, wealthy and capable, yet Germans shirk their international responsibilities with barely any sense of guilt.

        When it came time to reflate the world economy after the recent economic calamity, the whole responsibility fell to Americans. If the subject is providing for the defense of the western system and the democratic world, the Germans are AWOL. If the subject is creating a financial system in Europe that’s both workable and fair; the Germans are no where to be found. When it comes to defending the very Western values and liberalism that is responsible for their prosperity and ours, the Germans opt for an amoral multicultural ethos.

        A fair amount of German prosperity derives from their ability to freeload off the United States; not all of German prosperity, but some of it.

        Poland, which is far poorer than Germany (in large part because of how Germany treated Poland in the 20th century) is anxious to step up to the plate and meet and exceed its international responsibilities.

        If you’re ever in a fox hole and presented with an opportunity to have a German or a Pole join you as an ally in that foxhole; do yourself a favor and pick the Pole. Poland will fight with you; Germany thinks it makes a contribution by nagging you to death.

        • Andrew Allison

          I’m not sure that I would classify it as welfare, agree that Germany has benefited most from the eurozone and has perhaps not done as much as it should in response to the its difficulties. On the other hand, as Greece is discovering, whoever has the gold rules. I was struck by the import of the original post’s suggestion that the center of gravity of the production of goods (manufacturing) has moved east, to central Europe; and suggested that the problem with the rest of Europe, politely referred to as lack of competitiveness but, in more brutal terms, is living beyond its means. Simply put, there are those (Poland, et al.) who planted their seed corn, and those who ate it. I suspect that what those who had crops to harvest do with them is, in the long run, more significant than the fact that they did so.

    • Mader Levap

      Thanks for kind words. I am personally kinda annoyed (to say at least) that after all of these years, even supporting some dumb USA decisions (some of them that we shouldn’t, like participation in Iraq or secret jails on our territory), we still need visa. We feel taken advantage from without recompenstation. Worst news? We still need USA and NATO, as EU is pretty weak against Russia danger.

      …yeah, we are [bleep]ed again, aren’t we? At least this time it is only Putin’s Russia, not Germany-Russia combo.

      • WigWag

        Congratulations, Mader, you come from a great country; all Poles should be very proud. We shouldn’t forget the Polish Pope who did as much to bring down communism as anyone who has ever lived.

        One quibble; Poles don’t make enough children. Your country is committing demographic suicide. Poland has one of the lowest birth rates in the world. For a relatively devout Roman Catholic country this seems strange to me, but it is what it is.

        To continue to compete and thrive, Poland needs to bring its population growth up to at least replacement value; you’re nowhere near it now. Poles need to have more sex and utilize less contraception or in the long run the country’s goose is cooked.

        • Mader Levap

          “For a relatively devout Roman Catholic country”
          Seems like we are less devout than you think. 😉

          “To continue to compete and thrive, Poland needs to bring its population growth up to at least replacement value; you’re nowhere near it now. ”
          Demographics, or rather low birth rate, is problem of all countries that have relative prosperity. We certainly came out well (if painfully) from depth of communism, especially in comparison with other post-communistic countries.

          “or in the long run the country’s goose is cooked”
          I don’t think there was ever country in history of the world that ceased to exist just because of low birth rate. While it IS problem, I do not see it as existential threat for any country.

          And in long run (one or two centuries) technology will make this whole “sex as means to make babies” thing irrevelant. But that’s different story…

  • Curious Mayhem

    It’s certainly visible in investment and growth patterns. Europe’s remaining unreformed “blue model” states — France and Italy arethe big ones — are headed for the trash heap.

    This article doesn’t mention the energizing reforms that renewed the Nordic countries, or, earlier, Britain and Ireland (before the Irish made the mistake of joining the eurozone). These were and are the models for revitalizing Europe.

  • FriendlyGoat

    This is one of the many reasons why a very large “United States of Europe” would be a better idea than new “nations” of Corn-Land, Oil-Land, Electronics-Land and Financial Trading-Land differentiating themselves here. The more Europe unites its strong points with its weak points, the better off everyone will be.

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