Ailing Infrastructure: Scrimping Threatens Germany’s Future, Part 1

Published on Spiegel Online International, by staff, June 27, 2013 (Photo Gallery).

From the outside, Germany appears to have a robust economy. But a new study by a leading economic institute reveals that the country is investing far too little in infrastructure and its future, effectively saving itself to death … //

… Germans save more money than most living in the industrialized world, but they invest very little in their future, making them much weaker economically than leading politicians realize. According to the study, Germany is saving itself to death. 

Chronic Lack of Investment:

The diagnosis is alarming. Although Germany has weathered the financial and economic crisis better than all other large industrialized nations and created over a million new jobs, this comes largely thanks to years of wage restraint by the country’s trade unions.

To make matters worse, the productivity of these jobs — a decisive aspect of long-term growth and prosperity — has contributed just as little to the current upswing as consumer demand, which has been an important growth driver in other countries.

The Berlin institute points to a chronic lack of investments as the main cause for this low productivity. Both the state and the private sector spend too little money on infrastructure, education, plants and machinery.

“Despite all the successes of the past few years, Germany has not created an investment basis to ensure robust growth,” the researchers conclude.

In other words, Germany is living off its reserves. Bridges are crumbling, factories and universities are deteriorating, and not enough is being spent to maintain phone networks. This has resulted in a massive impoverishment of the country, according to DIW calculations.

Nearly 15 years ago, the state’s net assets still corresponded to 20 percent of gross domestic product (GDP). When adjusted for inflation, this amounts to nearly €500 billion ($650 billion). By 2011, this had dwindled to 0.5 percent of GDP, or a mere €13 billion, primarily due to systematic neglect.

All of Germany’s political parties have pledged to spend more money on highways, transportation and education during the upcoming legislative period — but they have often made such promises in the past. In the end, however, the already meager budgets for investment were slashed and the money was distributed to preferential groups of voters. It could be a similar story this time around.

Good at Saving, Bad at Investing: … //

… (full text).

Part 2: Rotting Roadways;

Part 3: Communication Breakdown.

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