Let’s look at
one of the most powerful countries in Europe, Germany, which has largely driven
the Eurozone’s overall recovery this year. Germany showed more expansions of
1.4 percent in industrial production in August than in the previous month;
and its gross domestic product (GDP) was increasing 0.7 percent that was over economists'
expectations in the second quarter of 2013. It seemed that the anticipation for
German industries could remain positive in the short term. Indeed, there are
several motivations: superior domestic demands, the moderate inflation, a stable
labor market, an increase in new exporting-orders and a historically low
interest cost in the euro zone. However, I think that there are still several
fatal problems in the longer term, for example the hard shift in energy
resources.
On one hand, compared with the United States, the price of German
energy is so high that it cuts down its International Competitiveness and
causes considerable losses; a rigid and inefficient energy market with rising
costs also puts Germany’s market share at risk. On the other hand, the foreign
dependency rate of the German economy reached 52 percent in 2012. This ratio
indicates that a higher carbon energy policy is not just an issue for some energy-intensive
manufacturers, it will affect the entire trade, the German
populace, and the fiscal position of the German state. Therefore, I consider
that Germany will have a long path to pursue a competitive energy scenario
such as exploiting onshore wind and solar power.
As our
textbook presented, avoiding additional costs for energy-intensive industries
has positive macroeconomic effects on balance of payment, foreign exchange
reserve, and terms of trade. Compared with the Germany, the United States has a
comparative advantage in heavy industries such as automobile because American’s
prices of domestic goods are under the world price but German market prices of
same products are higher than that level. Nowadays more importers would like to
set their orders from the U.S. companies such as General Motors rather than Volkswagen from Europe, which improves the American economy including adding
wages of industrial workers, gaining owner’s
capital and extending production possibilities frontier. On the contrary,
more German goods with high costs have to remain in the domestic market increasing
the unemployment rate and even causing amount of pollution in the long run. So
I believe that the upward profit in second quarter can not withstand potentially
rising energy prices in the long run, unless Germany speeds up shifting to low-price and clean
energy.
Reference:
So in away are you indicating that US has a comparitive advantage because of its efficient energy cost that let them make more autos. But I think that technology is the factor that determines the advantage but I dont know what thery we would use to look at this
ReplyDeletei would also agree with Alex that Germany would have a comparative advantage in cars due to their technology. But my real thought is that if you claim Germany can't continue its present growth unless more efficient energy is implemented, would you also agree that the United States could be better off and perhaps even grow if we began to use the energy we have here in North America. The U.S has two of the largest oil reserves in the world which are found in Bakken Shale oil field mostly in North Dakota, and the Permian basin, mostly in West Texas.
ReplyDeleteIf you look at these two areas of the country, they're doing quite well economically, the people working at Mcdonald's in North Dakota aren't on strike demanding $15/ hr, because they are already making $15 an hour. Not only are generally lower skilled workers being payed higher than in other parts of the country, but the actual jobs involving oil are very well payed.
I'm not suggesting we use fossil fuels forever, we can't, but these reserves could be utilized until efficient alternative sources of energy are available.