German Economy, National Strikes, Military Defense Spending, And Why Bernie Gets So Mad -- February 18, 2018

Updates

February 27, 2018: it's even worse than I thought. 

Original Post

One thing leads to another. I started the morning by reading this WSJ article, "Germany's coffers are overflowing, but no one is talking about tax cuts."

Despite huge government surpluses and comparatively low debt, lowering taxes is off the table. 

And the way the Germans are able to generate those huge surpluses? Let the US pay for their defense.

One may agree or disagree on that latter point, but before debating the issue, check out the defense budgets of countries about the world.

Quick, without looking, among the top twenty countries, which country spends the most money on military defense as a percent of its GDP? Two hints: that country ranks fourth in overall spending (the US, of course, is #1); and, that country spends almost 3x what the US does on a percent-GDP basis.

We will come back to this later. But color me surprised.

What about Germany? Germany is #9 on the "money" list, spending less than even France, the UK, or Japan. But wow, look at this: based on GDP ranking, it would be ranked #19 on the list of the top 20 countries. No wonder Bernie and Trump are so mad.

Only Canada, coming in last, spends less on a GDP basis. From the bottom up:

• Canada's military defense spending: 1.0%
• Germany (less than Brazil): 1.2%
• Spain: 1.2%
• Brazil: 1.3%
• Italy: 1.5%

And so it goes.

The German economy: last year the German economy grew at its fastest rate since 2011 and unemployment is at its lowest since reunification in 1990.

I came across that little nugget when checking to see if the most recent nationwide German strike had come to an end. It has. These are the facts and comments:

• it took only two 24-hour work stoppages, spaced about a week apart, to bring the strike to an end
• both sides can claim victory (but I think the tie-breaker goes to management)
• the unions said they were going to hold out for a 6% hike in wages, and a 28-hour work week
• they settled for a 4.3% wage hike over 27 months and decreased working hours
• the union turned down a 6.8% wage hike in exchange for additional one-time payments (the kinds of payments Pesky Pelosi calls "crumbs" ["let them eat bread"]) 
• reading between the lines, the union(s) caved; management came out pretty good
• it's a win-win in the big scheme of things
• compared to the US, the terms suggested by the headlines suggest the German workers got a great deal, but reading between the lines, it's a more balanced agreement than either side would admit
• the German's productivity (production / manhour) must be incredibly high; management must run a very, very tight ship: just-in-time manufacturing and robots are probably key
• I still see Germany as a manufacturing country; the US as a consumer country
• other than the defense issue and their crazy stance on renewable energy, I am quite impressed with Germany -- with "no government" they are muddling through with one of the best economies in the world; Italy should be so blessed

So, back to the question posed earlier.

What country, of the top 10 based on dollars (the countries that matter) -- on a percent-GDP basis -- spends the most on military defense? At the linked site above, from the 2017 Fact Sheet (for 2016), the answer, on a per-cent GDP basis:

• Saudi Arabia: 10%
• Russia: 5.3%
• US: 3.3%
• South Korea: 2.7%
• India: 2.5%

What about China: comes in near the bottom at 1.9%.

No wonder Bernie gets so upset.

Dollars: with the US at $611 billion and China at $216 billion, every other country, in comparison, is a pauper. Russia: about a tenth of what the US spends: $70 billion.

No wonder Bernie gets so upset.

Saudi Arabia is #1 on a percent-GDP basis, but get this: on a "dollar" basis, Saudi Arabia spends almost as much as Russia: $64 billion. And as far as I know, Saudi does not have a nuclear missile program, nor a nuclear submarine fleet. It begs the question: just where is Saudi putting its $64 billion. The $64-billion-question, I guess.

And much of Saudi's defense is augmented by the US' 5th Fleet; the 379th Air Expedition Wing in Qatar; and, boots on the ground -- upwards of 54,000 military and civilians "working" in the Mideast, an increase of 33%, apparently, since just a few months ago. 

No wonder Bernie gets so mad. 

By the way, how much does Iran spend? About $12 billion -- about what Canada spends -- amounting to 3% of its GDP, versus 1% that Trudeau spends. 

Anyway, enough of that. I now have a better idea of the German economy and defense military expenditures.