Quote of the Day: Kierkegaard on Shooting Himself

Germany: Senseless Regulations, Bloated Bureaucracy?

Greece's absurd regulatory state has gotten a lot of attention lately, including my favorite example of a Greek internet start-up that had to wait 10 months to begin operating because of rules which included requiring the company to submit stool samples from its board members.

But if Greece is a 10 of 10 on the scale of pointless regulations, Germany is at least a 4, I'd say. Jack Ewing of the New York Times kicks the tires of Germany hyperefficiency:

Torsten Emmel may have looked like an innocent florist, a gentle guy with a shaved head and an apron, clipping the stems of fresh freesia. In fact, he was on the verge of breaking the law.

Mr. Emmel’s crime: Setting a placard on the sidewalk outside his shop advertising that he would stay open from 9 a.m. to 4 p.m. It was, after all, Mother’s Day. But a city inspector noticed the sign and warned Mr. Emmel that it was illegal to stay open so long on a Sunday. Close earlier or be fined, the inspector said.

It was a lesson in how, despite its vaunted industrial sector, the German economy suffers from some of the same overregulation and sclerosis usually associated with much more troubled European countries.


Alongside the export juggernaut, though, is another, creakier economy that operates well below its potential and holds back not only Germany but the rest of Europe, some economists say.

This economy is overregulated, intended to insulate insiders from competition and deeply resistant to change. Though Germany’s chancellor, Angela Merkel, often harangues countries like Spain, Italy and Greece to become more competitive, the German economy features some of the same flaws that they do, including protected professions and zoning laws that favor existing businesses over new ones.

“Germany has what I would call a dual economy,” said Andreas Wörgötter, a senior economist at the Organization for Economic Cooperation and Development in Paris.

“On one side, we have this very dynamic, innovative, competitive and refreshingly unsubsidized export sector,” he said. “On the other side, there is a much less glamorous services sector which depends on barriers to entry, subsidies and not developing and reaching out for new activities.”


Germany could add about 10 percent to growth over the next decade if it removed barriers to competition and other inefficiencies, according to the O.E.C.D. Surprisingly, the untapped potential in Germany was almost as high as that in Italy and higher than that in Spain, according to the O.E.C.D., an indication that the German domestic economy is not as superior to its southern neighbors as is often assumed.

Ewing then goes on to undermine his point by noting that Germany has ended dozens of labor and opening-hours restrictions in recent years. (Note Ewing's basic assumption that getting rid of regulations is always a good thing.) Meanwhile, over at Slate, Bjorn Lomborg has a go at German solar energy subsidies:

Germany once prided itself on being the “photovoltaic world champion”, doling out generous subsidies—totaling more than $130 billion, according to research from Germany’s Ruhr University—to citizens to invest in solar energy. But now the German government is vowing to cut the subsidies sooner than planned and to phase out support over the next five years. What went wrong?

Subsidizing green technology is affordable only if it is done in tiny, tokenistic amounts. Using the government’s generous subsidies, Germans installed 7.5 gigawatts of photovoltaic capacity last year, more than double what the government had deemed “acceptable.” It is estimated that this increase alone will lead to a $260 hike in the average consumer’s annual power bill.

According to Der Spiegel, even members of Chancellor Angela Merkel’s staff are now describing the policy as a massive money pit. Philipp Rösler, Germany’s minister of economics and technology, has called the spiraling solar subsidies a “threat to the economy.”