No Special Sauce on This Currywurst

The end of the German "miracle" is coming.

Imagine, for a moment, what might have happened if the North American Free Trade Agreement had been something a little different, something a little more ... intense. Imagine that Mexico had not just opened its borders to American goods and services but had actually become the 51st state. Furthermore, imagine that all Mexicans had learned to speak English overnight. Extreme poverty in Mexico had disappeared, and much of its workforce had instantly acquired manufacturing skills. Finally, imagine that Mexico had, for the previous several decades, assiduously cultivated trading relationships with the rest of Latin America. And now, imagine that some years after this miraculous unification of Mexico and the United States, the U.S. dollar had become the common currency of much of the hemisphere. Can you see where I'm going with this?

When East and West Germany reunified in 1990, the whole was much greater than the sum of its parts. The East got the West's airtight economic institutions, its culture of precision in manufacturing, and its central position in the global economy. The West got a huge inflow of new workers -- the equivalent of about a quarter of its existing labor force -- and access to an enormous market that had been shut off since World War II. This market wasn't the wealthiest, but it had plenty of room to grow. And though these new workers weren't quite as productive as their counterparts in the West, on average they were more than 50 percent cheaper.

The sudden addition of millions of lower-wage, lower-productivity workers to the German labor force dramatically raised the return to capital. Once the initial growing pains of reunification subsided, investment started flowing in. Giving the new workers better equipment and installing them in refitted factories immediately made them more productive. At the same time, their lower wages made German exports much more competitive.

Then came the euro. Germany's exports to the eurozone became easier and more transparent, and buyers outside of the monetary union could pay for German goods and services with a versatile new currency instead of the trusty but limited deutschmark.

So, was it any wonder that Germany became a world-beating exporter? The first couple of years after reunification were rocky, and exports actually dropped. Then came the miracle: Germany's exports grew faster than its gross domestic product in every year from 1994 to 2008, when the global financial crisis started. In those 15 years, exports tripled while GDP (adjusted for changes in prices) expanded by just 27 percent.

Until the onset of the euro crisis, these stunning results had plenty of people saying that Germany had discovered some magic formula for export-led growth in an advanced economy. In The American Prospect, Eamonn Fingleton wrote, "It is high time the German economy got some respect" and called the German model "an extraordinary engine of economic success." It's true that Germany made some slight changes in economic policy during those boom years, including reforms in the labor market and the pension system. But pointing to those changes as the source of its growth was to ignore the elephant in the room -- the elephant with the word "reunification" painted on its side.

Just as there was no secret to Germany's economic triumph, there will be no secret to its decline. Wages in the East have almost caught up to those in the West, and eventually the advantage in exports will disappear. The trading relationships in Central and Eastern Europe have been almost entirely exploited, and Vladimir Putin's Russia is trying hard to pull those regions back into its economic thrall. The deutschmark is now an object of fond nostalgia. Two decades on, the boost from reunification is finally petering out.

This is natural. The size of every country's economy depends on just two things: the size of its workforce and the productivity of its workers. Productivity, in turn, rests on the amount of capital available to each worker and how exactly he or she uses it. As a country settles into a path of steady growth, the "how" is what matters most. You can add and subtract capital and workers with all sorts of idiosyncratic events -- reunification, war, natural disasters -- but the long-term trend in living standards will always depend on the "how."

For Germany, the "how" has returned to center stage. Its every move in the current crisis will have tremendous implications not just for the euro area but for Germany's future as well. It is on the cusp of changing its own economic institutions as well as those of the region. This is how you "improve competitiveness" for the decades to come -- by shifting the deep legal, cultural, and even physical foundations of the economy, not just by tweaking a few regulations in the labor market.

If Germany seizes the opportunity to reconsider these deep economic factors, it will be able to alter permanently the trend -- not just the level -- of its people's long-term living standards. This chance only comes along once in a very long while. For the East, it was reunification. For Germany as a whole, it is the euro crisis. With a little luck, Germany could finally throw some special sauce on that currywurst, rather than just dumping a quarter more hot dog onto the ketchup.


Democracy Lab

Who Cares How Many Women Are in Parliament?

There are plenty of good yardsticks for the state of women’s rights around the world. Parliamentary representation isn’t one of them.

Last month The Economist published its annual infographic about the dearth of women in parliaments around the world. Not surprisingly, some of the most-developed countries -- Sweden, Germany, New Zealand -- top the charts. (Also present are two African countries, Rwanda and South Africa, that have mandated parliamentary quotas for women.)

Equitable representation of women in politics and government is an ideal promoted by every development organization and to which every Western government aspires. Though women comprise over 50 percent of the world's population, they are underrepresented as political leaders and elected officials. The National Democratic Institute puts it plainly: "Democracy cannot truly deliver for all of its citizens if half of the population remains underrepresented in the political arena."

There's a problem with this argument, though: There's no evidence to support it. In Cuba, women MPs comprise 45 percent of the parliament. Yet, in a country where women make up nearly half of the parliament, democracy is not "truly delivering for all of its citizens." And so it goes in many repressive states. They may have plenty of women in power but lag far behind on every meaningful index of democracy.

The Eurasia region illustrates this uncomfortable reality all too well. In Azerbaijan, 16 percent of MPs are female, but every single female MP is a member of the ruling New Azerbaijan Party, which loyally rubber-stamps every decree issued by strongman Ilham Aliyev. In fact, the parliament of Azerbaijan is entirely dominated by one party; there are zero opposition parties in parliament. In other words, there isn't any party parity. Does the number of women matter in a fake parliament?

It is simplistic to assume that the mere presence of women in a parliament corresponds to greater political representation.

What's missing from the focus on women's political participation -- in Azerbaijan and elsewhere -- is political party affiliation. The point of getting women into parliament is to increase representation and, in theory at least, fairness. If a woman is in parliament but she votes however her leader tells her to (as do the male MPs), what difference does gender make?

Western governments and NGOs spend millions of dollars annually trying to increase the number of women in elected legislatures. But counting the number of women in a parliament does not actually tell you how free, fair, or representative that political system is; it just tells you how many women are in parliament. It says nothing about their freedom to think and vote as they choose without fear of reprisal, which should be the primary measurement of parliamentary health.

Women's participation in government matters, of course, but that value comes only after a certain degree of freedom is established. Women can be just as venal, corrupt, and self-interested as men. (Imelda Marcos comes to mind, though pop star and dictator's daughter Gulnara Karimova of Uzbekistan could give her a run for the money).

In the end, party, not gender, is where the focus should be. Yet the NGO community, including donor governments, wrongly focuses almost exclusively on increasing the number of women in parliament regardless of their party affiliation. That focus doesn't make sense if the goal is to improve democratic governance around the world.

As an example of this tunnel vision, the global listing of gender breakdown in parliaments by the International Parliamentary Union fails to capture party affiliation (data from the South Caucasus was drawn from the Caucasus Research Resource Centers). Let's take a look at the relevant gender data for these places:

Belarus leads the pack for gender representation. Similarly, Kazakhstan and Uzbekistan have a relatively high number of women in parliament -- outdoing the United States in raw percentages -- but that says nothing about how just or equitable their politics are or how independent their parliaments are relative to the president.

When we compare IPU's data on female participation with Freedom House's Freedom in the World rankings (with 1 being the most free), a dramatically different picture emerges:

Belarus, Kazakhstan, and Uzbekistan, the three countries with the most women in parliament, are the least free, and do not have independent parliamentary bodies that check executive power. Georgia and Ukraine, which have the fewest women in parliament, are relatively more free than their neighbors with greater female participation.

While we shouldn't draw too many conclusions from these charts, we can at least conclude that there isn't necessarily a relationship between a country's political freedom and the number of women in parliament.

Gender equality in government is important, but it's not the primary variable in ensuring true representation. Political freedom and good governance are basic rights that shouldn't be confused with gender issues. Assuming that female representation indicates greater political freedom is sloppy thinking of the kind that has too often skewed the priorities and undermined the promise of the development community.