The Economic Impact of Globalization on Germany’s GDP

International trade started with colonial empires and developed because no country is self-sufficient. Currently, countries depend on international trade, – exports, imports, international financing, foreign investment, etc. – which are the necessary foundation of international businesses. Sanjinés  (2002) states that a country will export the products in which it has a comparative advantage and import the goods in which it has a comparative disadvantage. This logic produces global competitiveness and makes the efficiency, effectiveness, and quality of products or services improve and spread throughout the world, reaching potential customers. This is where the term globalization comes from, and why it has arisen as an essential phenomenon for the economic, political and cultural development of the countries. Germany is a clear example of how this phenomenon contributes to the Gross Domestic Product (GDP), the indicator that measures the national production of each country, thus determining the macroeconomic state of Germany.

Economic Impact of Globalization on Germany’s GDP

The GDP is the value of the total sum of goods and services produced in a country after one year. In terms of GDP, Germany is the fifth world economy and the first in Europe. The country is recognized as a leader in the scientific and technological sectors and it is the second country in the European Union in R&D spending.

In terms of foreign trade Germany is the third largest exporting country in the world, after the United States and China. Since 1953 it has been recorded in the leading group, and led it temporarily for the last time in the years 2003 to 2008. Its world market share in 2010 was 8.3% (China’s was 10.4%, United States’ was 8.4 and Spain’s was 1.6%). Germany was the second largest importing country in the world, after the United States in the same year (Donges, 2012).

Germany’s Foreign Investment

Donges (2012, page 1) states that the volume of direct investment of the German business sector abroad was estimated by the Bundesbank in the order of 1 billion euros. It is today 50% higher than ten years ago. Only the United States and the United Kingdom exceed this record.. A country specializing in auto parts, science, and technology is a great niche market for large entrepreneurs because they can make investments in a market that is increasingly more interconnected by globalization, that contributes in a large part to the economic quality of the country.

Donges (2012) also states that “the current account balance of payments in Germany yields large surpluses. In terms of competitiveness, Germany lends itself to two interpretations: The first one focuses on the specialization of the comparative advantages of the economy ’(p.2). The second interpretation of the German foreign surplus derives from the macroeconomic equation of GDP and focuses on the excess of domestic savings due to the domestic investment in fixed capital.

Companies in Germany are obliged to pay their workers excellently, in addition to tax subsidies and benefits, to guarantee the quality of life of the inhabitants. . The German labor market is becoming an increasingly better participant of the international competition of wage costs. For a long time, products and capital were mobile, although labor was the element that represented a stable factor that slowed down globalization. Subsequently, cross-border action of the workforce can be  carried out in different ways: The workforce coming from abroad may be integrated directly into the European businesses and workplaces; or labor can be relocated overseas for a short or long time indoors; also, work centers may be founded abroad or work centers or parts of work centers (headquarters) may be relocated overseas (Kocher, 2017). These business and state policies represent, once again, the surpluses offered by Germany.

Over the years, Germany has not left margin for a fiscal deficit;  its rates and accounting periods are those planned by the government and contemplate research and development in each of its activities to reach every corner of the world and walk hand in hand with the centralization of technology brought by globalization. According to AMECO data, Germany’s nominal compensation, between 1996 and 2006, grew by 0.9% annually compared to 1.3% in the Euro area. Over the same period, productivity (per employee) grew by 1.8% compared to that of the Euro area, which was1.3% (Stockhammer, E., Hein, E., & Grafl, L. 2011).

For the reasons above, and thanks to globalization,  some countries, have had to contradict German policies to safeguard the management of their multinational companies by taking their businesses to less developed countries. In many cases, there they will not correctly install their operations and will prefer to abandon the framework of the European national states and, de facto, withdraw their loyalty to their national countries. This also causes a plummet of the degree of social integration in their countries, and all the more so, because their reasons to establish somewhere else are purely economic  (Beck, Moreno,  & Borrás, 1998 ). This situation adds a negative connotation to globalization – not everything can be positive – because it also implies the absence of global state, more accurately, a world society without a world state and a world government because multinational companies put themselves above the laws of a country.

 In addition to this, globalization provides an “economic opening” that has unequal consequences on the workers labor time and representation at the company level. Those consequences are channeled in a way that highlights the political agency of the people who respond to globalization (Burgoon, B., & Raess, D. 2009). Globalization brings significant growth and economic openness, decreases working hours and increases productivity.