When Economic Success is Not In the Cards
Last week I travelled to Germany to get to the bottom of that country's current economic success, and everyone I spoke with mentioned a few key reasons:
1) Well-engineered products made for export
2) The prevalence of small to mid-sized manufacturers
3) Labor and management working together in innovative ways
4) The frugality of German business and families, who tend to save instead of consume
I was particularly struck by that last one. Germans tend to do what economists are constantly, but unsuccessfully lecturing Americans to do:Â save. And those savings can be productively reinvested back into the economy, instead of falling into debt to spend.Â One German financial analyst suggested to me that "Americans have a gene for consumption." His implication is the Germans do not.
LISTEN TO THE STORY: Germany's strong economy provides lessons for America
Germany is good at making things that foreigners want to buy. But frugality and worker protections are key components of Germany's economic strength. Listen now
A lesson on this subject came from 19 year-old Lukas Seebrecht, the second son in a middle class family living in a lovely lakeside town an hour outside of Munich. I was getting a first-hand look at how German families have a different attitude toward consumption, savings, and debt than we tend to see in U.S. living rooms.
"Anybody here got a credit card?" I asked. Young Lukas had one. I inquired if he had a big balance to pay off on the card. It turns out that Lukas' card has a credit limit on it of just 100 Euro.Â At the exchange rate of the day, the young man can't spend more than $130 with his credit card.Â That is comically low, by U.S. standards. He might as well just carry five 20 Euro bills in his Adidas, I thought. It was one part of the family's pay-as-you-go approach to personal finance.
The statistics back up my finding in that cozy house in Prien am Chiemsee, Bavaria.Â A report about European use of payment cards assembled by the Italian Banking Association found that Germans do just 28 credit, debit, and prepaid card transactions per person per year.Â Americans swipe their cards, literally and figuratively, seven and a half times more often, 212 transactions a year, per person.Â Maybe that's part of the gene the man was talking about.