Outsourcing Debate Hits Germany

Well, well, this was hardly unexpected. In fact the reality may well be that this time there is plenty of smoke but no fire, since Siemens has announced it has no concrete plans to move 10,000 jobs abroad. Indeed much of the noise at present may emanate from a threat to move as a negotiating posture in order to try and force changes. But behind this the underlying reality is that the problem is coming. Not only is Germany having a ‘job-loss’ recovery there is good reason to doubt whether it is having a recovery at all. And of course the main course may well be yet to be served since many of the jobs threatening to relocate seem to be in the industrial sector, whilst just round the corner the high-end services issue is surely coming. Still there is one difference with the US: the headlines are not being made by an opposition candidate talking about Benedict Arnold CEO’s, but by a Chamber of Commerce head who seems to be saying he’s Benedict Arnold and proud of it.

Unpatriotic or economically imperative? The uncompetitively high cost of labour in Germany is fast becoming a source of friction between business leaders and the government in the eurozone’s biggest economy.

Companies argue their only choice is to move jobs abroad, a solution which is set to become easier with the imminent eastwards expansion of Europe.

But Chancellor Gerhard Schroeder, fearing a mass exodus of jobs to low-wage countries at a time when German unemployment is already cripplingly high, has roundly slammed such deliberations as “unpatriotic”.

The debate seems to have hotted up in recent weeks, with companies, particularly in the high-tech sector, apparently mulling plans to relocate thousands of jobs abroad.

The powerful metalworking union IG Metall said that the electronics giant Siemens was considering relocating up to 10,000 jobs in its mobile and fixed telephony divisions and its automatisation, energy and transport businesses in order to cut labour costs.

Corresponding plans had been submitted to employee representatives in the activities concerned in recent weeks, the union said.

But it is not only the IT sector — which is estimated to have lost around 70,000 jobs last year — that is following the call of lower costs abroad.

The airline Lufthansa is to move large parts of its accounting department and its purchasing activities to Poland and car maker Volkswagen already builds around 13 percent of its vehicles in central and eastern Europe.

And the VCI chemicals industry association found that while the domestic research and development (R and D) budgets of its members were set to stagnate this year, the companies were planning to increase their R and D spending outside Germany.

The DIHK federation of chambers of commerce poured oil on the fire of the controversy this week by appearing to throw its weight behind some sort of campaign for companies to turn their backs on Germany.

DIHK President Ludwig Georg Braun advised companies “not to wait for better policies, but to act and take advantage of the opportunities offered” by the eastward expansion of Europe.

The comments immediately drew fire from the government, currently battling to bring down the chronically high level of unemployment in Germany.

Schroeder slammed the remarks as “unpatriotic”. And the new secretary general of Schroeder’s Social Democratic SPD party, Klaus Uwe Benneter, was similarly enraged.

“When industry leaders talk down Germany as an economic site in such a way, they’re acting irresponsibly,” he fumed.

Even the opposition CDU party was up in arms, with the head of the CDU’s social committee, Hermann-Josef Arentz, attacking Braun’s comments as “bare-faced cheek”.

But business leaders insist they have no choice.

The head of the BDI industry federation Michael Rogowski said moving production out of Germany was the only way companies could remain competitive and “secure those jobs that are left in Germany.”

High-tech companies such as the software giant SAP agreed.

“If we don’t move, then we can’t be competitive. We lose market share and then we lose part of the jobs in Germany as a result,” SAP chairman Henning Kagermann said in an interview with Financial Times Deutschland.

It was “an economic imperative” to move to low-wage countries.

The head of Siemens’ fixed-networks division ICN, Thomas Ganswindt, said that by moving activities abroad, “we’re following the markets. Globalisation means that we create value where there is demand for it, that is to say, where there is growth. At the moment, growth is taking place elsewhere.”

The attractions of relocating are clear — an IT employee in India, for example, earns around a third of the amount his German counterpart takes home.

But that was not the only problem. The head of IBM Germany, Walter Raizner, pointed the finger at Germany’s inflexible labour market laws.

Countries that had changed their laws were now closer to full employment than Germany was, Raizner said.

And DIHK President Braun rejected the allegation he was unpatriotic.

“True corporate patriotism lies in pushing for consistent policies of reform,” he argued.
Source Yahoo News

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About Edward Hugh

Edward 'the bonobo is a Catalan economist of British extraction. After being born, brought-up and educated in the United Kingdom, Edward subsequently settled in Barcelona where he has now lived for over 15 years. As a consequence Edward considers himself to be "Catalan by adoption". He has also to some extent been "adopted by Catalonia", since throughout the current economic crisis he has been a constant voice on TV, radio and in the press arguing in favor of the need for some kind of internal devaluation if Spain wants to stay inside the Euro. By inclination he is a macro economist, but his obsession with trying to understand the economic impact of demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".

9 thoughts on “Outsourcing Debate Hits Germany

  1. Ah, well. As everywhere, this is a cyclical debate. Last time “offshoring” was a big deal was in early 1996, just as the Kohl government was finally starting to understand the need to reduce the social security contributions aka taxes on labour.

    But the patriotism twist is new. And as far as I can tell from today’s popular media reaction, it’s not the way people see it. Quite to the contrary. Going bankcrupt for the fatherland is not exactly popular in Germany. Strangely enough, SWR3, one of the most popular radio apparently only today realised that there is something wrong in the state of Germany. News that entire factories are being dismantled and shipped off to China are apparently hitting most Germans right on the spot.

    As I see it, the debate might well aid the chancellor’s slowed reform debate, as most people don’t have redeployable assets. So they need to get the legislation right in order to convince those with redeployable assets to stay because it makes good business sense.

  2. A link to this story.

    Funnily enough that version says “AFP text, photos, graphics and logos shall not be reproduced, published, broadcast, rewritten for broadcast or publication or redistributed directly or indirectly in any medium.”

    Is FFoE licensed to redistibute this content? This certainly isn’t fair use, and it certainly isn’t the first time Edward’s done this.

  3. “This certainly isn’t fair use, and it certainly isn’t the first time Edward’s done this.”

    This is an interesting point, and raises a lot of questions about blogging. I agree this isn’t the first time. Firstly does anyone know under what legal regime an international group blog like this actually falls?

    Having said that I suppose I don’t see the relevance in ‘fair use’ (even were it applicable) as a concept in a non-commercial hobby. Fistful doesn’t even accept advertising. Can someone help put me right if I am wrong (I am sure you will) and give some background examples.

    Raising this further: is there any case law whatever about blogging and *any* form of copyright?

    Of course it is fairly easy to cut/paste and rewrite chunks: I normally try to resist doing this for the somewhat warped reason that I think it is fairer on the orginal journalist to reproduce what they actually wrote (even though I often prefer my own version 🙂 ).

  4. Back to the main point:

    “So they need to get the legislation right in order to convince those with redeployable assets to stay because it makes good business sense”.

    I think this is what all the threats are about, to force the changes. And I think as far as the ECB is concerned this is what the high euro is all about: to concentrate minds on the ‘structural reforms’.

  5. Myself, I generally refrain from doing it after consulting a lawyer/blogger friend of mine. A teaser paragraph or two, enough to set up the mood, and that’s use. Fair use doesn’t cut it.

  6. “Fair use doesn’t cut it”.

    You may well be right here Randy, but my question is which law is actually applicable here, I have absolutely no idea.

    Just one thought: this information is actually given away free of charge. This makes it, at least to my untrained eye equivalent to the many free news papers which circulate our cities. So supposing you have a house with a window bordering on the pavement and you display prominently a copy of an article in one of these newspapers, or put it on a placard in a demonstration, and attached a recomendation to read, would this constitute infringement of copyright?

    Has any judge anywhere examined these issues? If you look at the napster case you will see that these are the types of issue which arise. We call blogging personal publishing, but has anyone looked into in court what publishing means in this case.

    Does anyone know what is the legal form of the blog, what I mean is in what categry it falls. What would be the distinction between the blog and my above mentioned window. They are non-profit personal pages. Remember this information is given away, and no-one is being asked to download anything. There is not even a file to be shared.

    I appreciate that Des is very concerned, but is there any evidence that Reuters and AFP are? My feeling is that if they haven’t made their displeasure known then they are implicitly happy to benefit from the small scale publicity, in this case indirectly through the Yahoo link I provide right at the start of the article.

    “Interestingly enough AFP assert the following: The information contained in the AFP News report may not be published, broadcast, rewritten or redistributed without the prior written authority of Agence France Presse”.

    The interesting word is “rewritten” since this seems to suggest they seek to exert property rights over ‘the information’ such as “the ECB yesterday raised intested rates” or Jean-Claude Trichet “is quoted as saying….”. Now it is important to remember that not every claim that people make is actually justified. In this case it is not clear that once you put ‘information’ or ‘ideas’ into public circulation that you can then exercise ownership rights on them.

    Also since it is not clear to me that what we do here at Fistful constitutes publication, broadcasting or redistribution as they are normally defined, it would seem that the most likely possible infringement would be rewriting, which is what I have normally meticulously refrained from doing. Of course if you just do a clever rewrite and no link at all, no one is any the wiser. The only losers would be Yahoo, AFP etc who no longer get the free publicity. Would you find this preferable Des?

    One last detail Des: I don’t follow the significance of the link to channnel news asia when the very same information was available on the link to Yahoo which I provided.

  7. I don’t follow the significance of the link to channnel news asia when the very same information was available on the link to Yahoo which I provided.

    Sorry, I simply missed the link – it’s a long way from the quoted text. The version I provided was exactly the one a Google search found.

    I am not a lawyer, and I don’t even play one on the InterWebNet, but my lay understanding is that copyright governs the right to make and distribute copies. (Your newspaper example misses precisely this point.) What Fistful does is most certainly as much a form of publishing as Yahoo! news is, and so far as I know the question of profit-making is relevant to nothing outside, perhaps, your conscience. I am as confident as my lay status allows that for all legal purposes a web site, personal or otherwise, is publishing.

    If you think Yahoo (or Reuters, or…) would grant permission, why not ask? If they said yes then you’d be in the clear.

    Normal blogging practice, which stays more-or-less within my worthless interpretation of the law, is to use a brief pertinent fragment (if there is one) in support of your point (if you have one), with a prominent and clear link to the original. I think it would be a net win in every possible way if you did it like this. As a reader of blogs, I know how to follow links, and I trust my judgment on when to do so.

    Reuters wire service is in the business of selling content to their customers, and those who want to redistribute it surely pay for that right too. I would, frankly, be astonished if their lawyers weren’t bothered about this kind of thing. (Although I certainly have no plans to grass you up.)

  8. Here are the copyright guidelines as listed in the AP stylebook:

    “The greater the amount of copyright work used, the less likely that a court will characterize the use as fair. The use of an entire copyright work is almost never fair.”

    I would echo Randy’s sentiments: better to include a small excerpt and then link to the entire story.

  9. “copyright guidelines as listed in the AP stylebook”

    Michael, I take the point, this is the AP opinion. I have the feeling they may be wrong, not legally – which I’m note sure about – but about what is in their own best interests.

    I agree there is the little detail here that I attributed this to and linked to Yahoo, but they were I imagined the appropriate licensed subcontractors. I was acting in good faith, since I felt and still feel that this is giving them free publicity and a kind of recommendation. I normally do not link to sources I am not recommending.

    So what I was trying to do was say “look what is happening in Germany” by pointing a finger towards them (what I would call deictic use) as a reputable authority to establish my case. In this sense I see blogging as meta-journalism. And I see the blogger as in more or less perfect harmony with the traditional journalist. This would be the win-win version of the story.

    Now Des is arguing (and I am going to accept while not really agreeing with his view, since in this context the reader is always right and I do not especially want conflict over this type of issue, as I am saying it is distracting from the main topic which is the problem of what is happening in Europe, right now) – what Des is arguing is that this is not in their interest. I am not sure that they themselves are arguing this, since if they had been we might have seen them moving against some bloggers, but still.

    If they were arguing this, I think this would be yet another example of someone not understanding the ‘information rules’ of the new economy. (Simply go back to Tobias’s post on this:


    This would really put them in a similar position to the RIAA and MP3. Similar, but I think worse, because we are talking here about something which they themselves distribute freely. (I think a quite different issue arises when some people – who shall remain nameless – take Pay Per View material and post it. I don’t do this, among other reasons, since I don’t have access to such material since my view is pay per view is a bit like trying to charge for daylight, it isn’t a realistic business model, and I’m not going to support it by paying for something which inevitably is going to have to be free. I simply act as a rational economic agent here).

    So what I am saying is that the traditional journalist would do well to try and adapt to and learn to live with the blogger. I think they could both co-exist, and not with a kind of armed-truce, but with a genuine harmony of interests.

    There is however another alternative, and that is the one which may really provide the greatest threat to them: push the blogger into replacing the journalist. Now if you look at my follow-up post to this – on the Economic Consequences of 11M – you will see where this is pushing me.

    In electronic journalism there are normally a commonly agreed set of given facts – lets say what Trichet is saying, or the latest findings of a consumer confidence index – call this ‘the information’. This is according to the spec what cannot be “published, broadcast, rewritten or redistributed”, but this is something which it is completely impossible to enforce. Once someone eg quotes Berlusconi as saying something nasty in the European parliament this ‘information’ then enters the public domain and really nobody saying “have you heard what Berlusconi is saying feels any need to cite the original journalist”. Ditto with the latest info in the ECB annual report, you may want to go and read the report, or you may simply ‘lift’ the extract that appears in some more proximate source.

    In fact in the age of electronic communication technology maybe 90% of journalism consists of doing just this: taking material from an electronic source and re-writing it. This is what I would call a ‘sweet hack’. This is what I have normally tried to avoid doing, in part because I didn’t especially want to do the journalism donkey work, and in part because I wanted to respect the traditional domain of the journalist.Maybe I will be simply an isolated case, but I have the feeling that if the conventional journalists let their fears get the better of them, and they push bloggers down this road in sufficient quantities, then in the long run they will be the losers.

    However needs must. So I am going to play with journalism. This raises more questions for me, since I don’t especially like the way most journalists write: I browse loads of examples of it simply to garner ‘the information’, not especially because I enjoy the read. So this raises an interesting question in my mind: should I do the two things – my own source material, and meta comments on it. I am an enormous admirer of the surrealists. One surrealist writer Raymond Queneau caught the essence of what I have in mind in a lovely book “Exercises in Style”. For an interesting intro to all this see eg:


    What I am saying is that what I would like to do is write my own journalism (maybe follow Pessoa and invent an identity, I don’t know I am just playing around with this in my head right now) and then comment on this using my other – blogger – identity.

    Well, if you’ve got this far, thank you for doing so, and thank you Des for helping me think about all this (I never imagined you were about to ‘grass me up’: I’m sure you are a perfect gentleman). And if you find all of this a bit far fetched please remember that my ‘authority’ in all this (Queneau) started out by writing l’encyclopedie des sciences inexactes, based on his researches into les fous litteraires (Literary Madmen). Personally, if I have any ambition at all, it would be to found a school of ‘whacky economics’. I’m bored with it being such a ‘dismal science’.

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