As to "economically wrong," it seems unlikely. As to the rest, who cares?

I did a study a couple years ago for my company about moving our German facility to Poland. Because shutting down a German facility is prohibitively expensive we didn't, but, if you already have a Polish facility and need to expand in Europe there is absolutely zero arguments for Germany, especially because in Germany you don't hire new workers, you marry them for life, That's why so few are hired. In our company it was approaching 10 years since we had hired a new hourly worker.

Jeff,

Are the German workers that loyal or is there a very strong union? It seems incredible, 10 years? Wow!

Bartman:

They do have a strong union. Any worker who has been with the firm for 90 days gets full rights including roughly 1 year's severance if terminated. Because of that terminations are rare but hirings are rarer. There is a vibrant temp industry supplying workers for 89 days and that is how we (and just about everyone else) handled short-term spikes. This leads to a situation where:

1) Nobody leaves voluntarily because there are so few jobs to go to. In addition, it doesn't take long to accrue 6-8 weeks vacation and nobody wants to start over. Also the works council (union local roughly) has the right to limit or overturn almost any management decision.

2) When terminations do happen they are devestating. One of our German executives told me that anyone we terminate over 45 years old will probably never work again.

3) Nobody hires anyone because the labor situation is so inflexible. The Germans (and French, Scandanavians, etc) have a terrible time competing with dynamic economies because of the statutory rigidity of their labor situations. Also, they get very little foreign investment except for take-overs of going concerns. Nobody wants to take on all the liabilites involved with having employees.

4) A constant unemployment rate in the mid-teens. In 2000, during the strongest economy in several years, the Ruhr valley had a 13% unemployment rate.

5) A political environment where the entire economic structure is based on entitlements and where even the tamest of reforms sends the workers to the barricades.

This is why despite all of the hype, the Euro-zone can't compete with the US or the best countries in Asia. They lack the dynamism.

Tragically for Eastern Europe they have chosen the wrong side. The current EU countires can't wait to impose their stagnant polices onto the new members in order to limit their current competitive advantage.

It would be an interesting mental exercise to hypothesize on whether that portion of Germany which was the DDR, might in the long run have been better off if Germany had not reunified.