With one of the world’s most rapidly shrinking populations, Germany faces many challenges to military security and economic stability. The country is de-militarizing as it realizes its coming shortage of human capital, and the need to shift focus to the economic sphere. However, in less than fifty years, over one third of the population will already be over the age of sixty. This will put huge stresses on social welfare programs and the overall spending budget, while Germany will have increasingly high dependency ratios. With an aging population and negative population growth, Germany’s total trade has decreased over the last three years. Although this was mainly due to the global recession, falling rates of domestic consumption are also a huge cause for concern.
In order to combat the negative externalities from Germany’s population trends, the government needs to focus on ways of increasing productivity levels. This can be done through automation, outsourcing, and research and development in order to find innovative ways to combat an increasingly insufficient labor force. This would help keep the country more competitive in coming years, but there is also now a greater reliance on exportation then ever before. Germany is highly reliant on other economies demand levels for success, therefore losing relative power within the European Union and global economy. The country’s trade surpluses are skyrocketing, and this has drawn much concern from other European Union member-states. There is a substantial reliance upon high trade surpluses for economic growth, which makes the economy more susceptible to global economic issues.
Failure to reduce net exports and combat labor shortages will be linked to the reduction of trade volumes in the future, because with all else equal less human capital will result in lower output volumes. With such a heavy reliance on exportation, lower production levels could provoke a domestic economic crisis. The potential labor pool is decreasing nearly twice as fast as the population, while increasing proportions of the population are elderly and reliant upon government. The country has embarked on numerous policy objectives to combat the multitude of challenges ahead, including the reallocation of military defense money to economic stimulus programs. The country has dedicated many resources, and high levels of investment in capital-intensive technology that will work to replace reliance on human participation. Nevertheless, the unbalance in the German economy is clear, as spending and income levels have stayed stagnant over the past ten years; exports share of GDP has risen over twenty percent. No other large, advanced economy is so reliant on other nations consumption levels for success and this will lead to questions about their future position as a global financial leader. French leaders claim that exports account for nearly fifty percent of the country’s gross domestic product, and they are looking for extensive policy reform of European Union trading patterns.
While the country’s de-militarization signals a shift in governmental focus to the economic sector, policy concentration needs to continue to move away from unemployment, disability, and retirement benefits. In the coming era of tight labor markets, unemployment should be eradicated, and poverty levels will improve. However, with the country rapidly depopulating, the tax base is going to take a drastic hit. Therefore, funds to combat these population trend issues will become relatively smaller and smaller. Sustained levels of productivity are a continued focus for the German government, but there is some question as to how successfully the aging workforce will successfully adopt new forms of technology and organization. Older workers tend to be less adaptable, technically apt, and many times are missing the skills needed in high-tech development occupations.
In order to successfully combat extensive labor pool contraction, Germany will be forced to heavily rely on the prevalence of positive participation from immigrants. There will be increased security risks and losses in social cohesion, but migrants could help facilitate increased production for the German economy, and even boost domestic demand levels for certain foreign products. However, policy focus in the economic sector is somewhat limited due to Euro zone policy constraints. Acceptance of the euro results in Germany not having a currency to devalue, which is an important tool in making exports relatively cheaper in the global economy. Future German officials, in response to drastic population decline, will have to move away from a social model, and will be forced to rely on increasing immigration, computerization, and outsourcing for continued economic success.
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