Mercantilism is the economic theory that trade generates wealth and is stimulated by the accumulation of profitable balances, which a government should encourage by means of protectionism, according to the Oxford Dictionary. We see nations like Germany rely on this model as they produce various products to export through trade. German manufacturing has provided the nation with Europe’s strongest economy, but this is not the model China is following to become America’s successor as the financial capital of the world.
Italy may have a lower GDP than Germany, but the average Italian has a higher net worth than the average German. The average Italian has a household net of $295,020. In contrast, the average German household is worth $304,317. Yet Italy has half the GDP of Germany at 2.108 trillion compared to 4.26 trillion. A few short years ago, the average Italian or Spaniard had a higher net than the average German despite Germany having the strongest economy in the continent.
Germany has clung to inflationary fears in the aftermath of the hyperinflation that arose post-World War II. The government has kept taxes high as a result. What made America great was consumerism – people lined up to sell products to Americans. Germany, on the other hand, focuses on producing products to sell to someone else.
China understands what Germany does not. China is moving in the direction of the US to create a consumer-based economy. It will take time, but in 15-20 years, nations will line up to sell to the Chinese.