A. Lange & Söhne is a German watchmaker just of outside Dresden in Saxony. But Lange isn't any ordinary watchmaker of the Swiss sort. Correction: in some respects it is. I'm a lover of fine watches and have loved clockwork since I was a boy. Lange timepieces are some of the finest and most valuable in the world. The Lange name, like its Swiss competitors, is synonymous with extraordinary engineering and high quality.
I toured the factory during my trip to Germany and it was nothing short of extraordinary. I'd imagined, before visiting the Lange factory, that it would be like in the movies: the old men huddled over their magnifying glasses with their instruments in some dusty room full of old clocks. But the place I saw was much more like some sort of advanced NASA laboratory. The factory hummed, while all sorts of extremely focused looking engineers when about their work. There was a room called the Decorating Room where each component of a Lange watch is sculpted by a master artist, even the various tiny cogs and spring machinery that will never be seen unless the watch is dismantled. After a watch is built by hand that way, it is tested and then taken apart, then re-assembled and tested again. The tour guide who walked us through the factory beamed with pride at almost every stop. The firm touts, frequently, their pride in their product, their Saxon heritage, and the Lange place in the pantheon of German engineering.
In the world of concert pianos, the name Steinway & Sons is well-known. The factory in Queens is one most people think of when they think hand-crafted quality pianos. But for almost as long as Steinway pianos have been produced in New York City, there has also been a Steinway factory in Hamburg, Germany. Concert pianists often take preference between the two, some preferring the "New York Steinway" and others the "Hamburg Steinway." While the Steinway firm insists there is little more than aesthetic differences between the two, in both price and reputation the Hamburg Steinway has the edge. Used Hamburg Steinway concert grand pianos sold in the United States frequently sell for substantially more than brand new New York Steinways.
After my visit the Hamburg factory, it is easy to understand why. The careful approach to craftsmanship, attention to detail, and beaming pride with which the workers went about their tasks was nothing short of impressive. Like the Lange watches, each Hamburg Steinway concert grand is a unique hand-made instrument. Each individual piano bears its own distinctive sound and feel. Needless to say, these pianos are premium goods at premium prices, but buyers swear they are worth every penny. I've been to the basement in Steinway Hall on 57th Street and to the factory selection room in Queens. While every New York Steinway is very impressive, the Hamburg Steinways I heard were simply amazing.
Which brings me to the point of this story. There is a simple reason why Germany manufactures so many high-end goods, from the best watches to the finest grand pianos, all the way up to Porsches and highly complicated precision instruments: it is the policy of the German government.
Well, it isn't exactly a policy. It is more of a framework. Germany's method of creating wealth is straightforward: 1. Produce a highly educated workforce. 2. Have that workforce create and make advanced, precision things for high wages. 3. Export the things at a high price and then re-invest that money back into item 1. This is why Germany is the Number 2 exporter in the world despite having only 27 percent of America's population and only 6 percent of Number 1 exporter China. The Germans realize they cannot beat either China or India based on cost. Advanced nations can't compete on cost. America could bust all the unions, get rid of the minimum wage, eliminate all social benefits and taxation and we would still lose jobs to low-wage nations. Germany decided to avoid going down the same path of downward spiral among its middle class that we are in. Instead, they invest in their people and in research.
This stands in stark contrast to the America's current policy, which can basically be summed up as: 1. Let the market work by having government not interfere. 2. If the market doesn't work, give the market a bunch of public debt money. In short, America has no industrial policy or framework for future growth. Worse, many American officials don't want one. Whenever you bring up an American industrial policy, the first thing Republicans trot out is the old "don't pick winners and losers" shtick. The problem is that no policy at all does pick winners and losers. The winners will be financial speculators and others who can manipulate information faster than everyone else.
If America is going to grow and prosper, it has to make, build and export things around the world in far greater quantity than we do today. The information, finance and consumer economy, as we have seen, do not produce tangible wealth for the middle class. The first step toward making things again is having a government that makes heavy industry a priority over banking.