The fact that Japan and Germany are doing particularly badly in the current crisis is often blamed on their "export dependency".
That's a bit misleading: It's not the export dependency. It's the product portfolio.
Imagine a small country that specialises on supplying McDonald's with its worldwide needs for hamburger buns and beef patties.
Such a country might be hugely export dependent. Yet it would be doing splendidly right now.
Whereas Germany and Japan specialize on providing the world with sophisticated and expensive capital goods. And demand for this kind of goods works like this:
- When the world economy is growing fast, the stock of capital goods needs to be extended fast.
- When the world economy stagnates, demand for capital goods drops to replacement level only.
- When the world economy is shrinking, demand for capital goods collapses, as there is excess supply based on the already existing stock alone
Assume a truck has a useful live of 20 years, and a company operates 100 trucks:
- If trucking volume grows by 5 %, it needs to order 10 trucks per year
- If trucking volume is stable, it needs to order 5 trucks per year
- If trucking volume drops by 5 %, it needs to order no truck at all
That's roughly where we stand right now:
Demand for consumption goods (= trucking volume) is "only" declining a bit, but the need for capital goods (= trucks) goes down by nearly 100 %...