Germany, France Need to Reverse Their Brain Drain
By Matthew Lynn
Feb. 14 (Bloomberg) -- Television shows and expatriate gatherings don't usually provide much of a clue to the long-term economic prospects of a country.
The exception? The popularity of the German TV show ``Goodbye Deutschland'' and French presidential candidate Nicolas Sarkozy's decision to hold a rally in London last month.
Germany and France are suffering from significant brain drains. Bright, entrepreneurial young workers are streaming out of both countries -- an indictment of the economic and social systems that have become stultifying.
In both cases, that needs to be reversed soon. No country can prosper unless it provides plenty of opportunities for its most skilled people.
That can only be done by cutting taxes and loosening many of the regulations on business that have stopped people from carving out careers for themselves in their own country.
In Germany, worries about a brain drain are relatively recent. ``Goodbye Deutschland'' has featured a host of German families relocating to countries such as South Africa and Spain. Yet the issue is real. Government figures showed 145,000 Germans leaving the country in 2005, the highest number since 1954.
Germany now has a rapidly declining number of inhabitants. According to the Berlin Institute for Population and Development, the German population will fall from 83 million today to just 24 million by 2100, assuming the birthrate stays at current levels and there isn't a wave of immigration into the country.
London Listing
Nor is it just people; it is companies as well. Air Berlin Plc, the fast-growing German budget airline, decided to incorporate in the U.K. rather than in Germany when it listed its shares on the stock market last year.
It is important to maintain some perspective. Dirk Chlench, an economist at Essen, Germany-based Hypothekenbank in Essen AG, says immigrants to Germany exceeded emigrants leaving the country by 79,000 in 2005. Moreover, the rate of emigration isn't rising.
That isn't the whole story. It is the type of people who are leaving and where they are going that is more important.
``Despite these benign overall figures, there is some anecdotal evidence that highly qualified workers are leaving Germany because of better opportunities to earn money abroad,'' he said in an e-mailed response to questions.
French Diaspora
The French exodus is, if anything, even more serious. In total, there were 102,470 French citizens registered at France's consulates in the U.K. at the end of 2005, including 98,199 in London, according to Foreign Ministry statistics. There is even a research group of French expatriates in London studying what ``les rosbifs'' have got right and the French have got wrong.
``To those who left France because they believe France has lost the taste for risk and success, I want to say that we can recoup it together,'' Sarkozy said at the London rally. ``Come back, because together we'll make France a great nation where everything will be possible.''
When presidential candidates are pleading with people to come home, you can tell something is wrong. Of course, at a time of globalization, people have become more mobile than ever. It isn't unusual to move to other countries, seeking new challenges, experiences and opportunities.
What is happening to France and Germany, however, looks more like a brain drain. There are three reasons why that is likely to be damaging to both economies.
Three Reasons
First, it robs a country of its most creative talents. There are only a small number of people in any generation who are likely to be good at running big companies, starting new businesses or devising new products. Lose them, and their place probably won't be taken by anyone else. After the people with ``get up and go'' have got up and gone, the country left behind will be drained of energy.
Next, it demoralizes the rest of the population. Every country needs role models. It needs to see its citizens doing well. If most of those people are making successes of their careers in a different country, then it is hardly going to encourage those who remain at home. Once the idea takes root that you have to migrate to get ahead, it can take decades to reverse -- as the Irish discovered before their success in recent years.
Lastly, it benefits your rivals. London has received a huge boost from the numbers of French and German highfliers who have crossed the English Channel. There are plenty of trading floors and hedge funds in London that would miss their regular supplies of sharp, young French mathematicians. So as your own country gets weaker, your immediate neighbors get stronger. You create a vicious circle. Once formed, it will be hard to break.
Rhetoric won't fix the problem. Pleas from Sarkozy won't empty the South Kensington cafes of their French expatriates. No amount of hand-wringing from German Chancellor Angela Merkel will stop the German exodus.
Instead, you need to have the right combination of low taxes, deregulation and open competition that will convince people they can build careers by staying where they are.
Because if your own people don't see a future in your country, it is unlikely that anyone else will.
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