Having spent a total of around 4 years living in Europe (3.5 in Germany, and half in Denmark), one thing consistently puzzles me upon my return to the United States: prices. For example, toothpaste would cost around 90 euro cents. Why does it cost around 3 dollars in the US? The same goes for similar personal care products like shampoo, conditioner, facial cremes, condoms and all drug store type items. Shower gel in Germany costs around 65 cents for store brand stuff, about 1.20 to 1.85 for name brand. In America it costs between 3 and 5 dollars? HOW?
The same also goes for food. Grocery shopping in the United States will lead to bankrupcy, even if you buy junk food! However, food prices in Germany are at least half, often even less than half of American food prices. One thing that immediately comes to mind is the portions, European sizes are indeed smaller, but I wouldn’t think enough to warrant such a price difference. Also, though the dollar isn’t doing well at the moment, even when living in Europe when the dollar was strong, the prices remained the same.
Rent is also another issue. Having lived in Boston/Cambridge for a few years, and most recently just a few blocks from Harvard Square and Central Square, rent prices are still lower where I live in Germany which is also the state capital, and far bigger than Boston. Miss Chirol lives right downtown a block or so from the main street in a large room with two roommates and pays much less than I did in Boston for a similar location and setup. Keep in mind both sides don’t have rent control.
Luxury goods on the other hand are dirt cheap in the United States whereas in Europe they remain a bit pricier. Both sides seem to be opposites. The basic cost of living in the United States is far higher than Germany yet luxury goods (electronics, cars, dvds, cds etc) are far far cheaper. Yet, in Germany, th cost of living is very low (the Ausländerbehörde who register foreigners and handout residence permits estimates total monthly needs at around a minimum of 450 EUR to qualify for a residence permit. And keep in mind that where Chirol lives, is in the most expensive area of Germany. Many electronic goods are also falling quickly in price with dvd players as cheap as 30 or 40 EUR and tvs for less than 100. Dvds range from 8 to 16ish EUR and computers are around the same as the US, ~800 EUR and up.
WHY? If Germany’s taxes are so much higher (which they are, salex tax being 16% for example) why is it so much cheaper to live there than here in the US? Readers?
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Comments to this entry
Gabriel Mihalache
August 14, 2005
7:17 pm
1. If portions are larger in the US then the prices per ml (or per ounce) should be smaller, because of the "bulk" effect, not higher.
2. Since Social(ist) Democracy is all the rage in Germany I wouldn't be surprised that basic commodities would be subsidies and luxury items taxed heavily. (It's obscene that some Americans can buy cheap DVDs while their others live in poverty---or at least that's how that old communist arguments goes rehashed...)
3. You also need to take into consideration the average paycheck Germans get. If an average German earns only enough to afford the same lifestyle as an American does, in German prices, then you can't really say that life is cheaper. (There are macro stats indexes for this. None of them have my confidence. The shopping basket one might be insightful.)
4. Higher sales taxes are only an aspect of the government's total intervention in the economy. Also, the German gov. is spending less in some areas and more in others. It's possible for them to use the redistributing nature of taxation for basic welfare. (Instead of ICBM Defense Shield projects, for example---don't get me wrong, I'm all for anti-ICBM defense and anti-communism, but that's how the example goes)
I don't want to preach, but as a classical liberal I have to say that this entire issue is bad business. If governments were to repeal all taxes except a fixed income tax and free all markets of subsidies, punitive taxation, tariffs and the like you'd get the same prices everywhere on this global market (ignoring the variation in transportation and production costs)
Economically speaking, we've suffered enough misguided Keynesian present-oriented bad policies, Chicago School "wizardry", or neo-communist anti-marginalist drivel! What we need is one market for one world and there are no economic reasons against this.
Kenneth
August 15, 2005
12:52 am
Fabian
August 15, 2005
4:39 am
snow
August 16, 2005
2:35 pm
bc99
August 17, 2005
7:03 pm
I remember living as a student in Heidelberg and receiving a great scholarship from DAAD that covered living and studying expenses. I even had play money for travelling to other countries during my time. Most foreign students in the U.S. might get a scholarship that would only cover their studies-- not their groceries and rent.
Also people in the U.S. probably earn more money on average, so that might lead to higher everyday costs.
Chirol
August 17, 2005
8:16 pm
Labor costs are higher in Germany which is one thing that should make prices higher. Also, the cost of buying a house is HUGE in the Germany since you have 83 million people and very little land, yet renting is very cheap. In the US, buying is overally cheap in comparison yet renting still isn't so great. Hmmm.
bc99: I got a DAAD scholarship too for a time as did a friend of mine. It was very generous. I really wonder how the cost of living in Germany is so low. Wages are different too. Some are higher than in the US but some are lower so its a mixed bag in that regard. I wonder if Grendel has any insight...