Nokia and socialism in Germany

[Torsten]

A couple of weeks ago Nokia announced that they would close its plant in Bochum, Germany. The German media mainly supported the employees of the plant who went on strike demanding that Nokia change their decision to move the plant to Romania. German politicians announced they would "fight for the right of the German workers". They also demanded that Nokia pay back millions of Euros the German and EU government gave Nokia in subsidies when they opened the plant in Germany. The German TV channels showed angry Nokia workers who gave interviews saying that Nokia was an "inhuman" company because of their plans to close the Bochum plant.

Although I can understand the emotions of these workers, I don't think they should act as if they had the right to be employed by Nokia. Who says that Nokia has to give them jobs? If Nokia hadn't opened the German plants those workers wouldn't have had any jobs in the first place. Also, Nokia is giving them at least 1.5 years notice so they'll have a secure job for the next 18 months. How many people have such a privilege these days? If those workers loved Nokia so much they could have applied for jobs at the new plant in Romania.

What is your take on the situation?
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[Prezbucky]

It's all about ownership -- who owns those jobs, Nokia or the workers?

In my view, it is the job of the government to entice employers like Nokia to continue operating in the country. If the govt is so pro-labor (anti-business) that Nokia has no incentive to stay, then the government has failed.

Hopefully Germans will learn this economic lesson: workers lose when companies close their doors. Ergo, being anti-free enterprise doesn't pay.
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[Torsten]

One of the reasons why Nokia opened that plant in Germany in the first place was that they received millions of euros in subsidies from the EU and the German governments. Now that Nokia has announced its plan to move the plant from Germany to Romania the German government wants Nokia to pay back 41 million.

As far as I know Nokia did nothing illegal -- the received the subsidies for opening the plant in Germany and they stayed as long as they were required by the EU regulations. I don't understand how the German government can be so naive as to think that Nokia would continue operating their plant in Germany when they can reduce their production costs and receive new subsidies by moving to Romania.
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[Prezbucky]

I'm no expert on contracts, but if Nokia fulfilled their end of the bargain (IE, both Nokia and Germany/EU met the demands of consideration as mandated by the contract), then Nokia is not culpable for moving to Romania. So Germany failed, somehow, to keep Nokia in Germany.

There's nothing wrong, per se, with wanting to look out for the interests of workers. But this is a good lesson that if the demands on companies are too great, competitive offers from other places will result in a move.

If we start from the basis that a company has the right to operate as it sees fit (within the law, of course), as directed by its owners, then Nokia is within their rights to move. That's assuming that they fulfilled their end of the consideration of the contract.
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[Torsten]

That's exactly how I see it.
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[Jamie (K)]

We have the same situation in the United States with competition among municipalities. One city will offer a bunch of big tax breaks for companies to move their headquarters or manufacturing facilities there. The companies move. Then, as soon as the tax breaks expire, the companies move their facilities to some other city that has offered them a similar deal. The administration and citizens of the city that the companies have left will scream that it's not fair, but it usually doesn't occur to them to lower taxes permanently so that the place is always attractive to employers.

Whether it's between two American cities or two European countries, if you offer some company a deal, and you do nothing to make the situation permanently attractive, then you deserve what you get.

Also, that entitlement mentality that workers exhibit in Germany -- and in my home state, by the way -- is one of the biggest things driving employers away.

[Prezbucky]

Yeah...

Not to rip on Delaware, but how on earth are so many companies headquartered there? It's not on account of the wonderful gardens or wide-open spaces.

It's because of the tax advantages of keeping shop in Delaware.
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[Jamie (K)]

No, it's because Delaware has no usury laws, so credit card companies and other lenders headquartered there can jack their interest rates up to the moon. You'll notice that banks located in other states still have their credit card branches as separate companies headquartered in Delaware. There's some other state they headquarter things like that in too. I think it's Montana.

[Prezbucky]

Lol

Citibank credit card HQ... in Missoula, MT

That would be funny
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[Prezbucky]

Home of the REAL city-slickers.
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[Fan Of Arabian Horses]

[Jamie (K)]

It's already been proven in many countries that governments don't run factories or other businesses profitably.

[Torsten]

Hi Michael,

I think Jamie is right, governments usually are bad entrepreneurs. Running profitable companies is not exactly their job. As for Nokia, where did you read that they didn't meet the subsidy requirement defined by the EU? I can't see anything wrong with what they did and I'm sure they will continue making profits and creating new jobs.
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[Prezbucky]

The USSR tried the government-as-proprietor gig and it didn't really work out for them.

The reasons were legion in aspect but really boiled down to a few key concepts.
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