ABSTRACT
This article privileges an institutional explanation rooted in the financial sector for the persistent German trade surpluses of the past 15 years. Specifically, it explains the disruptive consequences of a long-running stagnation in domestic investment in combination with rising German savings, particularly from corporate and government actors. It links these outcomes primarily to policy changes in the early and mid-2000s. The article also offers a constructivist explanation of how German elites have understood (and often misunderstood) the trade surplus. I characterise German elites as using a formula of ‘normalise and apologise’ to explain away worries about the surplus. The result is what one might call a ‘political narrative of unbalanced growth.’ The argument concludes with implications for the tense German-American economic relationship.
