German Economy

5 Key excerpts on "German Economy"

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  The German Economy

  Beyond the Social Market

  • Horst Siebert(Author)
  • 2014(Publication Date)
  • Princeton University Press

    (Publisher)

  CHAPTER ONE Basic Features of the German Economy

  Germany is an open economy with a strong industrial base, producing about a third of its gross domestic product for export. It is also an economy in which social protection and the state play dominant roles. These two characteristics establish the central theme that will be encountered throughout this book.

  Because of its openness, Germany is influenced both by the intense competition on the world product markets and by the competition among locations for the internationally mobile capital and technology that abound on the world’s factor markets. Economic decisions in Germany are therefore subject to the country’s need to compete in the world economy. This has been a fundamental economic law for Germany since the end of World War II. Openness means that, by and large, free markets for products prevail. The exceptions are regulations in specific areas and subsidies to sectors like coal mining and agriculture.

  In contrast to this openness to competition, however, protection exists in many areas of the German Economy, especially protection of the individual—e.g., through social security for unemployment, health care, nursing care, old-age pensions and by social welfare. About a third of GDP is allocated to the “social budget.” Those in employment are also protected, with respect to both their jobs and their wage incomes, as negotiated by the social partners, the trade unions and the employers’ associations. Germany’s labor market is heavily regulated. The social partners have a strong position arising from legal stipulations; they have been granted the right to define norms and set the nominal wage rate. In addition, people are protected against the implications of competition by the institutional forms of governance in the German system. Reliance is placed on a non-market type of decision-making, as in the management of firms through codetermination by the employees’ and union representatives in the supervisory boards of directors and in the workers’ councils, the allocation of capital through a bank-based system with intermediated products, and the formation of human capital, especially in universities, via a governmental administrative planning approach. Codetermination restrains the influence of market forces in firms; mediated products are a substitute for market products in the capital market, and human capital formation is government dominated.

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  Germany

  Unraveling an Enigma

  • Gregory Nees(Author)
  • 2011(Publication Date)
  • Intercultural Press

    (Publisher)

  The German Social Market Economy

  Like so much else about Germany, the German way of doing business is also enigmatic. How does a country with very high labor costs and one of the strongest union systems in the world manage to maintain its competitiveness as a world leader in exports? The explanation lies in Germany’s culture. Many people falsely assume that an economic system is the sum of immutable market forces combined with inviolable economic laws. Nothing could be further from the truth, as Hampden-Turner and Trompenaars have so eloquently shown.1 In any country, economic behavior mirrors the culture and the historical forces that have shaped it. In Germany’s case, the need for order, the desire for security, and the sense of duty and responsibility are directly reflected in Germany’s soziale Marktwirtschaft , or “social market economy.”

  Americans, especially businesspeople, sometimes find it hard to understand why the German economic system has functioned so well for so long. This comes from viewing the system from two characteristically American cultural perspectives. The first is the central American belief in individual freedom and a strong dislike of anything that constrains individual liberties. The second is the corresponding assumption that the “invisible hand” of a deregulated free market will most effectively organize an economy, and, consequently, anything that interferes with the operation of a free market is undesirable. As might be expected, given the Germans’ desire for order and security, Germany’s economy is indeed highly regulated. Nevertheless, the fact that the system has worked well is borne out not only by the high standard of living in Germany but also by its export statistics. Despite a severe lack of natural resources and a population only one-third the size of the United States, Germany often runs neck and neck with the United States in the race to be the world’s largest exporter.

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  West Germany (RLE: German Politics)

  Politics and Society

  • David Childs, Jeffrey Johnson(Authors)
  • 2014(Publication Date)
  • Taylor & Francis

    (Publisher)

  Faced with these indications of considerable economic success and individual prosperity, the observer may well wonder how such achievements can be explained. Can it all be attributed to excellent labour relations and high productivity? Is the organisation of German industry and commerce more efficient than that of its EEC partners? Do German workers work consistently harder than those of other nations? Has the West German Economy any weak points? Can its success be expected to last? The present chapter will try to answer these and other questions. At this stage suffice it to say that the German Economy can be compared to a beautifully maintained high-powered car which functions perfectly in reasonable weather on the motorway; its performance in winter on poor roads is as yet unknown.

  The main pillars in the structure of the West German Economy are the state, the employers or Unternehmer , the employees and, in an ancillary capacity, the chambers of industry and trade.

  In the Basic Law the state is implicitly charged with the duty of applying such economic, financial and social measures as are necessary to protect the economy and the interests of all parties involved in it. Successive federal governments have shown considerable reluctance to interfere in industry or in the relations between the various sectors, yet periodically certain government measures have been taken. During the 1950s, for example, the government supported the ailing Ruhr coal industry and the textile industry. The federal ministers most closely involved in the management of the economy are the Bundesministerium für Wirtschaft (economics) and the Bundesministerium der Finanzen (finance).

  Banking

  The chief agents of government intervention into the running of the economy are the German Federal Bank, or Deutsche Bundesbank , in Frankfurt and the Federal Cartel Office in Berlin. The Deutsche Bundesbank

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  Germany under the Old Regime 1600-1790

  • John G. Gagliardo(Author)
  • 2014(Publication Date)
  • Routledge

    (Publisher)

  Chapter Eleven The German Economy, 1650–1800: Industry, Commerce and Finance

  Next to agriculture and its closely associated industries, manufacturing was the most important sector of the German Economy and one which received a great deal of attention from the territorial princes and their Cameralist advisers and officials. Recovery from the Thirty Years War in this sector occurred more rapidly than in agriculture; the larger cities which housed artisan and other manufacturing activities had generally suffered less direct war damage than smaller towns and rural areas and population losses were less severe, so that the important factors of fixed capital and labour started from levels considerably better than in the agrarian sector. State activity, here as elsewhere in Europe in the age of mercantilism, was directed towards increasing both quantity and quality of manufactures – the former primarily in order to cover domestic demand as fully as possible so as to reduce imports, the latter for both that reason and to increase exports. With problems in both areas from somewhat to greatly more severe than in other countries of Europe until at least the middle of the eighteenth century, the German territories coupled the encouragement of domestic manufactures with a particularly rigorous prohibition of imports of finished goods and of exports of many raw materials, thus not only depriving German consumers of many commodities fairly readily available elsewhere in Europe, but also disadvantaging the commercial sector by reducing it to a handmaiden of the manufacturing economy. The universal recognition of the inferiority of German manufactures, particularly to those of France and especially in high-quality luxury goods, was in fact responsible for some rare legislative activity in the imperial diet: in 1676, 1689 and 1702, imperial laws prohibiting the import of a majority of French goods into the Empire were passed. While in each case passage was eased by the fact that the Empire was at war with France, war was more occasion than cause for these measures, which lay in the desire to protect a still recovering manufacturing industry from foreign competition. The seriousness of the problem is further exposed by the ineffectiveness of the laws, due to non-observance by a number of territories, including especially the Imperial Cities, most of which had opposed their passage in the first place.

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  The Politics of the New Germany

  • Simon Green(Author)
  • 2013(Publication Date)
  • Routledge

    (Publisher)

  Chapter 7

  Economic management The end of the ‘German Model’? Summary

  For much of the post-war period, the so-called ‘German Model’ of economic management was hailed as a great success, not only in terms of reconstruction after 1945 and the development of Germany into a major economic power, but for the consensual nature of its industrial relations. This chapter outlines the main characteristics of the German Model and examines pressures on the institutional framework of economic management in post-unification Germany, focusing on globalisation, industrial relations, corporate governance and European integration. In sum, it asks to what extent the German Model remains ‘fit for purpose’ in the twenty-first century.

  Introduction

  Germany possesses one of the world’s most successful economies. In absolute terms, it is the third-largest economy globally and one of the top three exporting nations in the world. In terms of wealth, as measured by gross domestic product (GDP) per person at purchasing power parity (i.e. taking into account variation in price levels), Germany is also one of the twenty richest countries in the world. German workers enjoy high levels of welfare, relatively short working weeks and some of the most generous holiday entitlements anywhere. In fact, so successful has the German Economy been, especially given the degree to which it had been destroyed during the Second World War, that it has become common to talk of the ‘German Model’ of economic management. This chapter explores what makes it so special. It also surveys the range of pressures, both external and internal, that have combined to place the German Model ‘under stress’ (Padgett, 2003).

  Background

  Germany’s status as one of the world’s leading economies is all the more remarkable in light of its roller-coaster historical development. Germany only really began to industrialise after unification in 1871 under the leadership of Bismarck. However, once begun, this process was extremely rapid, to the extent that, by 1914, Germany had already joined the UK, France and the United States as one of the world’s great industrial powers. Of course, like other countries, the First World War almost bankrupted Germany as a state, and this, combined with the heavy reparations imposed at the 1919 Treaty of Versailles, left Weimar Germany economically vulnerable. But worse was to come. As discussed in Chapter 2

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