How did Germany do it? How did it steer through the economic storms of the last several years and come out stronger than before? What is the secret of a country with high labor and energy costs in maneuvering successfully in global competition?
Jack Ewing takes a crack at answering those questions in his book Germany’s Economic Renaissance (Palgrave, 2014), primarily by drilling down into the experiences of several leading corporate leaders in Germany, who share their insights about success.
The trick, as Ewing tells it, is to find a market niche, pour R&D into creating the best product in it, and stick with it while dominating the world competition. In a country that gets half of its GDP from exports, this formula is vital. And despite the fact that what Germany makes is not cheap, it makes things the world wants.
Success begins at home. Over many decades Germans have developed a formula for maximizing resources to be competitive globally. Management-labor relations have been guided by a cooperative paradigm keeping conflict under control. Germany’s labor force is funneled through a job training apprenticeship system, which produces capacity and innovation. German managers are close to their customers no matter where they are.
The result is Germany’s superpower export machine, which has its presence all over the globe.
Ewing points at a few vulnerabilities in his analysis. He sees one in the excessive dependency on the automobile sector and its related networks. Another appears in the relatively static domestic service sector. And Germany shares a challenge with the United States—investing more in infrastructure and education at home. Then there is the banking system, which needs an overhaul. Whereas the U.S. economy draws a fair amount of its fuel from equity markets, Germany remains over banked and under developed in venture capital formation. Much of that is a legacy of the days of the interlocking economic-business-banking system of yesteryear. But that is now in transition by necessity.
Can anything be lifted from the German model to other countries—particularly the United States? Not entirely. A lot of Germany’s power is built in to the decades old socio-cultural web. But there are modules. Job training-apprenticeship programs are becoming widely popular now in the U.S. business network. An effort to revive the manufacturing base in the United States is part of a look at Germany’s experiences. Perhaps the cheaper energy sector may contribute to more innovation.
A former German foreign minister—Guido Westerwelle—once said about Germany’s economic competition with the United States, “wir müssen Amerika nicht unbedingt kopieren sondern kapieren.” (we don’t necessarily have to copy the United States—rather understand it). The United States has had a different path to its pinnacle of economic success, but it certainly can take a look across the Atlantic to understand what tools are needed to compete today—including those made in Germany.