GERMANY
GERMANY Biggest eco in Europe
THE Coordinated Market Economy of continentLabor
union density lower than Nordic but extensive collective
bargaining coverage Industry-level wage determination
(inter-industry diffs maintained, inter-regional diffs reduced)
Codetermination: employee participation in mngmt; includes work
conditions, wages Wage restraint (trade off personal wages for
other nonwage benefits), esp. post-reunification
Business
Organized in industry associations
Include large and medium firms
Linked to training schools
Concentrated shareholding, although banks now able to divest
more easily Mfg share of natl income remains substantialWelfare
state More stratified. Family oriented (Christian Dem); less
commitment to full employmt relatively generous social service
provision; little redistribution but high level of insurance
(income, job)FRG model central example for Roe, Soskice, although
evaluations of its pfmance opposed. (Pontusson writes more from
Nordic perspective)
Political system: Federal; upper house = state reps;
Parliamentary system, mixed PR/SMD in lower house.
2+ parties (CDS/CDU; SDP; FDP; Greens; Left party Central bank
(pre-euro): Completely independent in setting monetary policy;
legal responsibility for price stability only; stable D-mark de
facto reserve currency prior to MaastrichtCurrent issues
Problems with sluggish growth, generating employment,
demographic bulge remain, but most pronounced 1990-2006 But: high
level of exports, hi productivity, recent improvement. Like other
CMEs, ups and downs of eco not paralleled by ups and down in
employment ratesHow to explain 2-sided picture? Two (none mutually
exclusive!) diagnoses of problems (thru 2005 or so) and
turnaround
1. Internal: Overregulation of capital, labor markets --CME
outlived its usefulness?
--Solution: Introduce liberalizing reforms to make mkts more
competitive (see Economist)2. External: Unusual and exceptional
non-systemic eventsa. Exogenous shock: Unification (1989) i.
overvalue ostmark; kills DDR eco, distorts allocation of
resourcesii. overinvest: inflationary pressure, poor choicesb.
Euro: loss of monetary, fiscal flexibility
Adjustments (post 2000)
--Marginal reduction of protection of labor (Hartz plan) +
revamp active labor market policy
--Retrenchment in welfare state: some benefits cut, retiremt age
raised
--Some deregulation of capital markets via EU
--Some deregulation of retail trade (also in line with EU
programs)
--Political impacts: Split on left; CDU benefits from
recovery
--Adaptation of CME, not abandonment
--Current (2008-12): Big drop in exports in 2008-9 followed by
recovery (V-shaped recession); beneficiary of (for FRG) undervalued
euro
