Interest in the German model

This blog has referred several times to ‘the Scandinavian model’ of society and government (or “governance” in modern parlance) but it had failed to pick up the growing interest of the British “chattering classes” in ‘the German model’. More than a year ago, one of the British Think Tanks was drawn to observe that -

at some point in every generation, British policymakers look in envy and awe at the German economy. It last happened in the early 1990s, when the UK was recovering from the post-Lawson bust and the ignominy of forced exit from the exchange rate mechanism. Will Hutton’s The State We’re In captured the zeitgeist of this era brilliantly: a time when the Rhineland social market economy appeared to offer a stronger and fairer variety of capitalism than its rapacious, unequal and structurally weak Anglo-Saxon competitor.
The tables turned as the 1990s wore on. Anglo-Saxon economies boomed and created jobs while the German economy got stuck in low growth and high unemployment. Gerhard Schroeder talked about the ‘Neue Mitte’, in conscious emulation of the Clinton–Blair ‘third way’. Germany embarked on difficult structural reform of its labour market and held down real wages as it entered the euro.
The pendulum has swung back and the German model is now in vogue again. The TUC produced in early 2012 a detailed report on the lessons of Germany’s manufacturing strength, attributing its export prowess to deep institutional foundations in its social partnerships, apprenticeships and industrial strategies. Maurice Glasman regularly sings hymns of praise to Germany’s regional banks, vocational traditions (implanted, he argues, by Ernie Bevin after the second world war), and the fact that workers share fully in company decision-making. Meanwhile, shadow business secretary Chuka Ummuna has recently been on a study tour of Germany to mug up on how it achieves a more patient, responsible and resilient capitalism.
Germany’s appeal is not difficult to understand. Its famous Mittelstand of medium-sized family companies that export all over the world has long been admired. It has a superb apprenticeship system and huge investments in both physical and human capital. Its industrial social partnerships have proved a source of durability and strength in the era of globalised markets, not a weakness. Recently it has coupled an expanding service sector to its historic industrial pre-eminence.
What has attracted most attention recently, however, is its employment performance. Germany’s unemployment rate is now lower than it was before the financial crisis struck, while in most of the rest of the OECD it remains high or rising. This is a huge turnaround from the position Germany was in barely half a dozen years ago.

I have always felt at home in Germany - my father was one of a few Scottish pastors who developed a “Reconciliation” mission in the post-war period there – focussing on Detmold, Heiligenkirchen and Bad Meinberg areas in Nord-Rhein Westphalia. He took us with him on at least one trip there in the mid 1950s and it is to this I owe my (mainland) European orientation and (in all probability) the direction my life has taken in the past 20 years in central Europe and Central Asia.

One of my fond family memories is of my father is his wading through the various parts of the weekend Die Zeit newspaper - printed on special thin but glossy paper - which was flown over to him. Not surprisingly I excelled at German and French at school - and started out on a language degree at University (which I changed half-way through to an Economics and Politics one)
In 1961 I ventured to a Polish student work-camp – via Berlin – and will never forget the sight from the train of a still-bombed out Wroclaw.
The next year I spent some weeks at a summer school at Gottingen University – where I was introduced to the post-war stories of Heinrich Boll. 

In 1964 I spent 2 months living and working in Berlin (thanks to the student economic association AISEC) where I encountered for the first time the fervour of an old Nazi – the mother of my girlfriend of the time.
And, as a regional politician, I visited the country several times in the 1980s becoming very aware of how civilised the coverage of German politics seemed to be compared with Britain and envious of the role and status of German regional politicians in national policy-making.

Such a federal system was, of course, the post-war creation of the Anglo-Americans - building on the older system of Laender. And the worker representation embodied in the cooperative system of Mitbestimmung was very much a British element. But the wider aspects of the "social market" (as clearly set out in chapter five of this book) and to be seen in the industrial role played by the state-owned regional banks; in the strength of the training system; in the constant emphasis given to savings were very German; and embodied in their neglected concept of "ordoliberalism" is specifically German. The role of social insurance in the funding of the health system (and of the churches in the management of schooling) are yet more examples of how pluralistic the German system is.
For those wanting something deeper on the subject of the German model - see the recent article on Ideas, institutions and organised capitalism