Economic Growth, Footballing Superiority and Beer: A Grudging Respect For The Germans

In 1902 Cecil Rhodes said ‘to be born an Englishman is to win first prize in God's lottery’. 111 years later this Englishman thinks the Germans have won the jackpot.
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Sabotage Times has recently begun a series based on admitting to grudging respect for footballing rivals. This would certainly apply for most England fans with regard to the Germans, whose greater levels of skill, tactical nous and effort lead to them winning considerably more often. Sadly this is not just restricted to football and a case could be made for paying grudging respect to the Germans for their recent economic success too.

In the aftermath of the global economic crisis, the UK is struggling with austerity, the US with budget chaos and the rest of the Eurozone with the debt problem. Germany, meanwhile, in the midst of all this, is booming. Its most pressing problem is not cuts or budget deficits but deciding exactly how much of its burgeoning wealth to give away to its’ economically challenged European partners. How on earth does it do it?

Much of the answer lies in its response to an earlier economic problem. In the early 2000’s Germany was struggling, by its standards, with low economic growth and steadily rising unemployment. Much of this was down to the immense costs over the previous decade of absorbing an entire, poorer country (East Germany; in itself a task probably only the Germans could have accomplished so successfully). But rather than bowing to the “inevitable” of making deep cuts and allowing market forces to drive many of its companies to the wall, it chose to do something different.

The Germans realised, unlike some comparable countries, that there could still be a leading role in their economy for manufacturing. Their manufacturing sector is based on two pillars; thousands of small to medium sized family owned businesses that make components for sophisticated machinery and larger marquee brands such as the car makers BMW and Mercedes. Crucially, the focus for both pillars is on making stuff of a quality that countries like China, for all their lower costs, cannot match.

In order to preserve Germany’s manufacturing industry, the Social Democratic government of Gerhard Schroder pushed through a reform programme in 2005 called “Agenda 2010”. This involved reconfiguring welfare benefits to ensure the unemployed could profit from working, relaxing regulations on business and making a grand bargain with companies and trade unions to hold down wage costs in return for job security. The latter deal was implemented through a short-work scheme in which workers’ hours were reduced and part of their wages subsidised by the government.

Although the programme was politically unpopular at the time and cost Schroder his job, an independent report by the OECD calculated that it saved at least 500,000 other jobs during the crisis. It also enabled companies to stay in business, workers to retain their jobs and skills and the government to save on social security costs, all of which put Germany in a much stronger position to recover once the crisis had passed. Almost unbelievably in the present global economic climate, Germany’s unemployment rate has fallen from 8.5% to 7.1% over the last four years and its exports have grown by 27% since February 2010.

Respect, grudging or otherwise, is surely due for this latest German triumph, which owes more to innovative policy making and genuine “all in this together” cooperation, than to stereotypical hard work and efficiency. And just to rub it in, the average still-employed German’s after work beer still tastes better than ours and the train that takes him home is more likely to run on time.

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