The term German model is most often used in
economics
Economics () is the social science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services.
Economics focuses on the behaviour and intera ...
to describe post-
World War II
World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the vast majority of the world's countries—including all of the great powers—forming two opposin ...
West Germany
West Germany is the colloquial term used to indicate the Federal Republic of Germany (FRG; german: Bundesrepublik Deutschland , BRD) between its formation on 23 May 1949 and the German reunification through the accession of East Germany on 3 O ...
's means of using (according to
University College London
, mottoeng = Let all come who by merit deserve the most reward
, established =
, type = Public research university
, endowment = £143 million (2020)
, budget = ...
Professor
Wendy Carlin
Wendy Joan Carlin, (born 1957) is a professor of economics at University College London, expert advisor to the Office for Budget Responsibility, and research fellow at the Centre for Economic Policy Research. Her research focuses on macroeconom ...
) innovative industrial relations, vocational training, and closer relationships between the financial and industrial sectors to cultivate economic prosperity. The two key components of the German model is a national system for certifying industrial and artisan skills, as well as full union participation in the oversight of plant-based vocation training.
The German model of collective bargaining differs from the model common in other European countries and the United States.
In Germany, unions and employer associations bargain at the industry-region level.
In contrast to tripartite corporatist systems, the German government is not involved in the negotiations.
These large-scale agreements have broad coverage and lead to considerable standardization in wages and employment conditions across the country.
Some bargaining occurs at the firm level.
History
In 1869, legislation liberalized apprenticeship training, removing restrictions on who could take on apprentices.
In 1881, 1884 and 1887, legislation tightened the restrictions.
A law passed in 1897, the Handicraft Protection Law, stabilized a plant-based apprenticeship system in German industry. The law set limits on the number of apprentices a firm could take on and introduced a monitoring system for the quality of training.
According to
Kathleen Thelen
Kathleen Thelen is an American political scientist specializing in comparative politics. She is the Ford Professor of Political Science at the Massachusetts Institute of Technology (MIT), a permanent external member of the Max Planck Institute f ...
, this law played an essential role in cementing what would become the German model. The 1897 law was the result of bargaining between the state and the artisanal sector, which had a supportive relationship.
Organized labor had a minimal impact on the legislation and the social democrats opposed the legislation due to suspicion of the traditional artisanal sector.
Thelen writes that the impetus for the legislation was "deeply political and mostly illiberal."
Over time, the social democrats were incentivized not to dismantle the system established by the law, as labor unions became increasingly filled with skilled workers trained under the apprenticeship system.
In the Weimar Republic, German unions had become advocates of the in-plant training system.
Gradual changes were made to the vocational training system in the 20th century.
Industrial relations
![Germany-Tax-Revenues-As-GDP-Percentage-(75-05)](https://upload.wikimedia.org/wikipedia/commons/9/92/Germany-Tax-Revenues-As-GDP-Percentage-%2875-05%29.JPG)
Under the German model,
union
Union commonly refers to:
* Trade union, an organization of workers
* Union (set theory), in mathematics, a fundamental operation on sets
Union may also refer to:
Arts and entertainment
Music
* Union (band), an American rock group
** ''Un ...
s are organized at the industry level and co-exist with
works council
A works council is a shop-floor organization representing workers that functions as a local/firm-level complement to trade unions but is independent of these at least in some countries. Works councils exist with different names in a variety of re ...
s at both the plant and company levels.
These unions negotiate wage determination with
employers' association
An employers' organization or employers' association is a collective organization of manufacturers, retailers, or other employers of wage labor. Employers' organizations seek to coordinate the behavior of their member companies in matters of mutual ...
s. The strength of this setup is the cooperation among unions and management councils. This is unique among Western countries, which have been marked by either substantial weakening of union powers (such as in the
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...
and
United Kingdom
The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the continental mainland. It comprises England, Scotland, Wales and North ...
since the 1980s), or consistent union conflict (such as in
France
France (), officially the French Republic ( ), is a country primarily located in Western Europe. It also comprises of Overseas France, overseas regions and territories in the Americas and the Atlantic Ocean, Atlantic, Pacific Ocean, Pac ...
and
Italy
Italy ( it, Italia ), officially the Italian Republic, ) or the Republic of Italy, is a country in Southern Europe. It is located in the middle of the Mediterranean Sea, and its territory largely coincides with the homonymous geographical re ...
, where unions have remained strong).
Consensus model
As in relations between unions and employers, the German model also seeks to harmonize relations between regulatory bodies and affected parties, as well as between individual companies to prevent ruinous competition within the scope of applicable antitrust law. Considered an outgrowth of the non-confrontational culture of postwar Germany, finding a common denominator was often the main goal in such relationships.
Vocational education and training
![Kaminfegerausbildung-2008 09 10 038](https://upload.wikimedia.org/wikipedia/commons/5/51/Kaminfegerausbildung-2008_09_10_038.jpg)
The system of
vocational education
Vocational education is education that prepares people to work as a technician or to take up employment in a skilled craft or trade as a tradesperson or artisan. Vocational Education can also be seen as that type of education given to an ind ...
is perhaps the most important component of the German model, and is still very prevalent in the German educational system. In Germany, there is a much heavier emphasis on
apprenticeship
Apprenticeship is a system for training a new generation of practitioners of a Tradesman, trade or profession with on-the-job training and often some accompanying study (classroom work and reading). Apprenticeships can also enable practitioners ...
s for skilled positions, taught by expert worker-instructors. It has been made possible through long-term politics, focusing on establishing stronger links between the dual vocational education and training system and institutes of higher education, on improving integration into vocational training through basic skills and permeability and on establishing national coverage of branch-specific regional initial and continuing training centres.
As such, there is a lower percentage of university students in Germany when compared to other Western countries, and a much lower percentage of persons entering the workforce for on-the-job training.
Vocational training is required for a large number of occupations. At the end of vocational training, a highly regarded certification qualification is awarded that is valid for a range of over 400 occupations. This is in stark difference to other European countries, where the number of controlled occupations is much smaller .
Critics cite inflexibility of the school system as the main disadvantage. Some 60% of graduates change their profession within 10 years of graduation .
Financial and industrial relations
German
bank
A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets.
Because ...
s have a much larger role in shaping the industrial sector than those in other Western countries. Rather than simply collecting savings and investments and issuing loans, most German banks have large interests in the
commercial sector. As such, many corporate boards offer seats to high-ranking German banking officials, whose banks are often investors in the corporation. As a result, they seek to promote long-term
investment
Investment is the dedication of money to purchase of an asset to attain an increase in value over a period of time. Investment requires a sacrifice of some present asset, such as time, money, or effort.
In finance, the purpose of investing i ...
in the overall health of the companies they are working with.
Future of the German model
Since
German reunification
German reunification (german: link=no, Deutsche Wiedervereinigung) was the process of re-establishing Germany as a united and fully sovereign state, which took place between 2 May 1989 and 15 March 1991. The day of 3 October 1990 when the Ge ...
German prosperity has declined compared to pre-unification West German levels, and the German unemployment rate reached record levels: 12.6% (according to national definition) as of March 2, 2005, the highest rate since World War II. The failure of the German model to maintain standards of high performance has led experts to speculate about its demise, despite having been adopted successfully in other countries' corporations since its peak. Others see the relative decline as an unavoidable consequence of integrating the much less advanced GDR economy and 17 million new citizens, which necessitated a transfer of over 1.3 trillion Euros from west to east as of 2009.
Much of the political discourse regarding reforms in recent years revolved around the question of how to modify the German model (and the political conditions forming its framework) to sustain it in a globalised economy. Ex-Chancellor
Gerhard Schröder
Gerhard Fritz Kurt "Gerd" Schröder (; born 7 April 1944) is a German lobbyist and former politician, who served as the chancellor of Germany from 1998 to 2005. From 1999 to 2004, he was also the Leader of the Social Democratic Party of Germa ...
's reforms, called "
Agenda 2010
The Agenda 2010 is a series of reforms planned and executed by the German government in the early 2000s, a Social-Democrats/ Greens coalition at that time, which aimed to reform the German welfare system and labour relations. The declared objectiv ...
", made some steps towards such a goal, but also brought with them much controversy. Nonetheless, after years of 'painful' reforms, the German economy seems to have got back on track.
The
wage share
In economics, the wage share or labor share is the part of national income, or the income of a particular economic sector, allocated to wages (labor). It is related to the capital or profit share, the part of income going to capital,
which is also ...
, however, measured as
compensation of employees {{no footnotes, date=April 2010
Compensation of employees (CE) is a statistical term used in national accounts, balance of payments statistics and sometimes in corporate accounts as well. It refers basically to the total gross (pre-tax) wages paid ...
as percentage of
gross national income
The gross national income (GNI), previously known as gross national product (GNP), is the total domestic and foreign output claimed by residents of a country, consisting of gross domestic product (GDP), plus factor incomes earned by foreign ...
, was declining in Germany since the 1980s.
![GNIdistributionFRG](https://upload.wikimedia.org/wikipedia/commons/0/06/GNIdistributionFRG.png)
Unemployment has fallen below 10% (according to national definition) for the first time in years and economic growth reached 2.7% in 2006.
In June 2016, the unemployment rate was reported as 5.9% by the German Federal Employment Agency (
Bundesagentur für Arbeit
The Bundesagentur für Arbeit (Federal Employment Agency, BA) is a German federal agency in the area of responsibility of the Federal Ministry for Labour and Social Affairs and has its headquarters in Nuremberg. Its current director is Andrea Na ...
).
Whether this is an ongoing development is however a matter of continuing debate, as are further reforms.
Counter-argument: Rise of the German model
![Annual Export to 2008](https://upload.wikimedia.org/wikipedia/commons/7/79/Annual_Export_to_2008.jpg)
As of 2009 and the recent worldwide economic downturn, some analysts have speculated that the German model of social capitalism is resurgent and is the most responsible economic system that still ensures the survival of the
free market
In economics, a free market is an economic system in which the prices of goods and services are determined by supply and demand expressed by sellers and buyers. Such markets, as modeled, operate without the intervention of government or any o ...
. With recent economic schemes and company abuses, such as in the
Bernard Madoff
Bernard Lawrence Madoff ( ; April 29, 1938April 14, 2021) was an American fraudster and financier who was the admitted mastermind of the largest Ponzi scheme in history, worth about $64.8 billion. He was at one time chairman of the NASDAQ s ...
scandal, the
Enron scandal
The Enron scandal was an accounting scandal involving Enron Corporation, an American energy company based in Houston, Texas. Upon being publicized in October 2001, the company declared bankruptcy and its accounting firm, Arthur Andersen then on ...
, and the
financial crisis of 2007–2010
Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of fina ...
, the German model of a rigidly structured and regulated economy has become more attractive.
From 2003 to 2008, Germany (a nation with only 80 million inhabitants) was the world's biggest exporter. In 2009, China (1.3 billion inhabitants) overtook Germany in exports. One of the reasons for this are the
Hidden Champions Hidden champions are relatively small but highly successful companies that are concealed behind a curtain of inconspicuousness, invisibility, and sometimes secrecy. The term was coined by Hermann Simon. He first used the term as a title of a public ...
as a result of the German Model. Germany's
Hartz Reforms
The Hartz concept, also known as Hartz reforms or the Hartz plan, is a set of recommendations submitted by a committee on reforms to the German labour market in 2002. Named after the head of the committee, Peter Hartz, these recommendations went o ...
and a growing low-wage sector are believed to have weakened the core setup of this German Model.
See also
*
Economy of Germany
The economy of Germany is a Developed country, highly developed social market economy. It has the largest national economy in Europe, the List of countries by GDP (nominal), fourth-largest by nominal GDP in the world, and List of countries by ...
*
Ordoliberalism
Ordoliberalism is the German variant of economic liberalism that emphasizes the need for government to ensure that the free market produces results close to its theoretical potential but does not advocate for a welfare state.
Ordoliberal ideals ...
*
Social market economy
The social market economy (SOME; german: soziale Marktwirtschaft), also called Rhine capitalism, Rhine-Alpine capitalism, the Rhenish model, and social capitalism, is a socioeconomic model combining a free-market capitalist economic system alon ...
References
Further reading
*Edinger, Lewis J. and
Brigitte L. Nacos
Brigitte Lebens Nacos (born 1936) is an Adjunct Professor in political science at Columbia University. She has written on the news media, the politics of Germany, and terrorism.
She is a joint author of a paper, "Prevention of Terrorism in Post-9/ ...
. 1998. "Capitalism with a Human Face." pp. 145–195 in From Bonn to Berlin: German Politics in Transition. New York: Columbia University Press.
*Streeck, Wolfgang. 1997. "German Capitalism: Does It Exist? Can It Survive?" pp. 33–54 in Political Economy of Modern Capitalism: Mapping Convergence and Diversity, edited by C. Crouch and W. Streeck. London/Thousand Oaks: Sage.
*Roesler, Jörg. 1997. "The Rise and Fall of the Planned Economy in the German Democratic Republic, 1945-89." pp. 482–497 in The Economic Development of Germany Since 1870. Volume 2, edited by Wolfram Fischer. Cheltenham, UK/Lyme, N.H.: Elgar.
*Pickel, Andreas. 1997. "The Jump-Started Economy and the Ready-Made State." Comparative Political Studies 30 (Apr):211-241.
Vocational education in Germany, UNESCO-UNEVOC
{{DEFAULTSORT:German Model
!German model
Political-economic models