Miraculous Germany: changing perceptions of German economic performance.

Author:Meteling, Wencke
Position:RE-FORMING THE STATE

Germany's dashing wins of the World Cup semi-final against Brazil and then of the final against Argentina were followed by a huge wave of international praise not only for the national football team's achievements on the pitch, but also for the country's economic strength and consensus politics. Prompted by German successes in sports and economics, British commentators pointed to English--and British--shortcomings. In an Observer article Labour advisor Stewart Wood granted Britain permission to appreciate Germany (2014), and in a Guardian article, Simon Winder, author of Germania: a Personal History of Germans Ancient and Modern (2010), made a case for loving the country (2014). To Winder, 'modern Germany' seemed 'a country that focused on public service, efficiency, localism and had a vision of how society should function'. All of these virtues were in stark contrast to 'Britain's world of fawned-on Russian criminals, contempt for public service, UKIP, grotesque over-centralisation, Scottish separatists, public utilities from hell and "investment vehicle" football clubs'. Newsweek even wondered if 'this could be the start of a century of German success' (Jacobs, 2014).

Is the German miracle shining yet again? If so, why? And how is it possible to explain why dominant perceptions of Germany have shifted so radically in the recent past? For a European as well as a British audience it might come as a surprise that not long ago economic decline narratives were fixed on ... Germany. During the 1990s and early 2000s national and international commentators alike scrutinised Germany for its apparent lack of economic competitiveness and referred to it as the 'fading miracle', the 'sick man of Europe' and the 'sick man of the euro'. For more than a decade, the country's economic prospects were seen in a very gloomy light. The shift from a dominant crisis discourse on Germany as an endangered location for business and industry to a reassessment of Germany as a model was quite sudden. It can be dated to 2005--three years before the world financial and economic crash.

A common political explanation for Germany having finally regained its competitive edge are the reforms of the labour market and the social system of 2003-5, the so-called Hartz-Reformen, under Chancellor Gerhard Schroder, leader of a coalition of social democrats and the Green Party. Both the rapid shift of perception with regard to Germany as well as explanations of German economic success are worth a closer look, especially against the backdrop of the current crisis of the eurozone and Germany's crucial role as a leading economic and political power. It is an irony of history that Germany is criticised today for being too competitive and for imposing austerity measures on other European countries. This may well be seen as a legacy of the neo-liberal crisis discourse on Germany coming back to haunt other European countries.

From 'model Germany' to the 'sick man of Europe'

The story of how perceptions of economic underperformance and a lack of competitiveness shaped public policy debates is a major theme of the recent past. The threat of 'economic decline', the 'fear of failing' (Supple, 1997) was and is a key motive for structural reforms in advanced Western industrial societies, with Thatcherism and the narrative of a 'British decline' being a prime case (Gamble, 1994; Tomlinson, 2001). Frequently overlooked today, Germany had its own massive decline debate (Meteling, 2014). During the 1990s and early 2000s, a broad transnational debate took place that sought to make sense of Germany's apparent loss of international competitiveness, a debate that paved the way for a transformation of attitudes towards the economy and the welfare state and for comprehensive institutional change (Streeck, 2009; Streeck and Hopner, 2003). Commentators from the UK and the US played a significant and stimulating role in this debate. From 1992 onwards Germany was internationally referred to as 'the sick man of Europe' and then in 1999 even as 'the sick man of the euro' because of the German economy's supposed lack of competitiveness (Krugman, 1999 a, b).

Worries about Germany being too expensive as a Standort occurred after the first oil price shock of 1973-74, when investment rates dropped and business profits were kept down by taxes and incidental wage costs. The term Standort translates as 'location' and it had long been used in microeconomics to denote the site of goods and services. When the term Standort was transferred to macroeconomics--the political economy as a whole--it came to be used to suggest that 'the conventional "competition among location-based companies" had turned into a "competition among states"', so that 'the entire national system of regulations was pulled into an international competition as its appeal to mobile capital and business was reconsidered' (Hockerts, 2010, 277) (1). The welfare state was especially exposed to this pressure (Borchert et al., 1997; Butterwegge, 2005). The Council of Economic Advisors in 1975-76 was first among policy advisers to use the term Standort for denoting the political economy when it adopted supply-side economics (Sachverstandigenrat, 1975). A fervent proponent of the national Standort paradigm was the Institute of the German Economy in Cologne. In 1979-80 and then again since the late 1980s, it organised conferences and published papers about Standort Bundesrepublik and how to rescue it, making a case for supply-side economics (Institut der Deutschen Wirtschaft, 1980).

In 1987-88 business leaders began pushing the point that Germany, as a 'location for business and industry', was under threat. (The German term was Wirtschafts- or Industriestandort; since the mid-1990s the debate was commonly referred to as the Standortdebatte, i.e. the debate about Germany as a location for business). Even though Germany remained the world's leading exporter, business leaders pointed to Japanese investments in the UK instead of Germany and warned of high production costs. Lower salaries and Thatcher-era tax cuts attracted Japanese investment and because of this, some considered the UK to have beaten Germany to the game (Der Spiegel, 1988 a, b). Low foreign investment rates in Germany were commonly taken as a proof of national economic deficiencies. Economic advisors to the federal government and other experts also expressed concerns for the quality of Standort Bundesrepublik and its international competitiveness (Sachverstandigenrat, 1988; Institut der deutschen Wirtschaft, 1988; Biedenkopf and Miegel, 1989). Such jeremiads by leading German managers and economic advisors, however, failed to faze business journalists, politicians or the German public. In 1989, official statistics pointed to an excellent overall performance by the German economy and scaremongers fell silent. The extraordinary events of the fall of the Berlin Wall and German unification the following year muted economic concerns. But these concerns returned in full force when in 1992-93 a world-wide recession coincided in Germany with the sobering recognition that the country's economic and cultural reunification proved to be more difficult than anticipated.

After 1992, the location debate took on a new quality that it had not had before 1989. It now involved a broad public discussion about the German economy and its supposed lack of competitiveness, about principles of economic policy, and institutional prerequisites for economic activity such as law, education, and the social standing of businesses. This involved a critical reassessment of older and fundamental notions of a 'social market economy' and a corporate-style German economy. The debate updated issues that had been discussed in the late 1960s and 1970s, issues that had gained traction in the...

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