GERMANY

o Biggest eco in Europe

o THE Coordinated Market Economy of
continent
Labor
o union density lower than Nordic but
extensive collective bargaining coverage
o Industry-level wage determination
(inter-industry diffs maintained, interregional diffs reduced)
o Codetermination: employee
participation in mngmt; includes work
conditions, wages
o Wage restraint (trade off personal wages
for other nonwage benefits), esp. postreunification

Business
o Organized in industry associations
Include large and medium firms
Linked to training schools
o Concentrated shareholding, although
banks now able to divest more easily
o Mfg share of natl income remains
substantial
Welfare state
o More stratified. Family oriented
(Christian Dem); less commitment to
full employmt
o 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:
o Federal; upper house = state reps;
o Parliamentary system, mixed PR/SMD
in lower house.
o 2+ parties (CDS/CDU; SDP; FDP;
Greens; Left party
o 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 Maastricht

Current issues
o Problems with sluggish growth,
generating employment, demographic
bulge remain, but most pronounced
1990-2006
o 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 rates

How 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 events
a.Exogenous shock: Unification
(1989)
i. overvalue ostmark; kills DDR
eco, distorts allocation of
resources
ii. overinvest: inflationary pressure,
poor choices

b.

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