The German Miracle
One of the greatest paradoxes of modern history is that the nation at the centre of the most devastating wars in human history is less than a century later the paragon of civilisation. The current performance of Germany in both economic and social wellbeing indicators is by all means outstanding. With around 80 million citizens or roughly 1% of the world’s population, Germans account for 8,4% of the world’s exports. In the worst years of the most recent financial crisis (2009–2014) Germany suffered in average a meagre 6,13% of unemployment compared to 8,25% in the US, 9,3% in France and 7,5% in the UK.
Unlike others, its economical success does not come with such as stark societal divide between winners and losers. Of all large rich economies, it is the least unequal by GINI coefficient measures and is as well amongst the most socially mobile. Germans are not only well off, but they work much less for it than their peers: 6% less hours per year than the French, 21% less than the British, 24% less than the Japanese and a jaw dropping 29% less than Americans. In the Legatum Prosperity Index, of countries above 30 million people, Germany ranks second in Governance, second in Health, second in Security, third in Personal Freedom and fourth in Education.
These achievements are the more remarkable as they take place in the backdrop of an the extremely costly reunification that began in 1990 when the West side absorbed the equivalent of 25% of its population from the East. A measure of how difficult it was is that by the end of the 90’s Germany began to be known as “The Sick Man of Europe”. And German exceptionalism doesn’t stop there. It is the world’s leader in energy transition, having set itself in 2007 the goal of cutting greenhouse gas emissions by 40 percent by 2020 and up to 95 percent in 2050. And despite the subsequent backlash, Germans set an unprecedented example of benevolence welcoming around 1 million asylum seekers between 2015 and 2016.
Germans have less companies than France in the Fortune 500 list but have double their neighbours amount of mid sized firms as well as those that export. Its success is not only the result of their outstanding engineering, it has as much to do with its unique system of apprenticeships as well as its unusual labor relations. German workers of large and small companies are involved in decision making at the factory as well as at the board room level. This system, known as Mitbestimmung, which translates “Co-determination”, creates the conditions for a cooperative instead of an antagonistic enterprise culture to emerge. And is in part the reason why compared to other industrialised economies it lost less well paying manufacturing jobs to delocalisation in the onslaught of globalisation (currently still 22% of total jobs vs only 9% in the US).
Of course not everything in Germany is perfect. Alternative for Germany, their own breed of alt right political party, was the third most voted in the last elections. A confirmation that tensions around immigration and lack of opportunities in some regions are real. Many recognised economists hold the view its management of the European debt crisis only deepened the plight of the countries most affected by it. Plenty others have accused Germans of causing fundamental economic instability through their large current account surplus (the difference between imports and exports).
Since I’ve been living in Europe, the most frequent complain I’ve heard from other Europeans when referring to Germans is their “arrogance”. I would relabel this defect as “excessive self-confidence”. Germans quite often only believe in themselves. From this perspective, the positive side of the Volkswagen emission scandal is it offered them an important lesson of their own fallibility. But regardless of their shortcomings, which all nations and cultures have, the world does need to learn more from the Germans as what they’ve accomplished is not only wealth but also wellbeing.