Mr J.F.X Zahra's article appears weekly on Newsbook.
I start by confessing my soft spot for Germany and the Germans. My first paid work experience in 1975 at the age of nineteen was as an Internal Auditor trainee with Lufthansa AG at their head office in Cologne, (at that time, still) West Germany. Six years later I worked closely with an independent Dusseldorf based consultancy on investment appraisal and prioritisation. I learnt what work was about – application, quality, integrity and respect. Most people have a love-hate relationship with Germany – an admiration for their ability to transform and reform their economy as situations change. The reconstruction after World War II and the integration of eastern Germany after 1989 are commendable examples. And hate – hating the guts of subsequent governments as they influence European policy, especially recently in dealing with southern European countries (read in bold Greece, Spain, Italy and Cyprus) and their success following brave decisions on reforms in labour and social policy between 2002 and 2005. A country that has never been afraid to face challenges and that has done this with strong application and determination.
This does not mean that all is well on all social fronts. As Germany gets closer to its national elections more tensions will surface on issues related to Germany’s role in the European Union, the high price to pay in the financing of bail-outs in “undisciplined” Southern European countries, the future of the euro and immigration. Chancellor Merkel’s firm but practical handling of the debt crisis and its push for austerity in countries which have not yet learnt that runaway and unaffordable social security will return to haunt the countries in the euro area, have rendered her unpopular in many European countries, but could also be her salvation on the national political front.
The winning formula for Germany has been a balanced approach towards fiscal discipline and reforms, and economic growth sparked by innovation and exports. But there is more than this – the underlying critical success factor has been its business and economic model.
Germany has been a successful exporter of products but not of the values in business and the economy that have truly been the reason for its success. Well ingrained in the ideas of Alfred Muller-Armack are the tenets of Christian democracy – subsidiarity and solidarity, the foundations of the social market economy. Germany applies these principles in different forms at national and regional government but also in business. Examples of this are in its foundation and promotion of regional banks, well-capitalised development banks, in the institution of vocational education and training on the same level of academic education and in co-determination at the work-place, where labour is not seen as in conflict with capital, but as collaborator.
We have during these last sixty years experienced the extremes of economic management. On one hand Socialism with its belief in the benefits of a big government and its active role which has brought incompetence, dependence, mediocrity and misery; and on the other hand a weakly regulated market economy which has been abused and misused by operators in a way that has created the 2008 international financial crisis. The German model has proven to work during difficult global economic times. But economics is not only made up of academic models. Success lies in the ability of policy makers to take the brave decisions to have it adapted and applied in the context of a southern European country.