Over the past fifteen years, Germany has made one of the largest economic transitions in the world. Once considered the “sick man of Europe,” Germany was on the brink of economic collapse (Telegraph). Their admission into the European Union (EU) would allow them the relative stability to stay afloat with the economic support of the rest of Europe. However, fifteen years later Germany has one of the strongest industrial markets in the world and the rest of the EU is holding it back economically. Questions are rising about how Germany has risen so quickly? Are their fiscally responsible policies stable enough to keep up growth trends? Should Germany drop the Euro and re-adopt their old currency, the Deutsche Mark? Many questions are being risen, and the answers are everywhere, Germany has simply made itself one of the most intriguing economic development stories the global markets have ever seen.
It is without question that Germany’s rank as the fifth largest economy in the world comes with expertise in one industry or another. The industry that has kept Germany alive during the financial crisis of 2008, as well as supported the job market over the past few years is the manufacturing industry. Whether its automobiles, chemicals, heavy machinery and so on, Germany has become world known for their manufacturing.
Advanced manufacturing currently makes up 20% of Germany’s output, compared to the United States’ 11% (Prospect). What has made Germany rise to the top over large economic giants such as the United States is their focus on structural engineering. Considering the United States has put a large focus on abstract economics such as financial engineering, Germany has much more stability in a market that is tangible (Prospect). The structural advantage that Germany has developed took much more effort than software in financial engineering. This means that due to their efforts over the past few decades, they have a much stronger niche dominance over other competing states in the manufacturing markets than the leaders in the financial markets do.
One sub-market in manufacturing that Germany currently dominates is the automobile industry. Germany is home to some of the premier automobile producers such as BMW, Mercedes, Porsche, Volkswagen, and others. In a modern world where over 1 billion people have cars (Huffington Post), Germany accounts for 17% of the cars that are produced today (Prospect). Germany’s dominance in manufacturing has opened up a bright future for the state and opened up the doors to new industries and a focus on better business practices elaborated on in “Current Economic Climate.”
In the Organization for Economic Co-Operation and Development (OECD), Germany ranks 7th in hours spent in school by children ages 7-14 (BBC), even though Germany still ranks as the strongest economy in the European Union (EU). Questions are being risen on how Germany can consistently come out as the largest economy in the EU, considering their education system is seemingly weaker than most EU countries. For a country who is a leader in manufacturing, it is not ideal for Germany to send a student through an education system learning theoretical concepts when he can enter the hands-on field at a younger age. Students typically enter vocational school at a younger age which allows them to learn what they will be applying for the rest of their lives. This has given them a strict advantage over other states.
Other business culture aspects that have allowed Germany economic success are the relationships that have developed between employers, customers, government, and labor unions. Throughout the 2008 financial crisis, Germany saw their unemployment rate fluctuate around 2%, vastly smaller than other states in the EU (Insee). This is because businesses in Germany adopted fiscally conservative policies that would encourage them to not overspend. This would then keep down inflation rates and only spend true value. At the same point, many economists throughout Germany understood that a financial crisis was imminent, and therefore businesses, labor unions, and employees met to discuss how economic recession could be avoided. What was agreed upon was that employees would work less hours during the global recession if it meant keeping their job in the long run. By OECD numbers, Germany ranks 8th in GDP/Hr which shows that their economy remained productive while their workers worked less hours than average. Many of these relationships still exist today, along with fiscally conservative economics throughout the state.
In regards to the social aspect of conducting business, Germans focus on strict planning, punctuality, and a concern for the environment (Business Culture). When approaching various projects in business, the culture has put a strong emphasis on planning the process to the smallest of details. This way a direct path can be cultivated for workers so that they understand what needs to be done. Another aspect is the punctuality and severity behind business meetings and transactions. When dealing with a business cohort, it is strongly recommended that gift giving is not attempted to keep formality. The punctuality also relates to the surprise and spontaneity sense, it is strongly suggested not to make swift contingencies as these can be risky and knock the planning off track. Lastly, there is a strong transition in the demeanor of the state towards the environment. The Green Party has made a strong push in recent years and much of the public has sided with a concern for the environment. What has developed over the past decades is severity for business and a knack for the environment which has made Germany one of the prime places to conduct business in the world. It is through fiscal responsibility, punctuality in business practices, and the proper execution of mixed economic policies that Germany has found themselves as one of the economic leaders in the world.
It is due to the economic stability that has been developed in Germany that they are able to fund the transition to a green-energy focused economy. According to Renew Economy, Germany’s Energy Agency (UBA) hopes to reduce their carbon emissions by 95% by the year 2050 (Renew Economy). This is big news considering much of their economy is focused on the manufacturing industry which has high levels of pollution. The plan outlined by the UBA mentions how Germany will be focusing on shutting down many of their nuclear power plants, as they have already begun doing after Japan’s Fukushima disaster, as well as transitioning into a wind and solar based energy production system. What is even more intriguing is how business in Germany will be affected by these matters.
The transition from Germany’s previous energy system to a renewable one has come with a lot of financial constraints. Many utility companies throughout Germany have seen major financial declines in their profits due to subsidies that promote the use of renewable energy sources. Chancellor Merkel and Energy Minister Gabriel have cut back on the subsidies for renewable sources of energy to help the utility companies’ transition better over the new energy system in plan (Wall Street Journal). Merkel strongly supports the renewable energy plan released by the UBA, but she wants to keep in mind the financial toll it may have on the economy as they make the push through this transition process. This process is one that Germany must watch closely as it is a complete revamping of their energy infrastructure. There is plenty of financial risk involved however it has great benefits in the long run that can help preserve the ecosystem and manufacturing market for Germany.
Debate is heating up in Germany regarding one topic, currencies. Over the past few years, Germany has been bogged down by the poor performances of its European Union counterparts. This is because fifteen years ago, Germany dropped the Deutsche Mark and adopted the EU’s Euro, which is a multi-state currency that relies on the economic performances of multiple states. Germany was considered the “sick dog” of Europe, a state that would devalue the Euro. However, fast-forward many years later, Germany is the most well off EU state and is held down by the underperforming states of the EU. There has been a strong faction rising in Germany that supports dropping the Euro and adopting their old currency, the Deutsche Mark, as they are now independently economically well off. “Not so fast” says iPolitics, a very large part to Germany’s success it due to their partnership within the European Union. The debate is heating up and needs to be dissected a bit further.
Currently over 70% of Germany supports the Euro, which is up 20% from last year’s performance of 50% (Telegraph). Although there has been a rise in the people who do in fact support the Euro, there is also a rise in the amount of people who support bringing back the Deutsche Mark. This strong rise accounts for 25% of Germans who support completely dropping the Euro (Telegraph). The major arguments behind dropping the Euro regard Germany’s economic independence, which they have risen to become an economic powerhouse due to the strength of their domestic market. Another argument that supports this claim is the fact that the rest of the Eurozone has been struggling as of recent, and due to the binding of the EU, Germany is required to fund the bailouts of many of these failing states such as Greece and Cyprus. However, support for Germany keeping the Euro is the fact that many of their neighbors’ economies would crash upon Germany’s exit, thus affecting their own international market.
Germany should be very wary about any transition towards an alternative currency, they are currently competing very well in the global markets and are not too brought down by the poor performance of the rest of Europe. This case example of Germany serves as one of the most intriguing in the world due to their large size and rapid growth over the past decade. It will be very interesting to see how the state will continuously progress over the next few decades as they make a rise to challenge the top economies of the world. I had plenty of enjoyment studying the state and will continue watching them closely as Chancellor Merkel rises to become one of the most powerful leaders in the world.