After a few years of prosperity in the 1980s, when real growth in all income groups ignited productivity in the lower and middle classes and encouraged innovation in business, British economic activity has stagnated. Wood sees, in the German system, a motivation for employers to invest in their workers.
The perception that there is potential for growth makes investors more future-oriented. A predictable and stable economic environment, and freedom to innovate, foster a psychology in which management is willing to take risks, because prospects and expectations are better. Wood writes:
What is most inspirational about the German economy is not the policies it has pursued, but the consensus of values on which the economy is based. Germany is committed to a free market economy, but one in which capitalism is organised and responsible. This “social market” rests on widely accepted rules and practices: to encourage long-termism; to promote collaboration rather than conflict in the workplace; to incentivise employers to invest in the skills and productivity of their workers; and to try to ensure prosperity is available to Germans in all regions rather than just one. And when bad times hit, Germans fall back on a welfare system explicitly based on the interlocking principles of need and contribution.
One aspect of the German economy is a strong manufacturing sector. While other high-tech countries have outsourced physical production to offshore sites with lower costs, Germany found ways to keep factories at home: higher productivity and smarter methods.
To be sure, even German companies fight the threat, and the temptation, of outsourcing to third-world sites. But even in the sweatshop-prone clothing industry, German companies like Adidas, Puma, and Hugo Boss have kept at least some operations on German soil.
As German firms continue to expand - Adidas is now the parent company of Reebok, and Americans are now shopping at German stores like Aldi and Trader Joe’s - Stewart Wood wants his fellow Brits to study those examples
Because the truth is that there is much to like and admire about Germany. And – whisper it softly – there is a lot we can learn from them too.
While major names come quickly to mind - BASF, Bosch, Siemens, Lufthansa, T-Mobile, Birkenstock, Hapag-Lloyd, and Bayer - the small and middle sized companies, whose names are largely unknown outside, and sometimes inside, Germany are also crucial to economic success. These small and middle sized companies are categorized as Mittelstand, between the large companies and individual proprietors.
As often as not, the Mittelstand drives economic growth, creating innovative products, new processes, and increasing employment.
Germany’s education system produces superior technicians and highly-skilled craftsmen. While many first-world nations have excellent universities which produce professionals, Germany has paired its prize universities with mid-level training programs for machinists and tool-and-die makers.
Craftsmanship is as important as engineering for the production of legendary brands like Porsche, BMW, and Mercedes-Benz-Daimler. Stewart Wood states bluntly:
It remains the most successful exporting nation in modern European history.
The lesson from Germany: keep domestic manufacturing at home, allow stability and deregulation to encourage investment, and train a solid cadre of skilled craftsmen to complement the university-trained high-tech professionals.
