Older and Wiser a Special Report on Germany March 13Th 2010
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Older and wiser A special report on Germany March 13th 2010 GermanySURCOV.indd 1 1/3/10 13:32:14 The Economist March 13th 2010 A special report on Germany 1 Older and wiser Also in this section Inside the miracle How Germany weathered the recession. Page 3 The green machine A second wind for German industry? Page 5 Much to learn Germany’s education system is a work in progress. Page 6 What a waste Germany scandalously underuses immigrants and women. Page 8 Getting closer But eastern and western Germany may never quite meet. Page 10 For all its stolid reputation, Germany has become surprisingly exible, says Brooke Unger. But it needs to keep working at it Steady as she goes LM, like many German towns, is ar• crisis. Although Germany’s economy has Angela Merkel and the art of the possible. rayed around a central church like an plunged, its unemployment rate has so far Page 11 U expectant congregation. Its Gothic spire is barely budged, a German miracle, econ• the tallest in the world. The city is also fam• omists proclaim (see chart 2, next page). As A muted normality ous for being the birthplace of Albert Ein• the global economy recovers, Germany’s United Germany is becoming more stein. But Ulmers do not live in the past. will do better than the rest by selling cars, comfortable in its skin. Page 13 They are too busy making things, or work• chemicals and capital goods to markets ing out how to make them better, and dis• such as China, India and Brazil. Germany patching them to the rest of the world. The is still outtter to the world, says Bert Rü• family•owned Mittelstand rms that clus• rup, a former head of the government’s ter in and around this modest town along• council of economic wise men. side the Danube river were among the The crisis seemed to discredit the An• prime beneciaries of Germany’s export glo•Saxon model of growth based on • boom, the main source of growth until the nancial wizardry and property bubbles world economy slumped in late 2008. and vindicate the German one, in which Acknowledgments In addition to the people quoted in this report, the author That disaster has not shaken Ulm’s self• workers co•operate with bosses, managers is grateful to the following: Jutta Allmendinger, Reinhard condence. Since the nancial crisis Ger• invest for the long term and manufactur• Pollak and Wolfgang Merkel, Wissenschaftszentrum Berlin many’s economy has shrunk more than ing holds pride of place over services. The für Sozialforschung; Jörg Dräger, Bertelsmann•Stiftung; Sebastian Dullien, HTW Berlin; Jeanne Fagnani, CNRS; most, by around 5% in 2009 (see chart 1, chancellor, Angela Merkel, is promoting a Clemens Fuest, University of Oxford; Matthias Gabriel, next page). That of Baden•Württemberg, charter for international economic man• ChemiePark Bitterfeld Wolfen; Markus Grabka, DIW; Ulm’s home state, dived by as much as 8%. agement based on Germany’s social• Christine Grunert, Stadt Ulm; Ulrike Guérot, European Council on Foreign Relations; Wolfgang Herrmann and But the region around Ulm itself held up market principles. Crisis•prone members Bernhard Rieger, TU München; John Kornblum, Noerr LLP; better than the rest of the state because its of the euro zone could cure their woes by Cornelia Kristen, Georg•August•Universität; Roland economy is diversied, reckons Otto Sälz• becoming more like Germany, many Ger• Manger, Earlybird; Paul Nolte, Freie Universität Berlin; Lothar Probst, Universität Bremen; Kai Peter Rath, Anja le, managing director of the region’s cham• mans think. Its hottest export could be the Hartmann and Eckart Windhagen, McKinsey; Holger ber of industry and commerce. Some local German model itself. Schäfer, IW Köln; Hilmar Schneider, IZA, Bonn; Daniela rms are in hard•hit industries like cars Schwarzer, SWP Berlin; Dennis Snower, Institut für Weltwirtschaft, Kiel; Werner Tillmetz, Zentrum für and machine tools but many are not: Ulm Repeat after me Sonnenenergie• und Wassersto •Forschung; Ingrid also makes pharmaceuticals and James Germany does have some important les• Weinhold, MABA. Bond’s favourite rearm, the Walther PPK. sons to teach the world, as this special re• The region’s unemployment rate rose from port will explain. But the idea that Ger• A list of sources is at 3.3% to 4.6%, still well below the national many has got everything worked out Economist.com/specialreports rate. We are the strongest region in Ger• requires some big qualications. It has an many, crows Mr Sälzle. ageing population, a growing share of An audio interview with the author is at Feistiness is an all•German trait these which is either of non•German origin or Economist.com/audiovideo days, bolstered rather than subdued by the poorly educated, or both. And Germany’s 1 2 A special report on Germany The Economist March 13th 2010 2 towering export surpluses are at risk be• that of its neighbours. If it is not careful, so cause its trading partners cannot sustain will its living standards. It will have more decits for ever. Strikingly, too, the German pensioners and fewer workers. One possi• model is no longer all that German. Over ble future is that it will become less innova• the past decade the country has rewritten tive and less productive, and indeed less its recipe for success, incorporating many German in ways it would not welcome. foreign ingredients, including some from But that is not inevitable. the much•maligned Anglo•Saxons. Ulm shows that a springy economy The great thaw makes the challenges easier to tackle but Germany strikes people as being set in its does not remove them. People with a mi• ways. Revolutions, whether of the Thatch• gration backgroundimmigrants, their erite sort in Britain or the spasms of discon• children and grandchildren (including eth• tent in France, hold little appeal. From his• nic Germans who arrived after the fall of tory’s convulsions Germany has learnt to the Berlin Wall)account for 37% of the prize a quiet life. The fall of the Berlin Wall city’s 116,000 inhabitants and a majority of in 1989 and unication a year later was ex• its children under ten. Those who came as citement enough for a while. Change, if it guest workers in the 1950s and 1960s must happen, is painstakingly negotiated quickly adopted Swabian habits of thrift by everyone concerned, from political par• and hard work, says Ulm’s mayor, Ivo Gön• ties to the governments of the 16 Länder ner, but the kids have problems. Many (states) to the social partners (trade un• are unsure where they belong; some have ions and employers’ representatives). not mastered German. Yet the country has spent the past de• Ulm and Neu Ulm, its Bavarian sibling cade smashing its own taboos. In 1999 it across the river, became briey notorious sent its armed forces into battle for the rst in 2007 when police captured would•be time since the second world war as part of terrorists who were on the verge of blow• Integrating young immigrants into the a NATO operation to protect Kosovo from ing up American installations in Germany. workforce is the biggest challenge by far. Yugoslavia. In the same year Germany re• Two of the suspects, one a convert to Islam, Much therefore depends on how grace• luctantly surrendered the D•mark, an an• belonged to radical outts in the twin fully Germany becomes greyer and chor of its post•war identity, in favour of towns. These have nothing to do with the browner. Other countries have even fewer the euro, with notes and coins appearing established immigrant community, Mr babies, but none has such long•term ex• in 2002. In 2000 the government changed Gönner insists. But foreigners are often as• perience in low fertility, notes Reiner the denition of what it is to be German, sociated with the threat of terrorism. Klingholz of the Berlin Institute for Popula• which had been based on bloodlines since A bigger worry is what will happen as tion and Development. The number of imperial days, by giving non•ethnic Ger• ageing Swabians retire. By 2025 a quarter children per woman dropped below the mans born in the country a right to citizen• of the workforce will be older than 55, replacement rate of 2.1 in the 1970s. The ship. Meanwhile Deutschland AG, the compared with 15% now, and the number women born then in relatively small num• clannish system of cross•shareholdings of school•leavers will shrink by a third. bers are in turn having small families. Until among banks and enterprises, was killed Within ten years the region will be short of 2002 Germany let in enough immigrants o by Anglo•Saxon notions, and no one 60,000 workers, 7,500 of them engineers, to stave o demographic decline, but the wants it back. That brought more share• the soul of the Mittelstand. Mr Sälzle won• inux has slowed. In 2008, for the rst time holder democracy into the real economy, ders whether the next generation is ready in a quarter•century, more people left the says Frank Mattern, who heads the Ger• to step in. We’ve imported the education• country than came in. man operation of McKinsey, a consultancy. al problems of Turkey and Italy, he says. The newcomers are not as well educat• More contentious than all of these was 1 ed as the native Germans, but they have more babies. Ulm is not unusual. In some Growth plunged... 1 towns in the Ruhr region the share of un• ...but jobs held up 2 GDP, % change on previous year der•ves with migrant backgrounds tops Unemployment, % of labour force 60%.