UKCOVER CMYK Cyan Magenta Yellow Black Waiting for a Wunder A survey of Germany lFebruary 11th 2006 Republication, copying or redistribution by any means is expressly prohibited without the prior written permission of The Economist C B M R Y G K W C B M R Y G K W The Economist February 11th 2006 A survey of Germany 1 Waiting for a Wunder Also in this section In a bind The grand coalition will need quite a lot of luck to make Germany work better. Page 2 Wasting brains Germany’s school system fails to make the most of the country’s human capital. Page 4 Squaring the circle Despite a raft of reforms, Germany’s labour market still excludes far too many people. Page 6 Land of cliques Corporatism and lack of competition are the enemies of an ecient economy. Page 8 Thinning blood On immigration, Germany is torn between its Germany’s economy is picking up, and its football fans hope for a past and its future. Page 10 World Cup victory this summer. But a lot more will have to come right before the country gets back on track, says Ludwig Siegele Reincarnation valley F YOU are visiting Germany this spring, to a Walk of Ideas through the capital, The city of Jena provides a tantalising Iwatch out for footballs. They are every- complete with oversized sculptures of glimpse of the way Germany could be going. where, on posters, buses or entire build- German inventions. Page 12 ings, even though the World Cup which The hope is that a victory, or at least a the country is due to host this summer is respectable result, will help cure the collec- still four months o. A German rm is tive depression that descended on Ger- Letting go even wrapping the giant globe atop east many when the economy started to sag at Germany needs to loosen upor face decline. Berlin’s landmark television tower to the beginning of this decadejust as win- Page 14 make it look like a football. If marketing de- ning the 1954 World Cup, held in Switzer- partments had the technology, a German land, helped to heal the national psyche daily recently joked, they would project a after the war and kicked o the Wirt- football on to the moon. schaftswunder (the post-war economic Acknowledgments Nor is it just marketing people who are miracle). The Wunder von Bern, as the un- In addition to those mentioned in the text, the author would like to thank the following people for their help with getting excited. For the duration of the expected victory came to be known, preparing this survey: Wilhelm Adamy of Deutscher Ge- tournament most German states will lib- helped to restore Germans’ battered pride werkschaftsbund, Michael Burda of Humboldt University, eralise shopping hours, and the govern- in their country. Warnfried Dettling, Klaus Dörre of Jena University, Philipp Genschel of International University Bremen, Ingolf ment is even thinking of deploying the What are the chances that a Wunder Gritschneder, Wolf-Dieter Hasenclever, Arthur Heinrich, army around stadiums for the rst time in von Berlin might kick o a similar cultural Marie-Luise Homann of Capital, Michael Hüther of In- the Bundeswehr’s history. Germans, it and economic rebirth? The answer de- stitut der deutschen Wirtschaft, Hans-Helmut Kotz of Deutsche Bundesbank, Wolf Lepenis of Institute for Ad- seems, are taking the World Cup extremely pends on your perspective. Germany to- vanced Study Berlin, Randolf Margull of Technology and seriouslyand not just because most of day is like one of those pictures where, de- Innovation Park Jena, Wolfgang Merkel of Social Science them are passionate football fans. The last pending on how you tilt it, you see two Research Centre Berlin, Elisabeth Niejahr and Klaus-Peter Schmid of Die Zeit, Paul Nolte of Free University Berlin, time the world paid so much attention to dierent images. In exports, it is already Wolfgang Nowak of Afred Herrhausen Society, Ulrich Germany was 16 years ago when the [Ber- world-class. Many of its global companies Pfeier of empirica and Klaus F. Zimmermann of German lin] Wall came down, says Angela Merkel, have never been more competitive. With Institute for Economic Research. the country’s new chancellor. exports of nearly $1 trillion in 2005, this Germany aims to use the attention gen- medium-sized country (smaller than the A list of sources can be found online erated by this world-class event to repair American state of Montana, but with 82m www.economist.com/surveys its battered image. Made in Germany people) already sells more goods in the An audio interview with the author is at has long since lost its ring; now govern- world market than any other. www.economist.com/audio ment and big business have teamed up in Investment and domestic demand are a campaign to sell the country as the Land also picking up at last, so Germany’s econ- A country brieng on Germany is at of Ideas. In Berlin, where the World Cup omic outlook at home, too, has bright- www.economist.com/Germany nal will be played, visitors will be treated ened. In case you missed it, Germany is1 2 A survey of Germany The Economist February 11th 2006 2 no longer the sick man of Europe, says cial scientists have described, oering a Elga Bartsch, an economist at Morgan Stan- Modest expectations 1 social elevator for everybody. When it ley, an investment bank. In 2006, she pre- ”Do you regard the new year with hope or fear?” comes to social justice, Germany is already dicts, the country’s economy will grow by doing less well than many other European GDP Sceptical 1.8%, the highest rate since 2000 and in line Don’t know countries, according to a recent study by % change * † Hopeful with the European average. But the labour 14 70 BerlinPolis. For instance, the risk of pov- market does not seem to have turned the 12 60 erty has greatly increased in recent years, corner yet: in January, unemployment be- especially for the young. About a fth of 10 50 fore seasonal adjustment again hit 5m, or Germans under 16 now live in households 12.1% of the workforce. 8 40 with incomes below the poverty-risk Perhaps most importantly, after years 6 30 threshold. of chronic depression, the mood is much 4 20 The fault does not lie primarily with improved. According to the Allensbach In- 2 10 globalisation and the locusts, as many stitute, a polling organisation, 45% of Ger- + + Germans have taken to calling foreign in- 0 0 mans now say that they are hopeful for – – vestors. Rather, it is the very systems 2006 (see chart 1). Business sentiment has 2 10 meant to guarantee a well-balanced soci- not been so good since the new-economy 1949 55 60 65 70 75 80 85 90 95 2005 ety, along with the attempts to preserve *Not including Saarland and West Berlin up to 1960 bubble. Politicians, too, have changed †West Germany only up to 1991 them, that are increasingly dividing Ger- their tune since last autumn’s election that Sources: Institut für Demoskopie Allensbach; man society. Those systems now serve Federal Statistics Office; World Bank ushered in a grand coalition. The new-year vested interests, driving a wedge between address by Angela Merkel struck an up- well-provided-for insiders and marginal- beat note. I want to encourage us to nd red at an employer’s whim. ised outsiders. out what we are capable of, she told her The risk is that Germany’s labour mar- This survey will describe the ways in fellow Germans. I am convinced we will ket, in particular, will end up American- which Germany’s institutions have slid be surprised. ised, but without the good points of the from virtue to vice: in politics, in the labour Look at the country from a dierent an- American one, such as its openness and in- market, in education, in competition pol- gle, however, as this survey will do, and it clusiveness, argues Wolfgang Streeck, icy and elsewhere. It is not that the country becomes clear that even if it won the head of the Cologne-based Max Planck In- has not tried to change. But most of these World Cup for the rst time since 1990, it stitute for the Study of Societies. In many changes have been designed to optimise would have plenty left to do. Germany areas, he says, the German story has been existing systems rather than change them may be in better shape than France or Italy, one of a high average and a low standard fundamentally. and many other countries would love to deviation: a rich society with wealth and This survey will journey through a have its problems, but that does not mean opportunity fairly spread, with few outli- country struggling with change, passing it is in robust health. Most importantly, if it ers at either end of the scale. But increas- through Berlin, Stuttgart, Nuremberg, Co- does not start tackling its structural pro- ingly, he says, the story is turning into one logne and Frankfurt. It will note that in blems in earnest soon, it may nd itself of a low average and an exploding stan- some ways the future has already arrived: stuck with something its people dread: dard deviation. it is simply distributed unevenly. Much of amerikanische Verhältnisse, or American If think-tanks have their numbers right, it can be found in places where you might conditions, code for a socially polarised Germany has already ceased to be the eq- least expect itsuch as in the eastern city society in which workers are hired and uitable middle-class society that other so- of Jena, where the journey ends.