Economy 4.0

Germany’s strong economy provides lessons for America

David Brancaccio Jan 21, 2011
Economy 4.0

Germany’s strong economy provides lessons for America

David Brancaccio Jan 21, 2011


Kai Ryssdal: As of the last official word, unemployment in this country stood at a depressing 9.4 percent. It’s a problem for the global economy when the biggest part of that ecosystem is still faltering, two-something years after the recession started.

Our series Economy 4.0 is a study in how to make that economy work better for more people. Today our special correspondent David Brancaccio takes us to Germany to see what we might learn from their success.

David Brancaccio: This factory complex in Munich has a museum attached. It’s filled with 95 years of cars and motorcycles made by a German company. Maybe you’ve heard of it, BMW.

Tour guide: Now the engineers, for example, can test the aerodynamic behavior of this model in the wind tunnel.

Man: They still do clay models?

Tour guide: Yes, they still work with the clay models today.

Visiting Americans admire this sculpted clay version of a 3-Series coupe with the same reverence tourists in Paris might gaze upon the Venus de Milo. Germany is very good at making things foreigners want to buy.

Michael Haise: We’ve seen a remarkable development of German exports.

Michael Haise is chief economist for the financial services company Allianz. He says Germany is home to an outsized crop of smaller engineering companies that design and build what emerging markets, the U.S. and the rest of Europe seem to need.

Haise: We almost had a doubling of real exports in a period of 10 years.

That’s the result of a key German innovation: An evolved relationship between companies and labor. Two nasty economic downturns in the 1990s taught both German management and workers to play ball together. So during the 2009 financial collapse, companies worked to minimize layoffs, even if it meant workers had to accept radically shorter working hours.

Olaf Wortmann is an economist with VDMA, an alliance of German engineering companies.

Olaf Wortmann: For example, it may occur that a short-term worker works only one day a week, but he knows he already has that job. He kept the job. And when the upswing is starting again, he is also onboard.

Imagine that. A system that keeps folks on the payroll during tough times, at least a little bit, so they snap into action when orders begin to surge. But German engineers are famous for improving even on a good thing.

Wortmann: We are not living in a wonderland in Germany, we have also a lot things to improve and, for example, we could really also consume a bit more.

Brancaccio: We can start with you: How many cars do you have at home?

Wortmann laughs

Wortmann: I have only one.

Brancaccio: Alright, well that’s a big problem.

Wortmann: OK, right after this interview I will go out for shopping.

Brancaccio and Wortmann laugh

Sound of “Moonlight Sonata” by Beethoven

Beethoven flows through a fine, upper-middle class home an hour outside Munich. Lukas Seebrecht, a high school senior, shows off his playing skills as his mother, Barbara, an architect, and his father, Bernd, a lawyer, watch proudly.

But the kitchen here is not lined with the latest stainless steel German appliances and Barbara points out the corduroy living room set is hand-me-down.

Barbara Seebrecht: You see this is the furniture of my mom.

Brancaccio: We’re sitting in the sofa collection that came from your mother.

Barbara: Yes. When she died, I get the furniture.

German families tend to be leery of living beyond their means, something they also expect from their government, which studiously avoids the large budget deficits of some other spots in the European landscape. Bernd, the father, credits exports, frugality and Germany’s central role in the European Union for Germany’s economic strength.

Bernd Seebrecht: These countries are very important for us, for our export.

The biggest market for German stuff is the E.U., a union that at the moment has been shaken to the core by financial crisis. Still, it really bugs many Germans that some countries at the edges of the E.U. don’t exercise financial discipline. Even Bernd grouses about what he sees as their ridiculously expensive social safety net.

Bernd: So you look to Greece. Fifty-two years you can go to pension. This is incredible for us.

Brancaccio: That you could take a pension and retire at age 52? And you think that’s incredible.

Bernd: Incredible.

I heard this time after time, in Frankfurt and in Munich, always the Greeks with their cushy retirement system. For the record, the average Greek retires at 60, the average German at 62. Germans can kvetch about supporting social safety nets in other countries, but Bernd, the dad, doesn’t see much alternative. He compares the response to the euro crisis to another German rule of the road: Strict periodic car inspections.

Bernd: We bring Greece and other countries the TUV. You know TUV in Germany?

For Europe, it’s been like one of these vehicle inspections: Troubled parts of the E.U. have just survived a watershed moment of official reckoning. The logic is that now the financial problems are identified, economic repairs should be on the way.

In Munich, I’m David Brancaccio for Marketplace.

Ryssdal: David’s online for us as well. His Economy 4.0 blog is here.

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