German model - AbsoluteAstronomy.com

The term German model is most often used in economics

Economics

Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...

to describe post-World War II

World War II

World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...

West Germany's

West Germany

West Germany is the common English, but not official, name for the Federal Republic of Germany or FRG in the period between its creation in May 1949 to German reunification on 3 October 1990....

means of using (according to University College London

University College London

University College London is a public research university located in London, United Kingdom and the oldest and largest constituent college of the federal University of London...

Professor Wendy Carlin) innovative industrial relations, vocational training, and closer relationships between the financial and industrial sectors to cultivate economic prosperity.

Industrial relations

Under the German model, union

Trade union

A trade union, trades union or labor union is an organization of workers that have banded together to achieve common goals such as better working conditions. The trade union, through its leadership, bargains with the employer on behalf of union members and negotiates labour contracts with...

s are organized at the industry level and co-exist with works council

Works council

A works council is a "shop-floor" organization representing workers, which functions as local/firm-level complement to national labour negotiations...

s at both the plant and company levels. These unions negotiate wage determination with employers' associations. The strength of this setup is the cooperation among unions and management councils. This is unique among Western countries, which have been marked by either substantial weakening of union powers (such as in the United States

United States

The United States of America is a federal constitutional republic comprising fifty states and a federal district...

and United Kingdom

United Kingdom

The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...

) over the last twenty years, or consistent union conflict (such as in France

France

The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...

and Italy

Italy

Italy , officially the Italian Republic languages]] under the European Charter for Regional or Minority Languages. In each of these, Italy's official name is as follows:;;;;;;;;), is a unitary parliamentary republic in South-Central Europe. To the north it borders France, Switzerland, Austria and...

, where unions have remained strong).

Consensus model

As in relations between unions and employers, the German model also seeks to harmonize relations between regulatory bodies and affected parties, as well as between individual companies to prevent ruinous competition within the scope of applicable antitrust law. Considered an outgrowth of the non-confrontational culture of postwar Germany, finding a common denominator was often the main goal in such relationships.

Vocational training

The system of vocational training is perhaps the most important component of the German model, and is still very prevalent in the German educational system. In Germany, there is a much heavier emphasis on apprenticeship

Apprenticeship

Apprenticeship is a system of training a new generation of practitioners of a skill. Apprentices or protégés build their careers from apprenticeships...

s for skilled positions, taught by expert worker/instructors. As such, there is a lower percentage of university students in Germany when compared to other Western countries, and a much lower percentage of persons entering the workforce for on-the-job training.

Vocational training is required for a large number of occupations. At the end of vocational training, a highly-regarded certification qualification is awarded that is valid for a range of over 400 occupations. This is in stark difference to other European countries, where the number of controlled occupations is much smaller .

Critics cite inflexibility of the school system as the main disadvantage. Some 60% of graduates change their profession within 10 years of graduation .

Financial and industrial relations

German bank

Bank

A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...

s have a much larger role in shaping the industrial sector than those in other Western countries. Rather than simply collecting savings and investments and issuing loans, most German banks have large interests in the commercial sector

Commerce

While business refers to the value-creating activities of an organization for profit, commerce means the whole system of an economy that constitutes an environment for business. The system includes legal, economic, political, social, cultural, and technological systems that are in operation in any...

. As such, many corporate boards offer seats to high-ranking German banking officials, whose banks are often investors in the corporation. As a result, they seek to promote long-term investment

Investment

Investment has different meanings in finance and economics. Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security for the principal amount, as well as security of return, within an expected period of time...

in the overall health of the companies they are working with.

Future of the German model

Since the German reunification

German reunification

German reunification was the process in 1990 in which the German Democratic Republic joined the Federal Republic of Germany , and when Berlin reunited into a single city, as provided by its then Grundgesetz constitution Article 23. The start of this process is commonly referred by Germans as die...

German prosperity has declined compared to pre-unification West German levels, and the German unemployment rate reached record levels: 12.6% (according to national definition) as of March 2, 2005, the highest rate since World War II. The failure of the German model to maintain standards of high performance has led experts to speculate about its demise, despite having been adopted successfully in other countries' corporations since its peak. Others see the relative decline as an unavoidable consequence of integrating the much less advanced GDR economy and 17 million new citizens, which necessitated a transfer of over 1.3 trillion Euros from west to east as of 2009.

Much of the political discourse regarding reforms in recent years revolved around the question of how to modify the German model (and the political conditions forming its framework) to sustain it in a globalised economy. Ex-Chancellor Gerhard Schröder

Gerhard Schröder

Gerhard Fritz Kurt Schröder is a German politician, and was Chancellor of Germany from 1998 to 2005. A member of the Social Democratic Party of Germany , he led a coalition government of the SPD and the Greens. Before becoming a full-time politician, he was a lawyer, and before becoming Chancellor...

's reforms, called "Agenda 2010

Agenda 2010

The Agenda 2010 is a series of reforms planned and executed by the German government which are aimed at reforming the German social system and labour market. The declared aim of Agenda 2010 is to improve economic growth and thus reduce unemployment....

", made some steps towards such a goal, but also brought with them much controversy. Nonetheless, after years of 'painful' reforms, the German economy seems to have gotten back on track. Unemployment has fallen below 10% (according to national definition) for the first time in years and economic growth reached 2.7% in 2006.

Whether this is an ongoing development is however a matter of continuing debate, as are further reforms.

Counter-argument: Rise of the German Model

As of 2009 and the recent worldwide economic downturn, some analysts have speculated that the German model of social capitalism is resurgent and is the most responsible economic system that still ensures the survival of the free market

Free market

A free market is a competitive market where prices are determined by supply and demand. However, the term is also commonly used for markets in which economic intervention and regulation by the state is limited to tax collection, and enforcement of private ownership and contracts...

. With recent economic schemes and company abuses, such as in the Bernard Madoff

Bernard Madoff

Bernard Lawrence "Bernie" Madoff is a former American businessman, stockbroker, investment advisor, and financier. He is the former non-executive chairman of the NASDAQ stock market, and the admitted operator of a Ponzi scheme that is considered to be the largest financial fraud in U.S...

scandal, the Enron scandal, and the financial crisis of 2007–2010, the German model of a rigidly structured and regulated economy has become more attractive, as part of the financial crisis could be attributed to a lack of regulation associated with laissez-faire

Laissez-faire

In economics, laissez-faire describes an environment in which transactions between private parties are free from state intervention, including restrictive regulations, taxes, tariffs and enforced monopolies....

capitalism.

From 2003 to 2008, Germany (a nation with only 80 million inhabitants) was the world strongest exporter. In 2009, China (1.3 billion inhabitants) overtook Germany in exports. One of the reasons for this are the Hidden Champions

Hidden Champions

Smaller but highly successful companies, concealed behind a curtain of inconspicuousness, invisibility and sometimes secrecy are called Hidden Champions. The name Hidden Champion was coined by Theodore Levitt, who used it first in a discussion with Hermann Simon. Simon later on was the first to use...