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The German Economy

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The German Economy

Beyond the Social Market

Princeton UP,

15 min read
10 take-aways
Audio & text

What's inside?

Germany can solve its economic problems in education, social parity and telecommunications – but some people won`t be happy.

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Editorial Rating

9

Qualities

  • Innovative

Recommendation

getAbstract.com recommends this excellent, comprehensive and straightforward book, which clearly sets out the author’s diagnosis and prescription for the German economy: reform its approaches to education, social equity, subsidies, trade and more. Horst Siebert traces the roots of Germany’s problems to the student movements of the ’60s with their emphasis on collectivism and hedonism. He provides a detailed, highly readable account of German economic history. He covers the great recovery and prosperity that followed Ludwig Erhard’s reforms of 1948 and the lagging growth that seemed to begin with the oil shocks and recessions of the 1970s and 1980s, but that has roots far deeper than oil. Siebert says that Germany’s problems have no win-win solution. Some interest groups must lose if Germany is to restore economic growth and leave subsequent generations more than the invoice for today’s excesses.

Summary

What Have You Done for Me Lately?

Since 1950, Germany’s gross domestic product (GDP) has increased six-fold. The economic gains have been shared throughout German society. The middle class is stable, the workforce is well qualified and German firms compete with the best global enterprises.

However, since the mid-90s, Germany’s economic growth has lagged behind the growth rates of many other European countries and the United States. German unemployment stands at 10%, at least. When the statistics also include workers in special government programs, the unemployment rate may be 14%. Germany’s problems are not difficult to diagnose: a rigid labor market, disincentives to hiring, and unaffordable social security and welfare systems. Solving these problems is not easy. German governance emphasizes consensus and collective approaches, but the system does not seem capable of the decisive action needed.

Although Germany’s industries are strong and its export sector is healthy, the state is a powerful presence in the economy and the social budget is high. Because it needs to compete internationally, German policy makers since World War II have weighted the country’s international...

About the Author

Horst Siebert is President Emeritus of the Kiel Institute for World Economics, and a faculty member at Johns Hopkins University and the Netherlands Institute for Advanced Studies. He previously served as a member of the German government’s Council of Economic Advisors.

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