Germany’s Economic Model

 
 
 
 

Vocabulary

chance	vocation	vacuum (2)
export	model (3)	considerably
border	high-end	ran/run/run (2)
broad	concept	roughly (2)
tend	comprise	manufacture
fair (3)	establish	backbone (2)
design	specific	workforce
risky	undergo	revolution
chase	due (2)	private (2)
unique	regulate	stick/stuck/stuck (2)
sector	boom (2)	hold accountable
role	decision	minimum
wage	root (2)	significant
predict	criticism	leave in the dust
focus	opposite	innovation
dust	observe	recession
rank	recover	in terms of
export	demand	sustainability
robust	train (2)	appliance
rate	concept	employment
salary	combine	respective (2)
loyal	lifetime	degree (3)
focus	decade	long-term
profit	stability	benefits (2)
debt	research	investment
surge	sudden	specialize
former	emulate	estimated
globe	attempt	State of the Union Address
secret	duplicate	impossible
garner	lineage	sum of its parts
sum

 
 
 
 
 

Video

 

 
 
 
 

Transcript

If you have a vacuum, dishwasher or any other appliance in your home, there’s a chance it was made by German manufacturer Miele.

This company has grown considerably over the last century, exporting high-end home appliances all over the world.

But it’s still run by the same two families, and its products are largely made within German borders.

Miele is one of roughly three-and-a-half million businesses that make up Germany’s Mittelstand. This is a fairly broad concept, but in general, Mittelstand businesses are small or medium-sized manufacturers.

They tend to be family-run, specialize in one kind of product. And they are the backbone of Germany’s economy — comprising of an estimated ninety-nine percent (99%) of businesses and employing nearly eighty percent (80%) of the country’s workforce.

Germany specifically designed its economy to center around this concept.

After undergoing an industrial revolution in the late 1800’s, it became one of the world’s major exporters.

Roughly a century later, when other world powers were chasing the dot com boom, Germany stuck to manufacturing.

The country also developed a unique process of regulating the private sector. Employers were held accountable to workers and their community. Minimum wage was high. And employees had a larger role in decision making.

This garnered a significant amount of criticism from economists and other world leaders, who predicted that their highly regulated, manufacturing-focused economy would be left in the dust.

But in fact, the opposite has happened: Germany has become the richest country in Europe, and one of the top exporters in the world.

They recovered faster form the global recession than any other world power, and have ranked among the best in terms of innovation, sustainability and growth.

This is due, in no small part, to Mittelstand.

So what makes this model so successful?

Well, it starts with robust vocational training. After high school, many German students go directly into job training or technical school, and from there into a mittelstand company.

Because of this, Germany’s youth employment rate is the highest in Europe.

Unlike most manufacturing jobs in the US or other developed nations, German workers generally receive a fair salary, benefits and even health care.

This, combined with their respected roles in the company, cultivates a high degree of employee loyalty.

Many German workers stay with the same company for decades, or even a lifetime.

Mittelstand companies tend to be more focused on long-term success and stability, rather than quick profits. Instead of making risky investments or going into debt, these firms invest in research and development, which often yield long-term benefits.

And because they are independent or family-owned, mittelstand companies are better able to control the quality of their products and respond to a sudden surge in demand.

This model has been so successful that other countries have attempted to emulate it. The South Korean government has established German-style vocational schools, and China has sent officials to Germany to observe business practices.

Former US President Barack Obama talked about the mittelstand model in his 2013 State of the Union address. And former UK Prime Minister Tony Blair once asked German Chancellor Angela Merkel about her country’s secret to success was, to which she famously replied, “We still make things.”

But the mittelstand model is uniquely German, and experts say it is nearly impossible to duplicate.

It’s built on concepts like deeply rooted relationships between vocational schools and companies, long family lineages and trust between employers and employees.

When it comes to economic models, Germany’s mittelstand is truly the sum of its parts.

 

 

Questions

1. Does Miele manufacture cars, consumer electronics or other products? What do they produce?

2. Most enterprises in Germany are large, multinational corporations owned and controlled by a board of directors and shareholders. True or false?

3. Do German firms relocate (much of) their factories and production overseas?

4. What had economists thought about the German economic model?

5. Describe the features or components of the Mittelstand model.

6. Is there antagonism and friction between management and labor, or do they cooperate and work together?

7. Other countries have tried to learn and incorporate the Mittelstand model. Is this right or wrong? Will they probably be able to duplicate it?

 

A. Manufacturing and industry are very important in my city, region and country. Is this correct or incorrect?

B. Does your country trade extensively (with Germany)? Who are you main trading partners?

C. Is the manufacturing industry similar to that of Germany’s?

D. Could or should your nation adopt the Mittelstand way? Would it be practical?

E. What might happen in the future?