The Dynamics of German Industry

The Dynamics of German Industry: Germany's Path toward the New Economy and the American Challenge

Werner Abelshauser
Copyright Date: 2005
Edition: 1
Published by: Berghahn Books
Pages: 176
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  • Book Info
    The Dynamics of German Industry
    Book Description:

    Over the past decade, the "German Model" of industrial organization has been the subject of vigorous debate among social scientists and historians, especially in comparison to the American one. Is a "Rhenish capitalism" still viable at the beginning of the 21st century and does it offer a road to the New Economy different from the one, in which the standards are set by the U.S.? The author, one of Germany's leading economic historians, analyzes the special features of the German path to the New Economy as it faces the American challenge. He paints a fascinating picture of Germany Inc. and looks at the durability of some of its structures and the mentalities that undergird it. He sees a "culture clash" and argues against an underestimation of the dynamics of the German industrial system. A provocative book for all interested in comparative economics and those who have been inclined to dismiss the German Model as outmoded and weak.

    eISBN: 978-1-78238-799-2
    Subjects: Economics, History

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. List of Figures and Tables
    (pp. vii-viii)
  4. Introduction
    (pp. 1-6)

    This outline of Germany’s path to the postindustrial economy asks a good deal of its readers. It calls upon them to try and understand the world through a radically new economic worldview. The foil for explaining current economic interaction is not the familiar Industrial Revolution of the late eighteenth century, but rather what economist Douglass C. North calls the Second Economic Revolution, which closed the modern era at the end of the nineteenth century and inaugurated the period of nonmaterial production. Although the theoretical foundations of this paradigm have set sufficiently in the two decades since they were laid, studies...

  5. I. A Living Past
    • 1. Beyond “The End of History”
      (pp. 9-15)

      When the East Bloc imploded in the early 1990s, the American philosopher Francis Fukuyama spoke of the “end of history.”¹ He meant, in Hegel’s sense, the suspension of the great antagonism between the economic systems in East and West—between the First and Second Worlds—and, hence, the end of the idea of a dialectically mediated, progress-oriented synthesis of economic development bound to pull the Third World along gradually, too. The varieties of “Western” production regimes, for all their dissimilarities upon close inspection of their traditional institutional frameworks, counted little. As long as the East-West conflict also dominated the ideological...

    • 2. The Splendor and Misery of Rhine Capitalism
      (pp. 16-22)

      Pressure on the German production regime continued to intensify as the American economy overcame stagnation in the mid-1990s and enjoyed a surprising boom while growth in the German economy, burdened by the costs of the country’s unification, lagged behind that in other countries. With ever greater frequency, however, the widening gap in the development of the two world market leaders was also said to result from peculiarities of the German social system of production that liberal critics believed to be preventing the country from successfully tackling the challenges posed by globalized markets and the primacy of the scientific process in...

  6. II. The German Empire—Hothouse of Postindustrial Institutions
    • 1. From Liberalism to the Coordinated Production Regime
      (pp. 25-29)

      The inception of the coordinated market economy as a new social system of production can be dated quite precisely. Beginning after 1873, it supplanted the old production regime in a process completed by the turn of the century at the latest. The replaced regime may be described as a “liberal market economy from above” and was the result of reforms designed to pave the way for the German states to enter modern times after the military confrontation with revolutionary France and the economic challenges of the English industrial revolution.

      When the industrial revolution began in Britain, almost nothing of what...

    • 2. Patterns of Socialization Compared: The Economies of Germany and Great Britain
      (pp. 30-45)

      The revival of the German economy that had propelled the industry of the empire to international renown in the final third of the nineteenth century is riddled with contradictions. After 1879 the empire reimposed protectionist measures on its foreign trade and payments even as it rose to become one of the most dynamic export nations in the world. The German states, which under the imperial constitution of 1871 retained the right to pursue their own domestic economic policies, returned to the principle of state interventionism in order to develop the productive resources of their “political economies.” Until then they had...

    • 3. Interest Intermediation between Societal and State Corporatism
      (pp. 46-74)

      The “century of corporatism”68seemed to come to an end prematurely and irrevocably in 1945. The corporative idea, contaminated and discredited by the fascist regimes in central and southern Europe and by German National Socialism, was indisputably one of the casualties of World War II. In the altered economic and social conditions after the war, even liberal variants of corporatist interest intermediation, such as Roosevelt’s New Deal,69gave way to the return of freer game plans in economic and social policy. Particularly in West Germany and Italy, which both had rich, albeit ultimately painful, experience with the corporatist way of...

  7. III. The German Production Regime
    • 1. The Production Regime of the Coordinated Market Economy
      (pp. 77-86)

      Identifying the hallmarks of any country’s production regime requires a high degree of abstract thinking and ideal-type conceptualization. This is especially true of Germany, however, where the economy has developed numerous important interlocking regional systems that constitute integrated industrial units, each having its own specializations and comparative institutional advantages. Most of these clusters of economically interrelated companies have preserved their interlocking character to this day, examples being the Rhine-Main area, North and East Württemberg, the sites of heavy industry and New Industries along both banks of the Rhine River, East Westphalia-Lippe, Saxony, the Hanseatic cities, the Munich area, and the...

    • 2. The American Challenge
      (pp. 87-106)

      When Henry Ford’s first Model T rolled off the assembly line in Highland Park, Michigan, in 1913, it was not the upbeat to but rather the climax of decades of development in a production pattern that adapted ever better to the conditions of the American markets as time passed. During the nineteenth century, a gigantic, rapidly integrating domestic market and a critical scarcity of qualified labor pushed many economic sectors into the hands of monopoly-like trusts, the only sources of capital for systematically applying new scientifically grounded manufacturing methods. They were based on the mass production of standardized models with...

    • 3. Codetermination: The German Response to the Agency Problem
      (pp. 107-113)

      Judgment on the effects that codetermination has on the German economy vacillates between two oddly inconclusive, but by no means contrary, assessments. The first one emphasizes codetermination’s irenic influence, which serves Germany’s social system of production in the same manner that a functioning welfare state does. This view is supported by at least fifty years of positive experience with industrial democracy but avoids a clear statement about its economic value. The second assessment, often readable between the lines of well-meaning commentary, amounts to an assertion that codetermination in the waning industrial age is—like the welfare state—threatening to become...

    • 4. Social Market Economy: Production-Related Design of the Organization and Rules of the Economy
      (pp. 114-124)

      One of the most sharply drawn front-line positions in the culture clash between social systems of production is the role that government has, for it differs from one economy to the next. From the stance of economic history, it is difficult to justify the antithesis of market and state, of deregulation and regulation , as a struggle between two polar patterns of economic order competing to find the most efficient method of steering the economy. In reality, there is just as little functional antagonism between the market and the state as there is between the market and business. As shown...

  8. IV. The German Road to the Twenty-first Century
    • 1. Many Roads Lead to Rome
      (pp. 127-132)

      One result of this study is already clear: the search for the reasons for the durability of the German production regime in the previous one hundred years must begin in the late nineteenth century. The institutions that determined the “German path” in the twentieth century and that continue to inform institutional and, in particular, organizational change were shaped under the empire. The course staked out becomes even clearer when compared to the developmental lines of neighboring national economies, whose economic patterns of organization were formed against a different cultural background. Great Britain and the United States are of special interest...

    • 2. Anachronisms of the “Economic Miracle”
      (pp. 133-136)

      The German economy thwarted most of the interventions attempted by the occupation powers and experienced the economic miracle of the long 1950s with a social system of production that essentially kept to the lines set out earlier in the century. This preference for established structures derives partly from the German economy’s extraordinary success on product markets with proven technologies and highly diversified quality products, though it does have weaknesses against the market leader in each of a few highly innovative product areas. Recall, too, that the German economy’s late nineteenth-century institutional framework had been conceived of as a reply to...

    • 3. Strengths and Weaknesses of the German Production Regime
      (pp. 137-148)

      Two results are telling. First, the amazing continuity of the German economy’s institutional and organizational framework in the twentieth century is readily explicable by the fact that the main challenges posed by current markets have run along the main lines of economic development in Germany since the late nineteenth century. This is as true of the overall economy’s institutional context as it is of the sectorial production regimes that have stamped this framework as the New Economy from the outset. The macroeconomy’s social system of production and the institutional foundations of New Industries were therefore aimed at meeting the twentieth...

  9. Postscript
    (pp. 149-150)
    Jörn Rüsen

    This book is based on the lecture entitled “Culture Clash: Historical Perspectives on the Sustainability of the German Economy,” which Werner Abelshauser delivered in October 2002 as part of the Pott Lecture Series on Technology, Business, and Culture. The Pott lectures are organized by the Kulturwissenschaftliches Institut in Essen to address a broad audience on issues and viewpoints in the humanities. The tradition of having prominent thinkers present syntheses of their research not only to specialists but to the interested lay public as well is not yet highly developed in Germany. But because the sciences in general, and the humanities...

  10. Select Bibliography
    (pp. 151-160)
  11. Subject Index
    (pp. 161-168)