T HE P OLITICAL E CONOMY O F G ERMANY U NDER
C HANCELLORS K OHL A ND S CHRDER
Monographs in German History
Volume 9
The Ambivalent Alliance: Konrad Adenauer, the CDU/CSU, and the West, 19491966
Ronald J. Granieri
Volume 10
The Price of Exclusion: Ethnicity, National Identity, and the Decline of German Liberalism, 18981933
E. Kurlander
Volume 11
Recasting West German Elites: Higher Civil Servants, Business Leaders, and Physicians in Hesse between Nazism and Democracy, 19451955
Michael R. Hayse
Volume 12
The Creation of the Modern German Army: General Walther Reinhardt and the Weimar Republic, 19141930
William Mulligan
Volume 13
The Crisis of the German Left: The PDS, Stalinism and the Global Economy
Peter Thompson
Volume 14
Conservative Revolutionaries: Protestant and Catholic Churches in Germany After Radical Political Change in the 1990s
Barbara Thriault
Volume 15
Modernizing Bavaria: The Politics of Franz Josef Strauss and the CSU, 19491969
Mark Milosch
Volume 16
Sex,Thugs and Rock NRoll: Teenage Rebels in Cold-War East Germany
Mark Fenemore
Volume 17
Cultures of Abortion in Weimar Germany
Cornelie Usborne
Volume 18
Selling the Economic Miracle: Economic Reconstruction and Politics in West Germany, 19491957
Mark E. Spicka
Volume 19
Beyond Tradition and Modernity: Aby Warburg and Art in Hamburgs Public Relm. 18961918
Mark A. Russell
Volume 20
A Single Communal Faith? The German Right from Conservatism to National Socialism
Thomas Rohkrmer
Volume 21
Environmental Organizations in Modern Germany: Hardy Survivors in the Twentieth Century and Beyond
William T. Markham
Volume 22
Crime Stories: Criminalistic Fantasy and the Culture of Crisis in Weimar Germany
Todd Herzog
Volume 23
Liberal Imperialism in Germany Expantionism and Nationalism, 18481884
Matthew P. Fitzpatrick
Volume 24
Bringing Culture to the Masses Control, Compromise and Participation in the GDR
Esther von Richthofen
Volume 25
Banned in Berlin: Literary Censorship in Imperial Germany, 18711918
Gary D.Stark
Volume 26
After the Socialist Spring: Collectivisation and Economic Transformation in the GDR
George Last
Volume 27
Learning Democracy: Education Reform in West Germany, 19451965
Brian M. Puaca
Volume 28
Weimar Radicals: Nazis and Communists between Authenticity and Performance
Timothy S. Brown
Volume 29
The Political Economy of Germany under Chancellors Khl and Schrder: Decline of the German Model?
Jeremy Leaman
Volume 30
The Surplus Woman
Unmarried in Imperial Germany, 18711918
Catherine L. Dollard
Volume 31
Optimizing the German Workforce: Labor Administration from Bismarck to the Economic Miracle
David Meskill
Volume 32
The Masculine Woman in Weimar Germany
Katie Sutton
Volume 33
State and Minorities in Communist East Germany
Mike Dennis and Norman LaPorte
Volume 34
Fragmented Fatherland: Immigration and Cold War Conflict in the Federal Republic of Germany, 19451980
Alexander Clarkson
Volume 35
Death in East Germany, 19451990
Felix Robin Schulz
First published in 2009 by
Berghahn Books
www.berghahnbooks.com
2009, 2014 Jeremy Leaman
First ebook edition published in 2011
All rights reserved. Except for the quotation of short passages for the purposes of criticism and review, no part of this book may be reproduced in any form or by any means, electronic or mechanical, including photocopying, recording, or any information storage and retrieval system now known or to be invented, without written permission of the publisher.
Library of Congress Cataloging-in-Publication Data
Leaman, Jeremy, 1947-
The political economy of Germany under Chancellors Kohl and Schroder : decline of the German model?/ by Jeremy Leaman.
p. cm. -- (Monographs in German history ; 29)
Includes bibliographical references and index.
ISBN 978-1-84545-601-6 (hardback : alk. paper) -- ISBN 978-1-84545-936-9 (ebook)
1. Germany--Economic policy--1990- 2. Germany--Economic policy--1945-1990.
I. Title.
HC286.8.L42 2009
330.943'088--dc22
2009013506
British Library Cataloguing in Publication Data
A catalogue record for this book is available from the British Library
ISBN: 978-1-84545-601-6 hardback
ISBN: 978-1-84545-936-9 ebook
For K.
I NTRODUCTION
Writing about the German economy, the social arrangements that underpin it and the political management of its structures and processes invariably involves a paradox. On the one hand, this core political economy of greater Europe has maintained its leading status as a highly productive trading nation, exporting more goods in 2007 ($1.36 trillion) than either China ($1.22 trillion) or the United States ($1.12 trillion), which have, respectively, populations sixteen times and three-and-a-half times that of Germany. Without Germanys massive balance of trade surplus, the European Unions and the eurozones external balances would look much less favourable. Secondly, its engineering products, most notably its investment goods and its motor vehicles, carry a badge of quality which makes them less price-sensitive than those of their rivals, both because of their established reliability and because of the quality of after-sales service provided to their customers. Thirdly, it produces more industrial patents per head of population than practically any other European country, except Sweden. It continues to attract relatively high levels of foreign direct investment (2006 stock levels, approximately $763.9 billion) despite the comparatively high marginal wage costs (social insurance etc.) paid by enterprises in Germany.
As a catalogue of virtues, this kind of record would satisfy most superficial judges of economic fitness and successful political management. The paradox, the other side of the coin of success, is inevitably the set of indicators that question the sustainability of that success. Germanys rate of economic growth its average annual increase of real gross domestic product (GDP) has been comparatively disappointing in recent decades. Since 1993 there have been two business cycles; the first from the recession year in 1993 to the pre-recession year of 2002 showed an annual average rate of growth of just 1.24 per cent; in the, as yet unfinished, cycle from the recession year of 2003 to 2007, it is probable that it will result in a similarly low average. Growth in 2006 (3.1 per cent) and 2007 (2.6 per cent) indicated a cyclical recovery, but such recoveries have historically always occurred; in Germanys case they have been fewer and farther between in recent years. Notwithstanding the huge shock of German-German unification in 1990, growth in this core industrial economy has been weaker than any other EU-15 country since 1993; the GDP growth weakness has translated into weaker employment growth and more particularly into less favourable unemployment. In 1993 the standard rate of unemployment in Germany at 7.6 per cent was lower than the Organisation for Economic Co-operation and Development (OECD) average of 7.8 per cent (OECD 2007: Statistical Annex Table 14) but by 2005 had risen to 10.6 per cent while the OECD average had fallen to 6.7 per cent; the 200607 recovery has helped to reduce unemployment, but in all likelihood Germany will end this current cycle, as in all others since 1975, with higher unemployment than at the end of the previous cycle. A rule of thumb among economists contends that economies currently require an average rate of GDP growth of around 2 per cent to prevent unemployment rising inexorably from cycle to cycle. The medium-term signs for the German labour market are not favourable, therefore. Structural unemployment was well embedded even before unification and, reinforced by the tribulations of East Germanys transition to market economics, is set to remain firmly entrenched in the united countrys political economy. This is in part a result of a relative decline in the proportion of GDP that is reinvested in the national economy, the investment ratio, which has fallen from a typically high average of over 20 per cent before 2000 to 18.4 per cent in 2007 (after two years of strong growth in investments); the average investment ratio for the new cycle since 2001 is thus set to decline further, compared to previous cycles. Without a significant reversal of investment activity in the domestic economy, Germanys overall trend of GDP and employment growth is therefore likely to be disappointing.
