By Richard
Anderson Business reporter, BBC News
The German education system is
much more geared to vocational training than many of its economic
competitors
Imagine a country whose inhabitants
work fewer hours than almost any others, whose workforce is not particularly
productive and whose children spend less time at school than most of its
neighbours.
Hardly a recipe for economic success, you might think.
But the country described above is none other than Germany, Europe's
industrial powerhouse and the world's second largest exporter; a country whose
economy has single-handedly stopped the eurozone falling back into recession and
the only nation rich enough to save the euro.
When you consider that only the Dutch work fewer hours among the 34 members
of the OECD, that German children spend 25% less time in the classroom than
their Italian counterparts, and that there are six more productive economies in
Europe alone, these facts appear all the more remarkable.
So why is the German economy so powerful, and what lessons can the rest of us
learn from it?
Euro bliss
There is no doubt that Germany has benefited greatly from the euro.
By getting into bed with more sluggish economies in southern Europe, Germany
adopted a much weaker currency than would otherwise have been the case - as one
of the very few countries in the world running a balance of payments surplus,
the deutschmark would have been a great deal stronger than the euro.
This has provided a terrific boost to German exports, which are cheaper to
overseas consumers as a result.
But this goes only some way to explaining Germany's current economic
might.
Just as important are the relatively low levels of private debt. While the
rest of Europe gorged on cheap credit throughout the 1990s and 2000s, German
companies and individuals refused to spend beyond their means.
One reason for this, says David Kohl, deputy chief economist at
Frankfurt-based Julius Baer bank, is that real interest rates in Germany
remained stable, unlike those in other European economies.
"In the UK, Italy, Spain and Portugal, for example, higher inflation meant
real rates moved down, so there was a huge incentive to borrow money," he
says.
But cultural differences are just as significant - quite simply, Germans are
uncomfortable with the concept of borrowing money and prefer to live within
their own means.
"In German, borrowing is 'schulden', [the same word for] guilt. There is an
attitude that if you have to
borrow, there is something wrong with you," says Mr
Kohl.
This has been particularly beneficial to the Germany in recent years - unlike
its European counterparts, consumers and businesses did not need to slash
spending to cut their debt levels when banks stopped lending during the
recession.
Labour reforms
But there are other, deep-rooted reasons behind Germany's current economic
pre-eminence in Europe, not least in fact the relatively low number of hours
spent at work and in the classroom.
Most productive economies in OECD
| Country |
GDP/hr worked |
Source: OECD. Figures in $.
|
|
Norway |
81.5 |
|
Luxembourg |
78.9 |
|
Irish Republic |
66.4 |
|
US |
60.3 |
|
Netherlands |
59.8 |
|
Belgium |
59.2 |
|
France |
57.7 |
|
Germany |
55.3 |
|
Denmark |
53.2 |
|
Switzerland |
51.7 |
Germany embarked upon a programme of fundamental labour
market reform in 2003, sparked by the excesses of post-unification wage
increases.
Strong employment protection legislation and a degree of trust on behalf of
the workforce in well-capitalised companies that had not over-borrowed, meant
the Social Democratic government was able to use its close ties with labour
unions to push for moderation in wage inflation.
The reforms laid the foundation for a stable and flexible labour market -
while unemployment across Europe and the US soared during the global downturn,
remarkably the jobless number in Germany barely flickered.
German workers were simply willing to work fewer hours knowing that they
would keep their jobs because of it.
They were all the more willing to do so due to the stronger bond that exists
between workers and employers compared with many other countries.
"There is a culture of business owners acknowledging and rewarding the
efforts of the workforce," says Andreas Woergoetter, head of country studies at
the OECD's economics department.
No wonder, then, that Germans work fewer hours than most.
Job skills
Hours spent at school per year
| Country |
Hours |
Source: OECD. Selection of countries.
|
|
Italy |
8316 |
|
Australia |
7806 |
|
Netherlands |
7700 |
|
France |
7432 |
|
Spain |
7364 |
|
England |
7258 |
|
Germany |
6362 |
|
Japan |
6344 |
|
Greece |
6340 |
|
Poland |
4715 |
|
OECD average |
6732 |
More important still to Germany's industrial strength is
the country's education system.
School finishes at lunchtime across much of Germany due to what Mr
Woergoetter calls a "societal preference", designed to allow children to spend
more time with their families.
But it's in the later years of schooling that the German model really stands
apart.
"Half of all youngsters in upper secondary school are in vocational training,
and half of these are in apprenticeships," says Mr Woergoetter.
Apprentices aged 15 to 16 spend more time in the workplace receiving
on-the-job training than they do in school, and after three to four years are
almost guaranteed a full-time job.
And in Germany, there is less stigma attached to vocational training and
technical colleges than in many countries.
"They are not considered a dead end," says Mr Woergoetter. "In some
countries, company management come from those who attended business school, but
in Germany, if you're ambitious and talented, you can make it to the top of even
the very biggest companies."
The German education system, therefore, provides a conveyor belt of highly
skilled workers to meet the specific needs of the country's long-established and
powerful manufacturing base, which is rooted in the stable, small-scale family
businesses that have long provided the backbone of the economy.
Lessons learned
There is clearly much to learn from the German model, but blind replication
may not be the answer.
Germany is home to some of the
world's best-known manufacturers
Many economies jealously covet Germany's manufacturing prowess, particularly
while demand for its industrial products in emerging markets such as China
continues to boom.
And yet, not so long ago, the roles were reversed.
"Ten years ago, we in Germany were looking at the much higher value-added
potential of the UK service sector," says Mr Kohl.
"There are limits to adding value in manufacturing. If you want to be rich
and move up the value chain, you need to be in services."
As unlikely as it seems, perhaps one day Germany will once again look to
others for inspiration.
