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Shocks to the System: the German Political Economy Under Stress

Published online by Cambridge University Press:  26 March 2020

Wendy Carlin  and
David Soskice
Wendy Carlin*
Affiliation:
Department of Economics, University College London
David Soskice
Affiliation:
Wissenschaftszentrum für Sozialforschung, Berlin
*
Correspondence should be addressed to Wendy Carlin at The Department of Economics, University College London, Gower St, London WC1E 6BT.
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Abstract

The German economy is recovering hesitantly from the sharp post-unification boom and recession. Two features of recent West German performance are novel: there has been an unprecedented loss of jobs in industry, and manufacturing profitability has been pushed to its lowest level ever and is now low relative to other OECD economies. Serious problems with labour costs and innovation would be expected to show up in a weakening in the trend of export performance. That this has not yet happened is the consequence of the existence of an apparently robust innovation system which enables companies to pursue high quality incremental innovation strategies. However, the experiment of transferring the West German model to the East has proved extremely costly and has not so far established the basis for self-sustaining growth. Problems in profitability, investment and employment in West Germany reflect the failure of the bargaining system—unions, employers, Bundesbank and public sector—to negotiate the sharing of the burden of unification.

Type
Articles
Information
National Institute Economic Review , Volume 159 , January 1997 , pp. 57 - 76
Copyright
Copyright © 1997 National Institute of Economic and Social Research

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Footnotes

∗

The authors are very grateful for their help and advice to the following: Karin Wagner, Andrew Glyn, Peter Hall, Michael Fichter, Geoff Mason, Bob Hancké, Joachim Möller, Horst Kern, Amanda Gosling, Horst Albach and Walther Müller-Jentsch.

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