German Business Systems

“What are the main characteristics of Germany’s business system and how are these related to the Country’s export success?”

Introduction and Overview

Germany is a country that has undergone quite the sea of change over the last century since World War I. John Maynard Keynes has said that World War I and the Treaty of Versailles were ruinous to Germany and global prosperity. It was Nazi Germany that began a system of high subsidies for sectors that supported German military power and independence. It was the loss from World War II that plunged Germany into a period of economic ruin known as “Stunde Null,” translated as “Zero Hour.” It was during this time that Germany had to be basically rebuilt from the ground up.

Ludwig Erhard was a man whom took advantage of having similar economic ideals as the American forces tasked with rebuilding Germany. It was Erhard’s decision to undo as much of the Nazi regime’s rules and regulations and also to establish a new currency system, the Deutsche Mark, that were wildly successful in establishing the foundation for German economy moving forward. The economy that grew from all this is what the Germans have dubbed “social market economy.” Not to be confused with “socialist market economy,” they refer to their free market economy as social because of its increased desire to help both the upper and worker classes. This could be seen as the beginning of what they call, “Co-Determination,” or a system in which employees have a management role within the organization for representative decision making purposes.

Over the years, Germany looked more and more towards furthering the “social” aspect of their economy by increasing welfare systems, government subsidies, and by becoming “an instrument for the preservation of existing industries rather than a force for renewal.” (Giles) One of the most compelling aspects of Germany’s business system is the delicate balance between the “social” and “market” aspects of its...