+1-817-968-5551
+61-488-839-671
+44-7480-542904About Expert
Key Topics
- Introduction
- Discussion
- Varieties of German Capitalism
- Features of Germany economy system that make them ideal coordinated market economies
- The tendency to shift towards liberalization and shifting towards LME
- Are there any changes noticed in the German economic system? Is to temporary or permanent?
- Conclusion
- References
GERMANY: A CONSISTENT COORDINATED MARKET ECONOMY?
Introduction
Place Order For A Top Grade Assignment Now
We have some amazing discount offers running for the students
Place Your OrderThe entire project will revolve around the varieties of capitalism with regards to Germany. Some of the changes have been observed in the recent times by applying some of the LME strategies such as the companies have held down salaries for increasing their competitiveness in the marketplace, there is a looser salary coordination, the social benefits have been reduced, domestic investments have been also reduced by the German banks and there is a certain amount of development witnessed in the dual labour market. In terms of the political and constitutional environment it can be said that Germany has a government that is highly constrained in nature. The constitutional constraints of Germany include Federalism, Para-public institutions, Bicameralism with the public relations and Federal Constitutional Court. On the other hand, the political constraints include Decentralized part organization and coalition government. It is also quite unlikely that Germany will encourage any type of dramatic changes to their market economies in order to change into a single model due to the convergence time lag, path dependency, and the political processes. However, Germany can adopt some of the characteristics of LME for making sure that they have economic performances that are quite healthy in nature. The study will also highlight the characteristics that make Germany an ideal type of market economy, if there are some of the changes occurred in the perfect model of CME, does Germany really posses the tendency towards the increasing liberalization, if there are some of the temporary changes occurred/noticed in the German economic system and the varieties of German Capitalism.
Discussion
Varieties of German Capitalism
From a statistical point of view, it can be said that Germany is mainly divided into two main parts. The two regions correspond with the past state territories of the Socialist East-Germany and capitalist West-Germany. Now the change from the socialist planned economy to the capitalist market economy is completed since a long time. Arguably, it has been witnessed that in Germany there are a huge amount of socioeconomic differences that still exist. Contrasting to other East European Societies it has been noticed that East Germany had a good ground in the transformation process and West Germany not only supported the entire transformation process but it also became the vital point of reference. Furthermore, the entire transformation process was also a planned process of adoption to the capitalism of the West German Model. The German model of the industrial relations and the corporate governance has attracted the attention of the academic work from various disciplines such as economic geography, economics, and political science along with some of the policymakers from all across the world (Carlin and Soskice, 2008). It is quite evident from the period of 1900 that the German model came under huge pressure because of the low-cost competition from the countries such as Asia and Eastern Europe. The internalization strategies of German companies, high economic cost of the German reunification have brought a significant amount of relocation to the labour intensive production operation to various countries. The above-mentioned forces are also the main reason of creating extra pressure on the social security system, unemployment at a high rate, and it has also negatively encouraged the huge spread pessimism among the population of Germany. For fighting and overcoming these problems, the governing coalition of Gerhard Schroder's with regards to the Green party and Social Democrats have introduced the Agenda 2010 program that mainly aims to restructure the German economy fundamentally and also to encourage the role of the state for enhancing the international competitiveness (Soskice, 1999). A pain part of this program is also aimed at reducing the social security systems that is sponsored by the state at each and every level that includes the pension entitlements, unemployment benefits, and health benefits while moralizing individual responsibilities in a stronger manner.
There are some of the main elements present in the German Variety of Capitalism. To describe the German model of capitalism it is quite important to outline the main individual elements that make it along with the overreaching complementariness that provide it internal agreement and the institutions that allow coordination between the main subsystems and actors. Some of the scholars also argued that the prominence of the traditional market mechanisms along with the non-market forms is the describing feature of a group of national models clearly the German models in them that is characterized as the coordinated market economics.
The industrial relations systems in Germany are mainly dominated by a corporatist system of industry and national-wide wage bargaining between the trade unions and the employer associations. The main benefit of this system is that it supports a production system that is mainly built around the trained workers with a high level of workplace autonomy and skills and also encourages the worker's knowledge that is mainly bothered with the process and product improvements. Moreover, it is also the system by which the employees gain a huge amount of confidence that they are fairly remunerated among everyone present in the industry (Soskice, 2001).
There is a high amount of labour market stability and also a limited amount of inter-firm mobility of employees within the entire German system, the companies must rely on the knowledge sharing with each other and participating in various technology transfers. Furthermore, it has been observed that the industry-level employer's association plays an important role in fostering the dispersal of the common technical standards. They also tend to work in a close manner with the state and federal level public agencies for designing as well as delivering programs in order to upgrade the company's process technologies and products on a daily and continuous basis. All of the above-mentioned initiatives help Germany to create an industry-specific, commonly shared knowledge pool that is further supported by the training programs that is entirely designed to deliver industry-specific skills (Waterhout, Othengrafen and Sykes, 2013).
Features of Germany economy system that make them ideal coordinated market economies
It has been studied and also argued by a lot of scholars that the dominating factor in the financial and economic life of Germany can be noted as the all-ruling scarcity of goods. Additionally, Germany has the industrial base that is regarded as quite strong as it successfully produces about a third of its gross domestic product that is needed for the export purpose. It is also regarded as the economy in which the state and the social protection play a dominant role. The above-mentioned elements are the main themes that will be highlighted throughout this entire segment in an effective manner. It can be also said that because of the openness, Germany is greatly influenced by the competition among the locations for the international technology and mobile capital that exists in abundance with regards to the world's factor markets and also by the cut-throat competitions on the world product markets. Arguably, despite having a strong amount of political and economic turmoil rising with the EU, Germany at present is living in a period of steady and strong economic performance. The GDP of the country has expanded in an excellent way contrasting with the other years in the year 2016. Furthermore, the strong economic side of Germany is also highlighting the fact that they have also not failed to strengthen their roots in the labour market equally. In the previous year, it has been also observed that the employment rate is around 5.8% that is considered to be lowest in the last 26 years. The investment, as well as the business freedom, is said to be also quite strong in Germany. The enterpreniual growth and the long-term competitiveness are highly supported by to sound business regulatory environment, global commerce and also by the well-protected rights. The coordinated market economies mainly rely on the institutions that are formal for regulating the market and coordinating the interaction of the organizations and the relationship of the organizations with the employees, suppliers, consumers and also with the financiers. The CME is tending to be characterized by the long-term relations between the economic actors who also are also quite cooperative in nature. Furthermore, it has been also observed that the CMEs also have a huge level of job security, cooperative relationship between the employer's association and the trade unions, and the institutionalized forms of the employee's participation. The above-mentioned cooperative relations also provide the CMEs with a vital source of the competitive advantage in the global economy. Additionally, they also tend to be quite innovative and the production quality also remains high with high-value-added goods with regards to the mature manufacturing industries (Bathelt and Gertler, 2005).
Are there any changes in Germany at present with regards to the perfect model of CME
Are there any changes in Germany at present with regards to the perfect model of CME
It has been greatly observed and witnessed that there are some of the changes that took place in the recent times and Germany at present cannot be completely considered to be a perfect model of CME and they are also trying to shift towards the LME. It has been noticed that there are some of the important evolutions that took place in the labour market practices of Germany and it also included defection by the employers from the financial market liberalization and coordinating institutions in the current years. There are some of the scholars who have also argued with the fact that the Germany that exists today is not at all like the Germany that existed earlier. The Soskice and Hall argued that Germany is portrayed as near-perfect CME earlier. It can be also said that one of the most popular and fundamental oppositions between the types of capitalism is between a coordination-based model known as the CME and market-based system known as LME. On the other hand, it has been also noticed that the German dual model with regards to the vocational training is credited with a highly skilled working class and the below youth employment. Moreover, the governments all across the world have attempted to achieve the above-mentioned excellent outcomes by matching the dual model system. Some of the earlier literature also highlights that the system does work in coordinated market economies exactly like Germany's. The reasons for which Germany cannot be considered as the perfect model of CME in the recent times because of the following reasons: Firstly, the public education system provides the workers with only the basic education skills and the on-the-job skills are only taught by the employers so that a role can be fulfilled by the worker in an effective way with regards to the assembly line. In the current times, the German firms have no such incentive to invest in the workers that are high-skilled in nature. Secondly, the unions are also assumed to be quite weak in nature. The flexibility in the German labour market allows the other companies for using such model. Thirdly, there is also an absence noticed in the employer's coordination. There is hardly any self-regulation observed in the firms and there is almost insufficient real incentive present for self-regulating apprehentiship programs (Schmidt, 1991).
The tendency to shift towards liberalization and shifting towards LME
Some of the scholars and economists have always argued that the linearization is quite general and it also happens. However, liberalization occurs in a gradual manner so a lot of time it is not noticed by the individuals. One of the main aspects in which the liberalization mainly takes place is known as the codetermination. Throwing light on the above-mentioned statement it can be said that codetermination plays an important role in Germany as the employees in Germany always tend to enjoy their participation rights in the corporate decision-making processes stipulated by law. There are some of the cases in Germany such as the Daimler and Volkswagen that serve as the prominent examples with regards to whether both of the companies liberalized in terms of the codetermination. The additional liberalization can be said to be quite possible as long as the customers and the workers both are sheltered from services and harm are treated as the products that are highly tradable. The organized market economy of Germany also means that that the reform tends to proceed quite slowly when compared with the UK liberal market economy (Barry and Nienhueser, 2010).
There is some form of changes that are witnessed in the economic systems of the developed countries like Germany from a long period of time and it also indicates that Germany is shifting towards LME. Globalization is regarded as the main factors for undermining main features of the CME model and weakens the position of labour. The capitalist variety is linked to sector-particular comparative advantages that were earlier predicted by the Soskice and Hall. Furthermore, the CMEs tend to export more heavily in the tech industries that are medium high while the LMEs export in the high-tech industries. Additionally, Germany also moved towards LME model and specialized more strongly in the high-tech over the time (Müller, 2010).
Are there any changes noticed in the German economic system? Is to temporary or permanent?
Yes, there is a significant amount of changes noticed in the economic system of Germany in the recent times. The economy of Germany is always considered to be one of the strongest in the entire world. It can be said that from the inception of Germany at the end of World War 2 to the present the economic system of Germany has undergone a lot of change and it is still changing on a continuous basis hence it can be said that the changes are temporary. It has been witnessed that the new government of Germany has introduced a minimum salary of about 8.5 Euros per hour that came into effect from the year 2015. In the year 2014, it has been noticed that the budget of the country is quite balanced. On the other hand, the German economy suffered from the low levels of investment and the current government is planning to invest approximately 15 billion Euros by the next year. There is also some amount of structural change noticed in the German economic system that is because of the dynamic nature of their economic system to a great extent (Frankel, Stein and Wei, 1997).
Conclusion
The entire project highlighted Germany as a consistent coordinated economy along with some of the arguments by some of the scholars and economists from across the globe. Moreover, the different colors and flavors of capitalism are also discussed throughout the study. It has been witnessed that Germany has an excellent and strong economy when they are compared with the developed countries like U.S. and France. However, it has been observed in the recent times that Germany is shifting towards the LME model because it is proven to be much more effective and efficient than the CME model. There are also some of the changes noticed in the German economic system especially when a new government is elected in their system but the changes are temporary in nature.
References
1. Barry, M. and Nienhueser, W., 2010. Coordinated market economy/liberal employment relations: low cost competition in the German aviation industry. The International Journal of Human Resource Management, 21(2), pp.214-229.
2. Bathelt, H. and Gertler, M.S., 2005. The German variety of capitalism: forces and dynamics of evolutionary change. Economic Geography, 81(1), pp.1-9.
3. Carlin, W. and Soskice, D., 2008. German economic performance: disentangling the role of supply-side reforms, macroeconomic policy and coordinated economy institutions. Socio-Economic Review, 7(1), pp.67-99.
4. Frankel, J.A., Stein, E. and Wei, S.J., 1997. Regional trading blocs in the world economic system. New York: Peterson Institute.
5. Müller, D., 2010. Do Germany’s Global Players Liberalise? The European Works Councils of Volkswagen and Daimler–A Case-Study (Bachelor's thesis, University of Twente).
6. Schmidt, S.K., 1991. Taking the long road to liberalization: Telecommunications reform in the Federal Republic of Germany. Telecommunications Policy, 15(3), pp.209-222.
7. Soskice, D., 1999. Divergent production regimes: coordinated and uncoordinated market economies in the 1980s and 1990s. Continuity and change in contemporary capitalism, 38.
8. Soskice, D.W. ed., 2001. Varieties of capitalism: The institutional foundations of comparative advantage. Oxford: Oxford University Press.
9. Waterhout, B., Othengrafen, F. and Sykes, O., 2013. Neo-liberalization processes and spatial planning in France, Germany, and the Netherlands: An exploration. Planning Practice & Research, 28(1), pp.141-159.
2. Bathelt, H. and Gertler, M.S., 2005. The German variety of capitalism: forces and dynamics of evolutionary change. Economic Geography, 81(1), pp.1-9.
3. Carlin, W. and Soskice, D., 2008. German economic performance: disentangling the role of supply-side reforms, macroeconomic policy and coordinated economy institutions. Socio-Economic Review, 7(1), pp.67-99.
4. Frankel, J.A., Stein, E. and Wei, S.J., 1997. Regional trading blocs in the world economic system. New York: Peterson Institute.
5. Müller, D., 2010. Do Germany’s Global Players Liberalise? The European Works Councils of Volkswagen and Daimler–A Case-Study (Bachelor's thesis, University of Twente).
6. Schmidt, S.K., 1991. Taking the long road to liberalization: Telecommunications reform in the Federal Republic of Germany. Telecommunications Policy, 15(3), pp.209-222.
7. Soskice, D., 1999. Divergent production regimes: coordinated and uncoordinated market economies in the 1980s and 1990s. Continuity and change in contemporary capitalism, 38.
8. Soskice, D.W. ed., 2001. Varieties of capitalism: The institutional foundations of comparative advantage. Oxford: Oxford University Press.
9. Waterhout, B., Othengrafen, F. and Sykes, O., 2013. Neo-liberalization processes and spatial planning in France, Germany, and the Netherlands: An exploration. Planning Practice & Research, 28(1), pp.141-159.
Give your grades a boost
Just share your requirements and get customized solutions on time.
-
1,168,768 Orders
-
4.9/5 Overall Rating
-
5,052 Experts
