The Secrets of Germany's Success

What Europe's Manufacturing Powerhouse Can Teach America

As Americans fret about persistent economic challenges, particularly high unemployment, a nearly opposite mood pervades Germany. Neither the economic crises in the rest of the eurozone nor the instability in the Middle East has dampened a deep-seated conviction among German business leaders and economists that two decades after the costly reintegration of East Germany the country has reestablished its position as an economic juggernaut.

Germany's optimism appears warranted: whereas unemployment in the United States rose during the recent economic recession, from 4.6 percent in 2007 to 9.0 percent in 2011 (seasonally adjusted), in Germany, it fell, from 8.5 percent to 7.1 percent. For the first time since 1992, fewer than three million Germans are unemployed. By the time U.S. President Barack Obama was telling Americans in his January 2011 State of the Union address that the United States needed to double its exports, Germany had quietly become the world's second-largest exporter (after China). Indeed, Germany's exports have contributed two-thirds of the country's economic growth over the past decade and have driven its GDP per capita to increase faster than that of any other major industrialized country.

When it comes to boosting exports, of course, the need to maintain or even increase the size of the manufacturing sector, in particular, has been an article of faith in major developed countries for decades. Politicians and voters alike believe that having companies that "make something" is a key element of economic success, in part because manufacturing jobs have historically paid above average wages. For its part, Germany embraced manufacturing, and much of its economic success is thanks to that decision.

THE MITTELSTAND MIRACLE

Register for free to continue reading.
Registered users get access to two free articles every month.

Or subscribe now and save 55 percent.

Subscription benefits include:
  • Full access to ForeignAffairs.com
  • Six issues of the magazine
  • Foreign Affairs iPad app privileges
  • Special editorial collections

Latest Commentary & News analysis