How did European nation become the strongest Economy in EU

business     |     Apr 06 2019

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What do Audi, BMW, Ford, Mercedes, Opel, Porsche, and Volkswagen have in common? They are all automobile manufacturers. What else do they have in common? They’re an inventory of corporations in European country. What else do they have in common?

  • These German corporations list of nice automobile makers has been there forever.
  • All these companies have stood the test of time and have emerged strong.
  • They make some of the most technically advanced and classy designs of automobiles.

Wow, one country that makes such great machines. Out of curiosity, I checked what other companies are based out of Germany. I have grown up listening to the term ‘German precision’, so I wanted to see if this phrase extended beyond automobiles. Much to my surprise, some of the most reputed companies across all industry segments are of German origin.

Great German Companies

Adidas in
apparel and accessories, BASF in chemicals, Carl Zeiss in optical systems, Deutsche in banking, Faber Castell in writing instruments, Hugo Boss in luxury fashion, Knorr in food, Lufthansa in airlines, Merck in pharmaceuticals, Sennheiser in audio electronics and so on. If you actually check Wikipedia, you will be also pleasantly surprised to know that Germany company database has great companies starting with all alphabets except that of Q and X. I mean, it is difficult to name and pronounce names starting with Q and X, even for quality conscious and perfection-oriented Germans!

Sick Man of Europe

Germany is 357,376 km ² of a country compared to the giant 9.834 million km ² that the United States of America is. I am comparing these two countries because America is a general measure for everything, be it their currency or their leadership. While I was still astounded with what this small country has achieved in all segments of Industry, I was quite taken aback to know that it was called the Sick Man of Europe in the late 1990’s. In just over a decade, the sick man of Europe has come to be one of the strongest economies in the European Union. I think this is a brilliant case study to diligently study and learn from for any aspiring economist.

Why Was Germany call the Sick Man of Europe?

In the late 1990’s almost all the economic indicators of Germany showed a decline. It’s GDP reduced by 0.2% in the last quarter when the rest of the EU recorded a 0.5% increase. The whole economy showed signs of recession. Business growth was at the height of sluggishness. Jobs were on a record low. Unemployment loomed large everywhere. All these were reasons enough to qualify Germany as the Sick Man of Europe. Little did the world know that this was not to last long.

What Really Clicked for Germany?

Over the next few years, Germany grew out of the image of a doomed economy to become a superpower economy not just in the Euro but in the whole world. Wages improved as unemployment became a thing of the past. Exports became better than never before and clocked the highest in the whole of Euro. Suddenly, Germany became a popular and a much-discussed country the world over.
So, what really clicked for Germany? This is a question worth answering.

Manufacturing

When most
of the countries followed the American success of dotcom businesses, Germany stuck to its manufacturing roots. This really worked for the revival of ermany. The whole manufacturing segment of Germany took to innovative ways of doing things. They stuck to the German pride of quality over price. They used technology to enhance the workflows and became a compelling name in the world. No German company directory in the world is ever going to be complete without a manufacturing firm in it.

Trade Unions

Germany
as a country has a different set of rules in running their companies. It is
unique to Germany that employees have a say in the decisions of the Employers.
Most capitalist countries might not be in a position to even relate to such a
state of affairs in running a company. But, for Germany, it has proved to be a
boon.

The trade
unions of Germany manage aspects such as work councils, having representatives
on the boards of companies and access to power in the decision making of the
company. These aspects have made the trade unions a major force to handle
labor-related issues. They have brought in loyalty and commitment along with
justified pay rises and cuts.

A
case in example is the Volkswagen story of labor reforms in the early 2000’s.
The company wanted to shift their car manufacturing to a cheaper labor
location. A negotiation was made with the IG Metall union that included
performance targets along with training plans. What resulted was a success
story that was politically lauded and economically encouraged.

The German Mittelstand

The German Mittelstand is the term used for the small and medium enterprises. A study says that these companies are more than 90% of the overall German companies and support 50% of the economic output. The Mittlestand is basically family-owned companies that do niche manufacturing. They may manufacture just one product, but that one product is world class with no other rival. It is said that these companies have more than four hundred thousand patents to their credit. These companies employ almost 70% of the country’s workforce and contribute to 50% of the economic output. They have extremely good policies and have a great work culture which builds a committed and loyal workforce. A German business directory is incomplete without a mention of the Mittelstand.

Two
other factors which built into Germany’s revival are the education system
reforms and the political support for all things progressive. In between
education, manufacturing, labor reforms and politics, Germany seems to have
figured out its own unique formula to be a super economic power. What worked
for Germany might not work for all other countries as Germany takes pride in
its culture and still values the engineering spirit as a nation. Time will tell
how far these values will take Germany.

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