When Aditya said that

Germany isn’t a cut-out-and-keep model of how to manage a sound, socially just economy

I don’t think he meant that “we can’t import the German model wholesale into the UK”, but rather that we shouldn’t given the undesirable elements, particuarly the neo-liberal aspects, which we’ve got far too much of already.

“The Spirit Level” demonstrated that the countries with the best social outcomes are the ones with the least inequality, which means the Nordic countries and Japan. Those places aren’t perfect, they have their failings, and we of course have our own particular national circumstances to work within. But Britain clearly needs to change how it manages its economy, the goal should clearly be less inequality, and the countries have have been most successful in that regard are clearly the ones to learn from.

Yeah, I’d rather have the Nordic model myself.

Although a bit sceptical about the role played by Germany -and its teamplayer France- in the drive towards more European integration, which will prove detrimental to many areas (but this is another story: see e.g. what I wrote on my website: http://www.mikeconomics.net/downloads/downloads/Deutschland%20uber%20Europa.pdf), I stand among the ones who think Britain should find very useful lessons by looking at and emulating Germany’ socio-economic model.
Actually, it is even more cruel, because Britain has lost some of its past virtues…

It would be too long to elaborate upon, but here are some of them:

- An export machine unmatched in Europe: this is not only due to the strengths of large companies, but also to family-controlled SMEs (which are now rare species in the UK) who often claim strong international positions. I have a cultural explanation to this: contrary to Britain, Germany never had an empire (at least not for long and not, er, “legally”) where to sell its products -and buy them- and therefore was forced to find business opportunities where they arose.

- Diversified economic fabrics, where, contrary to many UK areas, the manufacturing sector has not been abandoned or sold out. Germany has managed to weather many recession times thanks to that -and a lesser dependence to the financial sector, which is a critical London -and UK- problem.

- Good productivity levels -and components- and organisational procedures enabling them. To any business consultant or just visitor, it is always stunning to see how Germans work well in so few hours while the British seem to spend hours at work for less results!

- An education system that is much developed, more egalitarian and more efficient than the UK one(s). That is a key success factor in the German model, often overlooked in superficial analyses.

- A high–skilled workforce, also thanks to effective continuous training schemes. Having worked in different countries, I am still struck by the poor attention paid to training in Britain. As a result, staff turnover is much higher and products and services of lower quality.

- Social protection is closely intertwined with the German economic model.

- Product quality is a German trademark, a reason often cited to buy “Made in Deutschland”. Where have all the Austin, Triumph, Rover, Morris, MG, Jaguar, Land Rover, Bentley, Rolls-Royce gone? We all now. But why? Tnhey used to be symbols of quality, difference, lifestyle, and that British touch. They lost their edge for a number of the above reasons (here we go again), but also due to decreasing quality standards.

- Capabilities to build real international companies and leading global brands. How many UK-based companies are really and truly international? BP? Mmm. Can you cite ten examples? And not Cadbury, please, it’s no longer truly British! And now on to Audi, Mercedes, Volkswagen, BMW, BASF, Bayer, Porsche, Adidas, SAP, TUI…

- Now more sad to say for free-trade liberals like me and many of those here. Germany’s belief (if any) in free trade is much more of the love story invented (remember Adam Smith) and repeated on the British Isles. A “story” that brought wealth to Britain, her Empire, and the whole world. But there is a… but. Modern British, whatever the party, like to say they are “open for business”. That openness has clearly gone too far, compared with most industrialised economies. Almost anyone from anywhere can buy anything from any Brit. German capitalism is based on a mix of families, workers’ partnership (Mitbestimmung), regional banks, limited free float, which have proved more effective in good and bad days than “air-draught” free trade as applied in the UK.

- An efficient infrastructure. Nothing’s perfect but taking the train, sending a mail or going to the hospital is a more pleasant experience -there are other less pleasant ones too- in Germany or France than in the UK!

- Less addiction to debt. (private and public) Following the US, the UK has become a credit-card economy. This is not the case of Germany. At government’s level, the prudent man’s rule is more effectively applied, and not at the expense of public service quality.

That will make it for now.

PS: And I admire Lloyd George much more than Bismarck!

@1/2 – Absolutely, give me something far closer to the Nordic Model.

One of the ways the UK could improve its prospects is by improving its education and training. However, it will not be by copying Germany, as they score lower than we do on the WEF competitiveness index. The Nordics do so well economically because they score highly in the areas that matter.

Higher Education and Training:

1/ Finland
2/ Sweden
3/ Denmark
18/ United Kingdom
19/ Germany

Primary Education:

19/ United Kingdom
25/ Germany

http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2010-11.pdf

The Nordic and German model do not produce less inequality through anything particularly unique to their economies. They achieve such outcomes almost entirely through redistribution.

” Before you take taxes and transfers into account, the rise in inequality in Germany looks very similar to what happened in the UK–indeed, the two countries converge to almost the same value by 2005. But disposable income inequality has stayed flat in Germany, because the German state has used taxes and transfers to counteract rising inequality. ”

” The fact that Sweden is one of the least unequal countries on earth has to do almost entirely with taxes and transfers. ”

http://www.peterfrase.com/2011/08/redistribution-under-neoliberalism/comment-page-1/

German firms are more sophisticated and innovative than ours. However, that is not something that is easily teachable. Their labour market efficiency is a dismal 70th in the world and ours is 8th. Not much we could learn in that metric. We could improve our infrastructure as it is the only scored at 8th, where Germany is 2nd.

People get too carried away with the good performance of the German economy in recent years. They have managed to reform their economy in positive ways and that is undeniable. However, it is the flip side and off the back of the destruction of the euro periphery and should be seen in that way.

” In a way, the strong German growth outcome is directly related to the peripheral sovereign woes. The euro is currently far too weak for Germany, which means that the German economy is extremely competitive, its economy is booming, and its inflation is starting to accelerate. This is why the ECB has been hiking rates and may hike again before the year is out. But the flip side of German growth is the utterly miserable growth rate in Southern Europe, which is because the euro is far too strong for these deeply uncompetitive economies. ”

http://www.bondvigilantes.com/2011/07/28/a-light-in-the-storm-the-german-economic-boom/

Sadly, concerns about Britain’s poor ranking for attainment in higher education and vocational training as compared with peer countries don’t really apply to those among us who opt out of – or get excluded from – schooling through to the GCSE exams at 16.

“Government figures show only 15% of white working class boys in England got five good GCSEs including maths and English last year. . . Poorer pupils from Indian and Chinese backgrounds fared much better – with 36% and 52% making that grade respectively.”
http://news.bbc.co.uk/1/hi/education/7220683.stm

“Though white children in general do better than most minorities at school, poor ones come bottom of the league (see chart). Even black Caribbean boys, the subject of any number of initiatives, do better at GCSEs”
http://www.economist.com/world/britain/displaystory.cfm?story_id=14700670

@5 – You mean that the University fees damaged the system? Well I never!

(So, so totally unsurprised!)

I’d be interested in how a large rental sector and more modest property prices might be a factor in this. I also understand Germany has a flatter wage ratio between top and bottom earners. With workers’ councils giving workers more involvement in decision making there is likely to be a positive psychology that we may lack.