What the U.S. Can Learn from Germany's Economic Rebound Many investors are taking a wait-and-see approach on the question of whether Europe's surprisingly sharp economic rebound is sustainable -- and understandably so. With much of the world's economy apparently slowing down, the Continent will be swimming against even stronger tides as it attempts to keep its impressive momentum going.

But as U.S. voters and policymakers head toward this fall's midterm congressional elections, it could be highly instructive to examine the prominent features of European economic juggernauts like Germany that have nearly recouped all the jobs they lost during the downturn.

During the credit-fueled boom just a few years ago, American private-equity firms backed by easy money seemed unstoppable, and commentators predicted that future for the German model of provisioning generous rights for workers was limited.

Of course, the credit bubble fueling much of that private-equity bravado came to a disastrous end. And the remarkable competitiveness of German titans like Volkswagen (VLKAY), Daimler (DDAIF), BMW (BAMXY) and Siemans AG (SI) on the world stage means that the tables might now be turning.

Egalitarian German Model Beats U.S. on Jobs, Exports


The German model has long been hailed as more egalitarian than its American counterpart. At large German companies, for example, half of a supervisory board -- which plays a key role in determining the company's strategy and direction -- is elected by employees. That stands in stark contrast to the dog-eat-dog world of American capitalism, where companies are run only to maximize profits for shareholders.

But along with more egalitarian, it may be more effective as well in relation to some big goals the U.S. is striving top achieve. President Obama is pushing to double U.S. exports over the next five years in attempt to tap into fast-growing emerging markets. Germany, though, is already a bigger exporter than the U.S. despite having an overall GDP that is much smaller: about $3.7 trillion, to America's nearly $15 trillion.

Despite having mounds of cash on hand from cutting costs during the downturn, American companies have yet to start hiring in a meaningful way to bring down unemployment. But Germany has posted 13 consecutive months of job growth.

The German rebound comes at a time when the standoff in the U.S. between business, labor and government is growing increasingly tense. Finger-pointing has been rising as the jobless rate continues to hover above 9% and talk of painful deflationary conditions picks up.

Discussions about how a stakeholder model might work in the U.S., meanwhile, were on the rise following the financial crisis and during the government's widely criticized dealings with Chrysler's creditors. But those discussions seem to have taken a backseat to schemes like more stimulus spending to prop up the American system in the short run as weak job growth continues to frustrate policymakers and Main Street alike.

Germany's robust and broadly shared rebound, though, suggests that its model may hold many insights for those seeking to creating sustainable growth in the U.S.

Increase your money and finance knowledge from home

Intro to different retirement accounts

What does it mean to have a 401(k)? IRA?

View Course »

Introduction to Retirement Funds

Target date funds help you maintain a long term portfolio.

View Course »

Add a Comment

*0 / 3000 Character Maximum

83 Comments

Filter by:
nuevepaul

If the right wing commentators address this issue, it would be with the language of "common sense" in which socialism and taxes are demonized as the downfall of our way of life. I have heard is said that in our system the CEO's pay is set by the board of directors' and the pay for the board of directors' is set by the CEO. In our system the CEO makes an income of hundreds or thousands of times more than the average worker. In Japan the CEO makes less than 20 times the pay of the average worker. Makes you wonder how they get by. When the middle class shares the reigns of control of corporations the lot of the average American will improved, and to hell with the status quo.

August 02 2010 at 8:35 AM Report abuse rate up rate down Reply
obama fools

why do you think american company have a lot of cash and are not hiring??? because they dont know what nobams is going to do .........my small busines has a lot of cash .we are not going to spend or hire for 4 more years till washingto is clear out of its rats.............

August 02 2010 at 8:13 AM Report abuse rate up rate down Reply
1 reply to obama fools's comment
GN

Your are not going to hire because you are making money where you are now. If I had a business making lots of money I wouldn't hire people for no reason I doubt most businesses are making a conscious choice to not hire they don't hire because they don't have more demand to fill, but this is all just assumption and generalization, Does what I say make sense? Or is it idealized and not the reality? I ask earnestly.

May 05 2012 at 11:24 PM Report abuse rate up rate down Reply
Terry

What scares me is that while Germany is the world's 4th largest economy at 3.7 Trillion that still is less than our Federal budget for this year under Obama. Not to mention all our other taxes at the State, County, City and Township levels. We really can't have less government???

August 02 2010 at 8:08 AM Report abuse rate up rate down Reply
1 reply to Terry's comment
GN

With my limited knowledge of governmental structure I really don't know what we could possible cut. If I made you emperor of the us what would you cut?

May 05 2012 at 11:25 PM Report abuse rate up rate down Reply
Louis Gahafer

The problem here in the US is GREED , PLAIN & SIMPLE. Also our goverment to big & they will not work together . They need to start doing what they were elected to do & that is to take care of the problems here in the US & quit meddling in everyone else,s buisness . There MAIN focus SHOULD BE FOR THE AMERICAN PEOPLE . The GUY,S IN WASHINGTON need to quit fighting each other and TAKE CARE OF OF THIS COUNTRY FIRST !!!!!!! The AMERICAN ( TRUE AMERICANS )PEOPLE SHOULD COME FIRST BEFORE ANYONE ELSE .......

August 02 2010 at 8:01 AM Report abuse rate up rate down Reply
Paul FIQUET

With our #1 mentality anyone who thinks we could learn from some other country is dreaming.

August 02 2010 at 8:00 AM Report abuse +1 rate up rate down Reply
garyrjas

This is how intelligent people are on this blog. They say they hate Obama for trying to turn us toward socialism but point to Germany as a success story, and Germany is socialist !!!. Yes, my friend, they pay much higher taxes, but they are taken care of from the womb to the tomb as a result. And employees participating in management? Isn't that similar to the U word (union)? Wow, how scary !!!!!

August 02 2010 at 7:51 AM Report abuse +1 rate up rate down Reply
garyrjas

Gee, all you Obama haters must hate this story, a socialist approach and its working??? One false point, we in no way are headed toward deflation. Energy costs along are going up, and therefore everything with it will also increase. No Virginia, there is not going to be deflation, and in about 2 years, look for about 5% with all the free money floating around.

August 02 2010 at 7:48 AM Report abuse rate up rate down Reply
bemahuron

Learn from Germany??? I don't think we have to look any further than Washington to identify where our problems originate. Hopefully we'll start taking care of that in November.

August 02 2010 at 7:38 AM Report abuse rate up rate down Reply
dsmithsfamily

it would be ashame if the forces locked horns and died. better pull your heads out

August 02 2010 at 7:31 AM Report abuse -1 rate up rate down Reply
dsmithsfamily

man i hate wrighting for a wile and nothing shows up

August 02 2010 at 7:28 AM Report abuse -2 rate up rate down Reply