The Federal Republic of Germany, located in the heartland of Europe, adjoins Denmark, Poland, Czech Republic, Austria, Switzerland, France, Luxembourg, Belgium, and the Netherlands, covering an area of approximately 357,000 sq. km. As Europe’s largest economy and the world’s 14th most populous country (2009), Germany has for centuries significantly affected this region’s political, social, and economical history. This country, which saw the birth of Wolfgang von Goethe and Ludwig van Beethoven, is also the world’s largest exporter.
Economic History
The political success of the reunification of Germany was not without high costs. Following the dissolution of the German Democratic Republic (1990), East Germany, which came under Soviet domination after World War II, experienced huge job losses and a rapid increase in the costs of living. Many young people left to live in the West, seeking new jobs, better education, and a new and better way of life. Unified Germany (1990) has had to provide considerable financial support to boost the flagging economy that has undermined economic growth in the eastern part of Germany.
The German Deutsche Mark was replaced in January 1999 when the European Union (EU) introduced a common European exchange currency that became known as the euro. As a result of the strict requirements imposed by the European Monetary Union, Germany’s economy faltered, resulting in substantial ramifications for the nation’s industrial economy. Unemployment reached a new postwar high.
While in more recent decades the economic growth rates had stagnated, in 2007 the economy showed considerable improvement with a growth rate of 2.6 percent. At approximately the same time, the long-term problem of high unemployment was steadily reduced. For a three year period beginning in 2005, unemployment rates slowly decreased. However, concomitant with layoffs, the shifting of manufacturing facilities to low-cost markets abroad and cost-cutting between 2002 to 2005, costs escalated. Notwithstanding, despite the euro trading at its highest level against the dollar, and the numerous interest rate increases perpetrated by the European Central Bank, the Germany economy recovered once more and job creation increased.
As one of the founding nations of the European Economic Community (EEC), precursor to the European Union, soon after the war Germany began to co-determine Europe’s economy. In the interests of economic cooperation, Franco-German cooperation became a central factor of subsequent mutual political, cultural, and economical relationships. Since the “Economic Miracle” of the 1960s, Germany has emerged as a highly efficient and vibrant economy— not only in Europe but worldwide.
By the end of World War II, Germany’s economy was in ruins. Many production facilities were either destroyed or dismantled as reparation payments. The country’s successful economic recovery is often attributed to two factors of Ludwig Erhard’s free market reforms: currency reforms and elimination of price controls. German industry was effectively stimulated by production investments funds from the Marshall Plan, the European Recovery Program, and the low wage scale in Germany at the time.
Germany is one of the most attractive and competitive business locations worldwide, a country in which foreign investors have increasing confidence as a destination for foreign investment. In 2006 Germany ranked third (after Great Britain and France) among the most popular European foreign investment destinations, having successfully leaped from the sixth place it occupied in 2005. The top three foreign investors were the United States, the Netherlands, and Switzerland (2006). The most popular industries that attract foreign investors are information and communication technologies, industrial machines, and the automotive industry. Today, for the first time, foreign investors own a majority of Germany’s 30 largest publicly traded companies (2007).
Germany’s strong economic performance is very much linked with its high number of successful companies that regularly top or are ranked high in international rankings in categories such as innovation and sophistication of the production process. “Made in Germany” signals good quality, innovative technology, reliability, and strong brands. Together with Germany’s numerous multinational companies, small and medium-sized enterprises (SMEs) play an important role in the country’s economy. Approximately 70 percent of all employees work in SMEs, key sectors of which include automobile manufacturing, electrical and precision engineering, chemicals, environmental technology, optics, medical technology, and logistics.
Germany is still the world’s largest exporter. In 2007 it outranked China and the United States, showcasing both its influential role in the global economy and its potential as global player. Germany’s major exports are motor vehicles, machinery, chemical products, and computer equipment. Export markets include France, the United States, the United Kingdom (UK), Italy, and the Netherlands. Altogether, 65 percent of exported goods went to member states of the European Union. The second largest export market was China with 11 percent, closely followed by the United States with 10 percent. According to the Federal Statistical Office, German exports increased for the fifth consecutive year.
Despite its marked export orientation, Germany lacks natural resources and is largely dependent on imports such as energy products. In 2007 imports increased by 5 percent over the previous year. The majority of imports come from Europe (predominantly France and the Netherlands), followed by Asia (China) and the United States. In 2007 Germany’s exports amounted to €969 billion and imports to €772.5 billion. The record foreign trade balance of €196.5 billion is the highest ever.
With Europe having Germany’s leading markets and suppliers, almost two-thirds of Germany’s imports and exports either originate in or are sent to European Union member states.
Political History
In 2005 Angela Merkel became Germany’s first female chancellor. An East German, Merkel succeeded Gerhard Schroeder, who was openly critical of the U.S. led invasion of Iraq in his reelection campaign in 2002. The new government joined a coalition of the Christian Democratic Union (CDU), Christian Social Union (CSU), and the Social Democratic Party (SPD). Merkel took over as party leader of the CDU in 2000 after Helmut Kohl, the “chancellor of the unification,” was caught in the middle of a party funding scandal. In 2007 Forbes magazine for the second time nominated Angela Merkel as the most powerful woman in the world.
Germany was involved in two world wars in the first half of the 20th century. At the end of World War II (in 1945) the Allies (United States, UK, France, and the Soviet Union) divided the country among themselves, resulting in the separation of (what would come to be known as) East Germany from West Germany and the subsequent formation of the eastern German Democratic Republic (GDR) and the western Federal Republic of Germany (FRG) in 1949. This separation was reified when the Soviet Union erected the Berlin Wall in 1961. Bonn became the provisional capital of West Germany.
The new German government was led by Chancellor Konrad Adenauer, who, by committing the country to assist Western defense systems and allowing the stationing of U.S. troops in the country, secured Germany’s sovereignty in 1955. In May of the same year Germany joined the North Atlantic Treaty Organization (NATO).
During the Cold War, the communist GDR became a member of the Soviet-dominated Warsaw Pact: the FRG, being a liberal parliamentary democracy, became a member of the precursor of the European Union, the Western European Union (WEU), the European Coal and Steel Community (ECSC), and the European Economic Community (EEC). With the end of the Cold War and the political and economical weakening of the Soviet Union, the way became open for German unification. After being separated for more than 40 years, October 3, 1990, finally marked the end of divided Germany.
December 2, 1990, saw the first elections to be held in unified Germany since 1933. The CDU coalition won and Helmut Kohl became the first chancellor of the new German state: In 1991, the Bundestag voted in favor of Berlin being its capital.
Germany had been founded on January 18, 1871, concomitant with the unification of the German Empire. Prussia, one of the numerous states within the German confederation created at the Congress of Vienna (1814–15), challenged Austria, the dominating political and economic force of the time. After winning the Franco-Prussian War (1871) that resulted in the removal of the French emperor Napoleon III, on January 18, 1871, Wilhelm of Prussia was crowned emperor of Germany at the Palace of Versailles. Otto von Bismarck was appointed the first Reichskanzler. These events saw the birth of the Second German Reich, which lasted until the abdication of Wilhelm II in 1919, after Germany was defeated in World War I. (The first Reich was the Holy Roman Empire of the German Nation [800–1806].)
Before unification, Germany consisted of a collection of small states that were linked from the “Revolution of 1848” onward in their common goal of liberal reforms. In 1848, German liberals and peasants erected barricades in Berlin and other German countries, voicing their demands to be granted more rights from the German princes and aristocrats. The outcome of the revolution was the establishment of a National Assembly in Frankfurt. The German flag (a horizontal tricolor with black, red, and gold stripes), the symbol of German nationalism, has its origins here. The colors represent the colors worn by Germany’s soldiers during the Napoleonic Wars, a time that marked an early upsurge of German nationalism. The flag was used until 1871, and again from 1919 to 1933, when Germany became a republic. After the war, from 1949 on, the flag represented West Germany; after unification in 1990, it became the flag of united Germany.
Along with massive political changes that occurred in the early and mid-19th century, the Industrial Revolution generated enormous economic development in Germany. After 1850 the country underwent rapid industrialization: New factories and railway networks were built and the production and export of textiles and iron increased. The population exploded, urbanization commenced, and Germany started on the road to becoming a modern prosperous economy. With time it became Europe’s dominating economic power.
Germany provides cutting-edge environmental technology. And in spite of increasing its economic output, environmental pollution has decreased in Germany over the past few years. Notwithstanding, air pollution emissions and the consumption of water and raw materials could still be sustainably reduced. Not least because of the increasing political decision making since the 1980s, German firms are among the most innovative in Europe when it comes to knowledge-intensive environmental research and environmental technologies. This is also demonstrated by the high number of environmental protection patents lodged at the European Patent Office. Germany is a world-leading exporter of potential environmental protection goods such as technologies and products designed to improve air quality, noise, and recycling, which account for 19 percent of world trade.
German Management Style
Harking back to the medieval guild and merchant traditions, German management styles have “specificness.” Often cited as another crucial factor in the economic miracle of the postwar years, distinctive German management characteristics include entrepreneurism and production orientation. Furthermore, the owner attitude manifested in the German “Herr im Haus” leadership has for long characterized many traditional German enterprises. In general— and due in part to the often more technical background of German managers—management in Germany is more closely connected with the production process than in many Anglo-Saxon countries. Rather than expecting a supervisor to motivate their subordinates, it is more common to expect the superior to assign a task while the subordinate is responsible for the execution of any technical problem. Other German management traits are planning, punctuality, discipline, accuracy, and orderliness.
Education And Science
The land of ideas invests in education. In 2004 Germany spent €7,000 per student from primary to tertiary level, more than any OECD country. Most students go to public schools: Germany rates below the OECD country mean vis-à-vis students studying at private institutions. The country’s unique two-track vocational training (2–3.5 years) program offers practical in-company training and specialist theoretical instruction in a vocational school. The companies pay the trainees/apprentices wages while the government finances the cost of attending vocational schools.
The high value placed on education and the applied sciences is demonstrated by the 78 German Nobel Prize winners—67 of whom received the award for their achievements in the natural sciences or medicine (e.g., Wilhelm Conrad Röntgen, Robert Koch, Max Planck, Albert Einstein, Werner Heisenberg, and Otto Hahn).
Immigration
Concomitant with the “Economic Miracle” of the postwar years, the number of immigrants to Germany has risen. From 1955 to 1973, so-called guest workers have been recruited to fill the needs of the country’s fast-growing economy. These early foreign workers came primarily from Italy, Spain, Greece, Turkey, and Yugoslavia. The immigration wave in the years from 1973 to 1985 consisted mainly of family members of foreigners already living in Germany. At the end of the 1980s, there were two different forms of immigration: asylum seekers and ethnic German repatriates mainly from eastern Europe and the Soviet Union.
On January 1, 2005, a new immigration act came into force. After several years of parliamentary discussion, a single legislative framework now manages Germany’s immigration policy. It constitutes a comprehensive reform of labor migration, humanitarian regulations, and integration and security aspects.
Geography
Reunified Germany is divided into 16 states: Baden-Wuerttemberg, Bayern (Bavaria), Berlin, Brandenburg, Bremen, Hamburg, Hessen, Mecklenburg Vorpommern (Mecklenburg–Western Pomerania), Niedersachsen (Lower Saxony), Nordrhein-Westfalen (North Rhine–Westphalia), Rheinland-Pfalz (Rhineland-Palatinate), Saarland, Sachsen (Saxony), Sachsen-Anhalt (Saxony-Anhalt), Schleswig-Holstein, and Thüringen (Thuringia).
Significant mineral resources can be found in the Rhenish-Westphalian industrial area (hard coal deposits), the Rhenish Basin, the Leipzig Basin, and Lower Lusatia (large lignite fields), Rhenish Slate Mountains, east of the Franconian Alp and the northern periphery of the Harz (iron ore deposits), in Northwest Germany (oil reserves), as well as in Lower Saxony (rock salt deposits).
Germany’s agriculture plays a notable role in the European Union’s agricultural sector. Within the European Union, Germany is the largest producer of milk and pork and the second-largest producer of cereals, potatoes, sugar beets, and beef.
Germany is Europe’s most densely populated country: Population density grew in particular along both sides of the Rhine valley, that is, in the Upper Rhine region, in the Rhine-Neckar and Rhine-Main regions, around Cologne and in the periphery of the RhenishWestphalian industrial area.
Germany consists of 16 federal states (Länder), which have the responsibility for central administrative areas such as education, law enforcements, culture, and environmental protection. The federation is mainly responsible for legislation, the Länder implement federal laws on behalf of the federation or under their own jurisdiction. The federal government is solely responsible for defense and foreign affairs. The Länder also direct regional governmental planning in a bid to ensure equal living conditions for all; that is, all citizens may avail themselves of schools, doctors, and pharmacies, for example. This is also a prerequisite for attracting business and industry. The federal states also determine environmental conservation planning, i.e., the protection of natural landscapes and economic use of natural resources.
Bibliography:
- David P. Conradt, The German Polity (Houghton Mifflin Harcourt, 2009);
- Francesco D’Amuri, Gianmarco I. P. Ottaviano, and Giovanni Peri, The Labor Market Impact of Immigration in Western Germany in the 1990s (National Bureau of Economic Research, 2008);
- German Federal Foreign Office, “Facts About Germany,” www. tatsachen-ueber-deutschland.de/en (cited March 2009);
- German Federal Office of Administration, www.bund. de (cited March 2009);
- German Federal Statistical Office, www.destatis.de (cited March 2009);
- Georg Meck, “Green Champions,” www.magazine-deutschland.de (cited March 2009);
- Wolfgang Streeck, Re-Forming Capitalism: Institutional Change in the German Political Economy (Oxford University Press, 2009);
- Dennis Sweeney, Work, Race, and the Emergence of Radical Right Corporatism in Imperial Germany (University of Michigan, 2009).
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