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Germany

Germany. Soziale Marktwirtschaft (Social Market Economy) State control and private enterprise supplement each other Growth and productivity are to be balanced by social equity Mittelstand Open economy. Compared to Sweden and Japan. Banking Exports Labor management Welfare.

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Germany

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  1. Germany • Soziale Marktwirtschaft (Social Market Economy) • State control and private enterprise supplement each other • Growth and productivity are to be balanced by social equity • Mittelstand • Open economy

  2. Compared to Sweden and Japan • Banking • Exports • Labor management • Welfare

  3. http://www.odci.gov/cia/publications/factbook/geos/gm.html

  4. Origins of SMW • Freiburg school of neoliberalism: the state could and should intervene in the market matters and be held responsible for social agenda (intellectual) • Postwar political environment of demilitarization and direct controls (Erhardt as an advocate of decontrol)

  5. Germany compared • National economic goals are written into laws like price stability, a stable currency,full employment, b.o.p equilibrium, and stable economic growth • National social goals are social equity, social security, and social progress

  6. Characteristics of SMW • Sanctity of private property • Market allocation unless a serious conflict with social objectives • Konjunturrat and fiscal policy • Anti-inflationary monetarism • Enforcement of competition

  7. German welfare • Security of employment • Protection of employees • Insurance against risks • Improvement of income distribution • Other early introduction and comprehensiveness (1/3 of GDP)

  8. German welfare • Not progressive taxes but transfers and subsidies, insurance, and profit sharing • Capital formation (savings premiums, health insurance and tax breaks)

  9. Mitbestimmung(codetermination) • Representation of of workers, extended to all industries since 1976(compulsory for +500 employees): industrial democracy • Workforce on both sides of collective bargaining • 2/3 shareholders and ½ workers and unions representatives • Wages, workday length, firing, layoffs

  10. Unions as exception to anti-cartel law • No closed shops • Industrial unions • 40% unionized

  11. Public enterprise • Denationalization (compared to Great Britain prior to the 1980s)

  12. German Unification • West Germany and the fading of the Economic Miracle • Capital tock destruction amd monetary overhang • Ordo-liberal favoring markets but expecting the government to enforce competition

  13. German Unification continued • Eurosclerosis • The social safety net and nativity • Decentralized welfare

  14. East Germany • National socialism • Marxism • 1953: the gap in income has widened due to the Soviet reluctance to build up defeated country • Warsaw Pact 1955 and CMEA

  15. East Germany continued • Kombinaten(1979) and technological intensification • East and West compared • General production and consumption • Standard of living • Environmental quality

  16. Costs of unification • Big bang • 1 to 1 exchange rate (wild DD over-valuation)and unemployment • Interest rates and macroeconomic credibility • Pre-existing financial and legal infrastructure • Women in labor force • Collapse of domestic demand in the East due to competition from the West

  17. German and European Unification • Centrifugal forces (The leadership role and supranationality issue between Germany and France) • Centripetal forces (world trade and challenges of NAFTA and China)

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