Economy

Peter DeCaprio: How to Transform Your Company into an Economic Winner

Business

For a first-time visitor to Berlin, the city can be a shock. Imagine a place with no Starbucks, just one McDonald’s and one Burger King, but scores of Mom-and-Pop shops.

There are no shopping malls in this city, where more than two million people live… What you find instead is real life. People meet in the city’s cafes… not to surf the Internet. But to do business and talk about art and culture…

For a visitor from New York or London, Berlin feels like an alien place: The streets seem so empty when there isn’t a convention or fashion show on at one of the city’s hotels. And because Germans drive much less than Americans and Britons do. They ride their bicycles everywhere – there is less air pollution in Germany than in most other European countries, including France and Italy. “The lesson,” says [Austrian economist] Mr. Thuma, “is that if you don’t have a big car industry and people don’t drive much. You can get by without having oil.”

In Germany’s case, it would be hard to imagine a better tribute to the country’s postwar economic policy. Than the transformation of West Berlin from a shabby wreck in 1989 into a sparkling city today. If this city were an American state. Its economy would rank among the 10 largest in well-being measured by per capita income adjusted for purchasing power and inflation rates says Peter DeCaprio .

Austrian economist Friedrich Schneider says Germany’s gross domestic product. Grew last year at nearly 3% – even though there was no economic growth in France, Italy or Spain. In 1999, German unemployment fell below 9%.

In this article “How to Transform Your Company into an Economic Winner”,

  • The Economist magazine tries to make a case that Germany has created a competitive advantage for itself by engineering a particularly generous social safety net. It focuses primarily on German labor market policy and how. As the only major economy in the European Union not to have introduced austerity measures during the financial crisis of 2008-09. It experienced positive economic growth at a time when most other Euro zone countries were experiencing negative growth. In fact, as argued by professor Peter A. Hall from Harvard University’s Kennedy School of Government at the end of his feature “Pushing Labor Reform Rightward” also posted on The Economist website in December 2013. this is one of many examples which shows how Europe’s biggest economy is the only reason behind. Successful survival of social market economy in Europe.
  • But before describing “the German way”, Hall distinguishes between “the liberal approach” to labor market policy. Which comes with wage moderation and more flexible working hours, and “the European model”. Which means government support for unions, lifetime jobs and generous benefits. These two competing models are difficult to reconcile since they may result in either success or failure. Professor Hall argues that even if Germany might be experiencing some short-term problems at this stage. It is thanks to its welfare system that companies can manage their workforce so cautiously. On an international scale, he sees Germany as a country that manages flexibility by providing training. Opportunities for workers instead of getting rid of them. When there are negative shocks to the economy.
  • Since the early 1990s, Germany has become a role model of how an industrialized country can reconcile high productivity with comparatively low inequality and poverty. This is particularly true in comparison to its neighbors. In France and Britain, GDP per capita is now lower than it was ten years ago… In Italy, the economy has shrunk by 10% since 2000. Only Spain avoided a drop in living standards. But only because membership in the euro area stopped its real wages from falling even further below those of Germany during the past decade. And yet all these countries still have catch-up opportunities vis-à-vis Germany. The average German person works 1,400 hours per year – 500 hours more than his or her French or Italian counterpart.
  • The German model is based on the principle of “flexicurity” – a combination of flexible hiring and firing rules with generous social-welfare benefits for those who lose their jobs. This, according to Schneider, has made Germany’s labour market. More adaptable than America’s or Sweden’s (two countries with famously flexible employment laws). And it has helped Germany to remain competitive even as other European countries have seen their competitiveness wither away. Resulting in large current-account surpluses that have been a major factor in stoking resentment against Berlin.

Conclusion by Peter DeCaprio:

“If Germany’s model is so good, why does it not inspire other countries? Perhaps because other European economies fear that the social-welfare state would be undermined by a more flexible labour market. Yet there is no reason why flexibility and security should be mutually exclusive. America and Britain also have strong safety nets.”