"All the more enigmatic are the Germans. From the start they have spent their lives pondering their problems, each one occupied with his own and many with those of their fellow countrymen. Have they found an answer?"
– On the German National Character
(First published in Deutsches Adelsblatt, XLII, 1924)
When I talked to Mike about perhaps writing a few entries on life here in Germany and the German culture and mentality, a thousand conflicting impressions, thoughts and ideas started bottlenecking in my mind.
First and foremost among these was the thorny dilemma of how one can write about an entire culture, make generalized observations based on anecdotal evidence or experience and then somehow connect those mental dots to paint a picture of what life is like in Germany. So from the outset I will state that the material herein reflects merely my own personal experience, thoughts and impressions on life as an expatriate American living in Germany. While it is practically impossible to avoid making stereotypical assertions concerning the culture you live in, I recognize and hold the caveat that there are always exceptions to the stated rule. In fact, often times I will have what I consider a strong handle on how Germans think and operate and will encounter someone here who totally dashes all of my preconceptions. So what I am saying, and this goes with any culture, is tread with caution and respect and keep an open mind.
With that caveat, I have decided to write a series of installments that will give the reader some minor insight into what makes Germans tick specifically, and on a broader level, insight into some of the differences between Americans and Europeans in general.
The first of these installments shall be devoted to the Social-Market Economy as a paradigm of how Germans view themselves in relation to the government or Der Staat.
Sozialmarktwirtschaft
Many Germans see the state in an inherently positive light. This is not an abstract idea—it permeates all facets of life here. The state is the mechanism through which Germans seek to maintain the ordre public (and private life).
Nothing new to this, right? Every culture seeks to do this in some form or fashion. However here in Germany, Germans seek to order everything through rules and regulations, down to the minutiae of life. Just how pervasive this striving for Offentliche Ordnung (public order) is will be discussed later.
One can take the economy as a point of departure to examine how elements of the German character in the form of over-organization, the concept of sozial and solidarität (the fundamental buzzwords of socialism), and the quest for order and risk-aversion manifest themselves.
Germany has, over the past 50 years or so, attempted to institute a "third way" between socialism and capitalism. Since I see it’s manifestations here in daily life, I thought it would be interesting to delve into some of the economic history. I have included for the sake of background a relatively good article outlining the development of the so-called "third way":
Taken from Barry, Norman, Germany and the Third Way, The Freeman: Ideas on Liberty, Vol. 49 No. 11 (Nov. 1999). (Norman Barry is professor of social and political theory at the University of Buckingham in the United Kingdom. He is the author of Business Ethics (Macmillan, 1998)).
All major political movements have been infected with the virus of the third way, with its illusion that there is a morally appealing midway point between capitalism and socialism and that we can indulge our social consciences with welfarism and heavy economic regulation without seriously corroding the market society. It is highly successful capitalist societies that are peculiarly vulnerable to these illusions; they have little resonance in Poland or the Czech Republic.
Their origins in Germany date back to the foundation of the Erhard system. There were two interconnected social visions that governed political and economic life in postwar West Germany: the idea of Ordo-liberalism—that is, the peculiarly German version of classical liberalism—and die Soziale Marktwirtschaft (social market economy). The values, policies, and personnel of the two intellectual movements overlapped. All German market theorists had some doubts about unregulated capitalism. Most particularly they thought there was a tendency for free contract to produce, quite spontaneously, a non-contract society through the emergence of monopolies and cartels. The German skeptics were encouraged by their own experience; the German economy had been badly cartelized in the early decades of the twentieth century (which ultimately enabled Hitler to run a "non-socialist" command economy). The Ordo-liberals thought that mistaken legal decisions had produced this outcome. In their Wirtschaftsordnungspolitik, the legal and political order of a free economy, the state was given the responsibility of preserving, artificially, the foundational rules of a market society, though they ought to have realized that free international trade is the most effective guarantor of a noncartelized economy. The Germans were very much influenced by American antitrust law.
Both "liberal" movements believed in some state welfare but it was much more pronounced in social market theory than in Ordo-liberalism. Alfred Müller-Armack, a member of Erhard’s government, coined the deadly phrase "social market economy," and he actually believed in a new concept of the person—neither capitalist man nor socialist man—who would emerge from a properly and ethically organized market society. Erhard himself probably regarded the social market economy as a morally convenient mask behind which he could advance his genuine market reforms. But at least the German liberals thought that welfare policies should be marktkonform, that is, consistent with an efficient exchange system; they should not encourage the emergence of a dependency culture.
However, as the German system developed, it was the "social" element that began to predominate over the "market," and throughout the 1960s the country began to resemble a Scandinavian welfare state, to which its liberal theorists had originally been vehemently opposed. Many reforms were quite debilitating. Unemployment pay was, and is, close to the wage paid for work; sick leave is very generous; and more or less free education can last almost forever. And, as any traveler will tell you, most shops are closed on Saturday afternoon. Given the reduced attractions of work (and German nonwage labor costs are the highest in the world) is it any wonder that German unemployment is 11.5 percent? The original Bismarckian state pension scheme was foolishly extended and its unfunded foundations, in combination with a declining birth rate, promise to present the country with a horrific problem in about 20 years. Government spending, which was kept below 30 percent of GDP under Erhard, is now above 50 percent.
Social Consensus
One reason for West Germany’s original success was its social consensus. There was none of the confrontational attitude between capital and labor that so disfigured Britain before Margaret Thatcher. Once trade unions had accepted the market system, they were anxious to cooperate in what became a common enterprise. But this benign industrial culture had its downside. It produced a certain insularity and a hostility to the takeover mechanism: nothing much should change, and nobody should lose his or her job. Fearing the concentration of industry, the Ordo-liberals themselves gave this attitude some intellectual justification. They and the postwar government set up a cartel office, which sedulously sought out any innovator who might get a fraction more than the permitted market share.
German companies have never been concerned about delivering shareholder value. Indeed, they have traditionally financed their investment by bank debt, giving the lie to American business ethicists who worry about the immorality of corporate raiders loading up American corporations with junk-bond debt. Those ethicists looked to Europe as an example of probity, but as it turned out, the "greed-driven" Anglo-Saxon model of corporate governance proved highly flexible and innovative.
What nobody realized in Europe was that the predator breaks up companies, spins off unwanted parts, fires layers of redundant managers, and produces leaner and fitter enterprises. Such restructuring has been the foundation of America’s economic success since the 1980s. But in Germany’s much-vaunted consensus, the raider is subject to opprobrium and ostracism, especially if he is a foreigner. With banks (which, unlike those in the United States, hold substantial equity stakes in German companies), trade unions, and local interests forming invincible coalitions against change, German managers are secure, as they were in 1997 when Krupp tried a reverse takeover of Thyssen in order to rationalize the steel industry. The stakeholder groups got together and turned a hostile bid into a tame merger, with guarantees of no unemployment. Even Italy seems to be ahead in adopting Anglo-Saxon methods of industrial reorganization. The computer company Olivetti has just completed a spectacular $60 billion takeover of Telecom Italia against a formidable array of stakeholders. The takeover strategy, and motivation to maximize shareholder value, is now spreading to Europe. But Germany is far behind.
Fear of Inflation
Of the classical-liberal principles that undoubtedly inspired West Germany in the early postwar period, only a belief in sound money survived the onslaught of social democracy. Of course, Germany’s experience of runaway inflation in the 1920s made the country sociologically equipped to cope with the occasional pains of monetary rigor. Keynesian demand-management policies were eschewed from the early days, for excellent microeconomic reasons. An independent central bank, the Bundesbank, resisted all political pressures to relax what was basically Chicago-style monetarism ("just watch the monetary aggregates").
But by the 1960s macroeconomics became fashionable, and successive governments became obsessed with tinkering with the aggregates; committees were set up and suggestions made by "wise men" for improving overall performance. But the Bundesbank retained its virtue (and the people their pride in the German mark) right up to reunification, when Helmut Kohl’s government compelled the Bundesbank, for overtly political reasons, to sanction a catastrophic one-to-one currency swap, the East German mark for the Deutsche mark. The former was pretty much worthless, and this arrangement, plus the granting of partial West German welfare "rights" to the former East, undoubtedly made the union of the two countries more difficult than it need have been.
….
With excessive social welfare and a sclerotic industrial economy, Germany is no longer the powerhouse it once was. An early Ordo-liberal, Wilhelm Röpke, once said that "like pure democracy, undiluted capitalism is intolerable." He was a pioneer of the idea of the third way, but even he would be distressed at what has happened to his country.* Perhaps the major problem with Ordo-liberalism was its neglect of public choice. Its adherents really did believe that once people had experienced the joys of the social market they would have less reason to rely on the familiar human motivations and on the historically validated legal and market constraints. Social-market theorists had an "elevated" view of human nature: When politicians and public officials were imbued with a sense of community and reinforced by the glue of solidarity, no one need worry about things like antisocial rent-seeking; moral hazard would not be a problem for enlightened people in a generous welfare system; and managers of industrial corporations would be disciplined without stockholder pressure and the threat of raiders."
In keeping with the above article, the government-molded economy tends to, in my mind, over time imbue persons with a lack of individual self-responsibility and an impetus towards mediocrity.
When posed with certain societal problems, the discussion centers around what can the government do to remedy/rectify the situation. The idea that many people have here is that since they pay high taxes and other social outlays (mandatory health insurance, mandatory social security, etc.), they have entrusted the government to solve/fix the problems of society. Case in point: You don’t see many "philanthropists" here, certainly not on the scale of, say Warren Buffet or Bill Gates. Most charities or philanthropic organizations are, at least in some form or fashion, subsidized by the state or the churches, which… surprise, are also funded by the state in the form of a church tax.
My personal perception is that having the state act as arbiter, attempting to regulate a orderly balance between unbridled capitalism and socialism, causes a great many of its citizens in the long run to become either: (1) greedy or (2) jealous/envious.
Greed on the part of the "haves": If you are "successful" in Germany and making, let’s say, a six figure salary, you probably have the feeling that the government and other forces in society are trying to obtain as much of this as possible. As a result, many people become selfish and assume that since the government is taxing the hell out of them, then they should not freely donate any of their own wealth back to the community. That is the government’s job. This, of course, is not different that in say, England or especially, America. However, the attitude of most Americans towards wealth and wealth accumulation is markedly different than from most Germans. Owing much to the American philosophy (fable?) of the "American dream," many (although certainly not all) Americans see "rich" people as having obtained their riches through hard work or merit. On the other hand, Germans tend to view someone’s material success as having been gained at the expense of someone else.
While this topic has deep historical roots (e.g., European feudalism and land ownership in hands of a Lord vs. colonial new world indenture servitude followed by the promise of a modest land grant, the later 50 acres and a mule) and would take volumes to explain, suffice to say that there is a severe distrust on the part of the average German towards capital and wealth accumulation, especially the Anglo-Saxon model. The overriding undercurrent in society is that everyone should be more or less equal. This is not just mere philosophy—people really believe that individuals should have material wealth within an accepted range: no more no less. Many people here also believe it is the role of government to shape society into this utopian end-state. Incidentally, I remember being in a conversation about three years ago where my counterpart told me that she believed there should be a set celing on salaries at 100,000 Euros. Talk of a Mindestlohn or a minimum guaranteed salary that people are entitled to, is actually a plank of a few political parties here.
Jealousy and Envy on the part of the "have not’s" and "have-just-enough’s": You always see people trying to NOT stand out in material terms versus their neighbor. For example, when many people buy an expensive BMW or Mercedes they will remove the 740iL symbol or the S500 symbol or any mark that denotes how much horsepower the car has or how expensive it is. Also, people refrain from wearing any badge of wealth, in other words anything that would in Anglo-Saxon societies be considered "showy." If a person is successful and has earned, let’s say, millions, many people start acting hysterically and you then hear the call for "social justice."
At bottom, living in such a controlled economy can at times be maddening, but most often it is simply annoying. Everything here is over-regulated by the state. Here is a mere laundry list of minor everyday examples:
Chimney-sweep man: These folks are given a monopoly by the local government to fix your heating unit in your apartment. They charge an arm and a leg and are always looking to see if they can find some compliance "error" with your heater or furnace (e.g., out of date unit, non-code, etc. so they can leverage their monopoly by forcing you to buy a new unit, installed by the chimney sweep man of course). They are always leaving letters in your mailbox to force you to set up appointments with them. Annoying folks.
TV enforcement: There is an actual state agency, called the GEZ. (short for GEBÜHRENEINZUGSZENTRALE) which acts as the TV and radio police. Much like an Orwellian big brother, they are charged by the state to ensure that every household with a television (or any device that can be equipped to receive TV signals) or radio (car included, even an alarm clock) pays a monthly fee (upwards of 15-30 euros) to subsidize three state-run TV channels.
This absolutely blew me away when I heard about this agency. You actually have to register with them upon moving to a new flat (in Germany every time you move or change addresses you have to register (Anmeldung) with the local office your new address, so the state knows where everyone is). You receive in your mailbox a letter with boxes you can cross off indicating which devices you own. You then send this back and start paying. Some people choose to lie and cross off no boxes and watch TV or listen to radio "black," or "illegally." The GEZ actually has employees who "enforce" the payment. For example, they will walk around your residence and listen outside windows for signs of TV or radio noise. But most of the time they will just ring your doorbell unannounced.
I remember one Saturday morning around 10:00 I heard my doorbell ring. I opened the door and this scuzzy looking guy was standing before me in my doorway. After peering over my shoulder to see if he could crane his neck for a better look into my apartment, he asked if I had a TV or radio. I stated that I had and had been paying for it and had registered. He then asked both myself and my girlfriend all sorts of obtrusive, unrelated questions about work, etc. and then left. It was absolutely unreal. The guy proceeded upstairs to harass the next neighbor.
Price control & Anti-Competition Laws: On the public channels, showing a brand name or logo is forbidden. Commercials are restricted until after 8:0 p.m. Manufacturers are unable to do comparative advertising, such as "the guy down the street is selling this for $4.00, but we have the same item for $1.00." The price of bread at bakeries is regulated, in other words wholesellers like Wall-Mart cannot offer "super cheap" bread at bulk discount.
Regulated store hours: All shops (with some very circumscribed exceptions) must close at 8:00. In some cities the opening hours have been extended to 10:00 p.m. On Saturdays most shops close at 1:00-2:00 p.m. Larger stores stay open later until 8:00. Apparently this is a relatively new advancement, as a few years ago the hours were MORE restricted. On Sunday, most stores are closed, with the exception of a handful.
Unionized everything: In the U.S. I was pretty much in favor of people, such as Wall-Mart employees, being unionized. In Germany, the situation is overkill.
Unions are very pervasive here and I would argue, stifle productivity and wages (as well as engender an entitlement state of mind). For example, since the time I have been here, the unions I.G. Metall and Ver.di, have made the most ridiculous wage and hour demands on employers and have gone on strike almost at the drop of a hat. For example, in Stuttgart where I live, last year the garbage collection personnel (all quasi-state employees and unionized) were arguing over extending the work week from 35 to 38 hours. They went on strike for what seemed like two months and trash piled up all over town. Yesterday, the train drivers of the Deutsche Bahn went on strike (unannounced until the last moment to my early morning dismay) and caused commuter chaos until they resumed work at 11:00 a.m. They were striking over a 2% or so pay raise or something like that. Last weekend I was walking down the main shopping thouroughfare and all of the H&M employees were outside the stores on strike with bullhorns and red flags. It seemed almost cliché: e.g., French 60’s protestors storming the barricades, flags flying.
Well, I could go on and on and probably produce a multi-volume set, Britannica-esque chronicle of the state’s heavy handed involvement in the economy, and people’s lives here. But I’ve already taken up too much of Mike’s blog space.
The next installment will, in the spirit of balance, offer what I consider to be aspects of life and culture here that are truly great and worth emulating in the U.S. Until then, Tschüß! (goodbye)