Sulekha Rani.R,PGT Chemistry,KV NTPC Kayamkulam
German Geography
Germany is located in the Central Europe, bordering the Baltic Sea
and the North Sea, between the Netherlands and Poland, south of Denmark.
Roughly the size of Montana and situated even farther north, unified Germany
has an area of 356,959 square kilometers. Extending 853 kilometers from its
northern border with Denmark to the Alps in the south, it is the sixth largest
country in Europe. At its widest, Germany measures approximately 650 kilometers
from the Belgian-German border in the west to the Polish frontier in the east
The territory of the former East Germany (divided
into five new Länder in 1990) accounts for almost one-third of united Germany's
territory and one-fifth of its population. After a close vote, in 1993 the
Bundestag, the lower house of Germany's parliament, voted to transfer the
capital from Bonn in the west to Berlin, a city-state in the east surrounded by
the Land of Brandenburg.
Topography: With its irregular,
elongated shape, Germany provides an excellent example of a recurring sequence
of landforms found the world over. A plain dotted with lakes, moors, marshes,
and heaths retreats from the sea and reaches inland, where it becomes a
landscape of hills crisscrossed by streams, rivers, and valleys. These hills
lead upward, gradually forming high plateaus and woodlands and eventually
climaxing in spectacular mountain ranges.
As of the mid-1990s, about 37 percent of the country's area was arable; 17
percent consisted of meadows and pastures; 30 percent was forests and
woodlands; and 16 percent was devoted to other uses. Geographers often divide
Germany into four distinct topographic regions: the North German Lowland; the
Central German Uplands; Southern Germany; and the Alpine Foreland and the Alps.
Climate: Cool, continental
climate with abundant rainfall and long overcast season. Lower temperatures
with considerable snowfall in east and south. Prone to rapid weather variations
from merging of Gulf Stream and extreme northeastern climate conditions. More about climate in Germany...
Administrative Division: 16 states (Länder): Baden-Wuerttemberg, Bayern, Berlin,
Brandenburg, Bremen, Hamburg, Hessen, Mecklenburg-Vorpommern, Niedersachsen,
Nordrhein-Westfalen, Rheinland-Pfalz, Saarland, Sachsen, Sachsen-Anhalt,
Schleswig-Holstein, Thueringen.
Population, Area, and Capitals of
the Länder, December 31, 1992
|
|
|
|
Population
|
|
Land
|
Capital
|
Area (in square kilometers)
|
Total (in thousands)
|
Density (persons per square kilometer)
|
|
Baden-Württemberg
|
Stuttgart
|
35,751
|
10,149
|
284
|
|
Bavaria
|
Munich
|
70,554
|
11,770
|
167
|
|
Berlin
|
Berlin
|
889
|
3,466
|
3,898
|
|
Brandenburg
|
Potsdam
|
29,476
|
2,543
|
86
|
|
Bremen
|
Bremen
|
404
|
686
|
1,697
|
|
Hamburg
|
Hamburg
|
755
|
1,689
|
2,236
|
|
Hesse
|
Wiesbaden
|
21,114
|
5,923
|
281
|
|
Lower Saxony
|
Hanover
|
47,348
|
7,578
|
160
|
|
Mecklenburg-Western Pomerania
|
Schwerin
|
23,421
|
1,865
|
80
|
|
North Rhine-Westphalia
|
Düsseldorf
|
34,072
|
17,679
|
519
|
|
Rhineland-Palatinate
|
Mainz
|
19,846
|
3,881
|
196
|
|
Saarland
|
Saarbrücken
|
2,570
|
1,084
|
422
|
|
Saxony
|
Dresden
|
18,408
|
4,641
|
252
|
|
|
|
|
|
|
Saxony-Anhalt
|
Magdeburg
|
20,443
|
2,797
|
137
|
|
Schleswig-Holstein
|
Kiel
|
15,732
|
2,680
|
170
|
|
Thuringia
|
Erfurt
|
16,176
|
2,546
|
157
|
|
TOTAL
|
|
356,959
|
80,975
|
227
|
German Society
Population: 81,338,000 (July 1995 estimate) with growth rate of 0.26 percent
(July 1995 estimate).
Ethnic Groups: 95.1 percent German, 2.3 percent Turkish, 1.7 percent Italian, 0.4
percent Greek, and 0.4 percent Polish; remainder mainly refugees from former
Yugoslavia.
Languages: Standard German, with substantial differences in regional
dialects. Three very small linguistic minorities, which speak Serbian, Danish,
or Frisian.
Religion: Protestants, mostly in Evangelical Church in Germany, 30 million;
Roman Catholics, 28.2 million; Muslims, 2.5 million; free churches, 195,000;
and Jews, 34,000.
Education and Literacy: 99 percent literacy rate in population over age fifteen (1991
estimate). Education compulsory until age eighteen. At age ten, after primary
school (Grundschule),
students attend one of five schools: short-course secondary school (Hauptschule);
intermediate school (Realschule);
high school (Gymnasium);
comprehensive school (Gesamtschule);
or a school for children with special educational needs (Sonder-schule). At
about age fifteen, students choose among a variety of vocational, technical,
and academic schools. Higher education consists of many kinds of technical
colleges, advanced vocational schools, and universities.
Health and Welfare: About 90 percent of population covered by comprehensive compulsory
insurance for sickness, accidents, disability, long-term care, and retirement.
Most of remainder enrolled in voluntary insurance programs; the very poor are
covered by state-financed welfare programs. Quality of medical care generally
excellent. Comfortable pensions paid according to life-time earnings and
indexed to meet cost-of-living increases. Wide variety of other social welfare
benefits managed by both government and private agencies available to those in
need. Life expectancy 76.6 years for total population (73.5 years for males and
79.9 years for females) (1995 estimates). Infant mortality rate 6.3 deaths per
1,000 live births (1995 estimate). Total fertility rate 1.5 children born per
woman (1995 estimate).
Structure of German
Society
Most of the workforce is employed in the services sector. West
Germany completed the transition from an industrial economy to one dominated by
the services sector in the 1970s, and by the late 1980s this sector employed
two-thirds of the workforce. In contrast, when the Berlin Wall fell, East
Germany still had not made this transition. Because more of the workforce was
engaged in industry and agriculture than in the services sector, its
socioeconomic structure resembled that of West Germany in 1965.
Rainer Geissler, a German sociologist, has examined his country's
social structure in light of the economic changes that have taken place in the
postwar era. Because of the growth of the services sector and the doubling of
state employees since 1950, he has discarded earlier divisions of German
society into an elite class, middle class, and worker class, with a small
services class consisting of employees of all levels. He has replaced this
division with a more nuanced model that better reflects these postwar changes.
As the economy of the new Länder is incorporated into the western economy, its
much simpler social structure (elite, self-employed, salaried employees, and
workers) will come to resemble that of the old Länder.
According to Geissler, at the end of the 1980s West Germany's
largest group (28 percent of the population) was an educated salaried middle
class, employed either in the services sector or in the manufacturing sector as
educated, white-collar employees. Some members of this group earned very high
salaries; others earned skilled blue-collar wages. This professional class has
expanded at the expense of the old middle class, which amounted to only 7
percent of the population at the end of the 1980s. A less educated segment of
the services sector, or white-collar employee sector, amounted to 9 percent of
the population. Geissler divided the working class into three groups: an elite
of the best-trained and best-paid workers (12 percent); skilled workers (18
percent), about 5 percent of whom are foreigners; and unskilled workers (15
percent), about 25 percent of whom are foreigners. A portion of this last group
live below the poverty line. Farmers and their families make up 6 percent of
the population. At the top of his model of the social structure, Geissler
posits an elite of less than 1 percent.
Religion in Germany
Roman Catholicism, one of Germany's two principal religions,
traces its origins there to the eighth-century missionary work of Saint
Boniface. In the next centuries, Roman Catholicism made more converts and
spread eastward. In the twelfth and thirteenth centuries, the Knights of the
Teutonic Order spread German and Roman Catholic influence by force of arms
along the southern Baltic Coast and into Russia. In 1517, however, Martin
Luther challenged papal authority and what he saw as the commercialization of
his faith. In the process, Luther changed the course of European and world
history and established the second major faith in Germany--Protestantism.
Religious differences played a decisive role in
the Thirty Years' War. An enduring legacy of the Protestant Reformation and
this conflict was the division of Germany into fairly distinct regions of
religious practice. Roman Catholicism remained the preeminent faith in the
southern and western German states, while Protestantism became firmly
established in the northeastern and central regions. Pockets of Roman
Catholicism existed in Oldenburg in the north and in areas of Hesse. Protestant
congregations could be found in north Baden and northeastern Bavaria.
The unification of Germany in 1871 under
Prussian leadership led to the strengthening of Protestantism. Otto von
Bismarck sought to weaken Roman Catholic influence through an anti-Roman
Catholic campaign, the Kulturkampf, in the early 1870s. The Jesuit order was
prohibited in Germany, and its members were expelled from the country. In
Prussia the "Falk laws," named for Adalbert Falk, Bismarck's minister
of culture, mandated German citizenship and attendance at German universities
for clergymen, state inspection of schools, and state confirmation of parish
and episcopal appointments. Although relations between the Roman Catholic
Church and the state were subsequently improved through negotiations with the
Vatican, the Kulturkampf engendered in Roman Catholics a deep distrust of the
empire and enmity toward Prussia.
Prior to World War II, about two-thirds of the
German population was Protestant and the remainder Roman Catholic. Bavaria was
a Roman Catholic stronghold. Roman Catholics were also well represented in the
populations of Baden-Württemberg, the Saarland, and in much of the Rhineland.
Elsewhere in Germany, especially in the north and northeast, Protestants were
in the majority.
During the Hitler regime, except for individual
acts of resistance, the established churches were unable or unwilling to mount
a serious challenge to the supremacy of the state. A Nazi, Ludwig Müller, was
installed as the Lutheran bishop in Berlin. Although raised a Roman Catholic,
Hitler respected only the power and organization of the Roman Catholic Church,
not its tenets. In July 1933, shortly after coming to power, the Nazis scored
their first diplomatic success by concluding a concordat with the Vatican,
regulating church-state relations. In return for keeping the right to maintain
denominational schools nationwide, the Vatican assured the Nazis that Roman
Catholic clergy would refrain from political activity, that the government
would have a say in the choice of bishops, and that changes in diocesan
boundaries would be subject to government approval. However, the Nazis soon
violated the concordat's terms, and by the late 1930s almost all denominational
schools had been abolished.
Toward the end of 1933, an opposition group
under the leadership of Lutheran pastors Martin Niemöller and Dietrich
Bonhoeffer formed the "Confessing Church." The members of this church
opposed the takeover of the Lutheran Church by the Nazis. Many of its members
were eventually arrested, and some were executed--among them, Bonhoeffer--by
the end of World War II.
Population Distribution
and Urbanization in Germany
Following unification, the Federal Republic encompassed 356,958
square kilometers and was one of the largest countries in Europe. With about
81.3 million people in mid-1995, it ranked second behind Russia in population
among the countries of Europe. Unification actually reduced the Federal
Republic's population density, however, because East Germany, which had a large
rural area, was more sparsely populated. With an average of 228 persons per
square kilometer in late 1993, unified Germany ranked third in population
density among European countries. It ranked behind the Netherlands and Belgium,
which had 363 and 329 persons per square kilometer, respectively.
Germany's population density varies greatly. The most densely
populated Länder are Berlin, Hamburg, and Bremen, with densities of 3,898,
2,236, and 1,697 persons per square kilometer, respectively, at the end of
1992. The least densely populated are two new Länder, Mecklenburg-Western
Pomerania and Brandenburg, both mostly rural in character. They had population
densities of eighty and eighty-six persons per square kilometer, respectively,
at the end of 1992. Other Länder are closer to the national average: the
largest Land , Bavaria, with 167 persons per square kilometer, is mostly rural,
but its capital is the large city of Munich; Rhineland-Palatinate, with 196
persons per square kilometer, is also mostly rural but has numerous heavily
populated areas along the Rhine; and Saxony, with 252 persons per square
kilometer, also has a number of heavily populated areas.
The Land with the most population, one-fifth of the nation's
total, is North Rhine-Westphalia. With a population density of 519 persons per
square kilometer at the end of 1992, it is the most heavily settled of all
Länder, with the exception of the three city Länder of Bremen, Hamburg, and
Berlin. North Rhine-Westphalia's density is caused by its many cities; several
dozen of these cities have populations above 100,000, including five with
populations above 500,000. Many of these cities are located so close together
that they form one of Europe's largest urban agglomerations, the Ruhrstadt
(Ruhr City), with a population of about 5 million.
The Federal Republic has few very large cities and many medium-sized ones, a
reflection of the centuries when the name Germany designated a geographical
area consisting of many small and medium-sized states, each with its own
capital. Berlin, by far the largest city, with a population of 3.5 million at
the end of 1993, is certain to grow in population as more of the government
moves there in the second half of the 1990s and as businesses relocate their
headquarters to the new capital. Some estimates predict that Greater Berlin
will have a population of 8 million by early in the twenty-first century.
Berlin already dwarfs the only other cities having more than 1 million
inhabitants: Hamburg with 1.7 million and Munich with 1.3 million. Ten cities
have populations between 500,000 and 1 million, seventeen between 250,000 and
500,000, and fifty-four between 100,000 and 250,000. In the early 1990s, about
one-third of the population lived in cities with 100,000 residents or more,
one-third in cities and towns with populations between 50,000 and 100,000, and
one-third in villages and small towns.
Other densely populated areas are located in the southwest. They are Greater
Stuttgart; the Rhine-Main area with its center of Frankfurt am Main; and the
Rhine-Neckar region with its center in Mannheim. The greater Nuremberg and
Hanover regions are also significant population centers. The new Länder are
thinly settled except for Berlin and the regions of Dresden-Leipzig and
Chemnitz-Zwickau.
Urban areas in the east are more densely populated than those in the west
because the GDR saw little of the suburbanization seen in West Germany. As a
result, there is a greater contrast between urban and rural areas in the new
Länder than in the west. West Germany's suburbanization, however, is not nearly
as extensive as that experienced by the United States after the end of World
War II. Compared with cities in the United States, German cities are fairly
compact, and their inhabitants can quickly reach small villages and
farmlands.
Germany's population growth has been slow since the late 1960s.
Many regions have shown little or no growth, or have even declined in
population. The greatest growth has been in the south, where the populations of
Baden-Württemberg and Bavaria each increased by well over 1 million between
1970 and 1993. (Each had also grown by over 1 million in the 1960s.) North
Rhine-Westphalia, which had grown by 1 million in the 1960s, added another
750,000 to its population between 1970 and 1993, a small increase, given a
total population of nearly 18 million at the end of 1993. Bremen, Hamburg, and
the Saarland experienced some population loss between 1970 and 1993. With the
exception of united Berlin, all the new Länder lost population between the fall
of the Berlin Wall and the end of 1993. In general, this development reflected
long-term trends in East Germany, although the rate of decline has been higher
since unification.
Education in Germany
The Basic Law of 1949 grants every German citizen the right to
self-fulfillment. In theory, citizens are able to choose the type of education
they want and are given access to their preferred occupation or profession
whether it is through a business, engineering, or nursing degree. The goal of
educational policy is therefore to provide each citizen with opportunities to
grow personally, professionally, and as a citizen in accordance with his or her
abilities and preferences. The Länder are to provide equal educational
opportunities and quality education for all through a variety of educational
institutions.
Education is free and in
most types of school is coeducational. Almost all elementary and secondary
schools and about 95 percent of higher education institutions are public.
College, graduate, and postgraduate students pay a nominal fee ranging from
DM35 to DM60 a semester, which includes extensive rights to health care and
other social benefits. When churches or private organizations run
kindergartens, they do so independently, and the public sector is not
involved.
According to the terms
of the Düsseldorf Treaty of 1955, the first major attempt to unify or
coordinate the school systems of the Länder, school attendance is mandatory for
a minimum of nine years (or in some Länder ten years), beginning at age six. A
student who starts vocational training as an apprentice must attend a part-time
vocational school until the age of eighteen.
Overview of Education
System, Academic Year 1992-93
|
Type of Institution
|
Number of Schools
|
Number of Teachers
|
Number of Students
|
|
Primary and secondary schools
|
|
|
|
|
Grundschulen
|
17,941
|
208,768
|
3,419,584
|
|
Hauptschulen
|
9,209
|
101,939
|
1,483,229
|
|
Realschulen
|
3,634
|
59,176
|
1,056,739
|
|
Gymnasien
|
3,126
|
146,124
|
2,047,241
|
|
Gesamtschulen
|
930
|
48,419
|
493,406
|
|
Evening schools
|
352
|
3,734
|
48,606
|
|
Total primary and secondary schools
|
35,192
|
568,160
|
8,548,805
|
|
Secondary vocational schools
|
|
|
|
|
Berufsschulen
|
3,233
|
56,779
|
1,796,452
|
|
Berufsaufbauschulen
|
230
|
423
|
6,564
|
|
Berufsfachschulen
|
2,612
|
22,103
|
263,592
|
|
Fachoberschulen
|
740
|
4,983
|
75,461
|
|
Fachgymnasien
|
564
|
9,842
|
151,819
|
|
Total secondary vocational schools
|
7,379
|
94,130
|
2,293,888
|
|
Advanced vocational schools
|
|
|
|
|
Fachschulen
|
1,537
|
10,953
|
171,693
|
|
Schools of higher education
|
|
|
|
|
Universities
|
81
|
127,755
|
1,223,907
|
|
Comprehensive universities
|
7
|
8,732
|
136,731
|
|
Teacher-training colleges
|
8
|
n.a.
|
22,518
|
|
Theological seminaries
|
17
|
n.a.
|
2,828
|
|
Technical colleges
|
126
|
5,281
|
389,501
|
|
Art academies
|
45
|
1,136
|
29,718
|
|
Colleges of administration
|
30
|
n.a.
|
53,252
|
|
Total schools of higher education
|
314
|
142,904
|
1,858,455
|
|
TOTAL
|
44,422
|
816,147
|
12,872,841
|
Junior Secondary
Education in Germany
Secondary education, the third level of education, is divided into
two levels: junior secondary education (also called intermediate secondary
education) and senior secondary education. Upon completion of the Grundschule, students between the ages of ten and sixteen attend one of the
following types of secondary schools: the Hauptschule, the Realschule, the Gymnasium, theGesamtschule,
or the Sonderschule (for children with
special educational needs). Students who complete this level of education
receive an intermediate school certificate. Adults who attend two years of
classes in evening schools can also earn these intermediate school
certificates, which permit further study.
Junior secondary education starts with two years (grades five and
six) of orientation courses during which students explore a variety of educational
career paths open to them. The courses are designed to provide more time for
the student and parents to decide upon appropriate subsequent education.
The Hauptschule, often called a
short-course secondary school in English, lasts five or six years and consists
of grades five to nine or five to ten depending on the Land. Some Laenderrequire a compulsory
tenth year or offer a two-year orientation program. About one-third of students
completing primary school continue in the Hauptschule. The curriculum stresses preparation for a vocation as well as
mathematics, history, geography, German, and one foreign language. After
receiving their diploma, graduates either become apprentices in shops or
factories while taking compulsory part-time courses or attend some form of
full-time vocational school until the age of eighteen.
Another one-third of primary school graduates attend the Realschule, sometimes called the intermediate school. These schools include
grades five through ten. Students seeking access to middle levels of
government, industry, and business attend the Realschule. The curriculum is the same as that of the Hauptschule, but students take an additional foreign language, shorthand,
wordprocessing, and bookkeeping, and they learn some computer skills.
Graduation from theRealschule enables students to enter a Fachoberschule (a higher technical
school) or aFachgymnasium (a specialized high school or grammar school) for the next stage
of secondary education. A special program makes it possible for a few students
to transfer into theGymnasium,
but this is exceptional.
The Gymnasium, sometimes called high
school or grammar school in English, begins upon completion of the Grundschule or the orientation grades
and includes grades five through thirteen. The number of students attending the Gymnasium has increased
dramatically in recent decades; by the mid-1990s, about one-third of all
primary school graduates completed a course of study at the Gymnasium, which gives them the right to study at the university level. In
the 1990s, the Gymnasium continued to be the
primary educational route into the universities, although other routes have
been created.
The Gesamtschule originated in the late 1960s to provide a broader range of
educational opportunities for students than the traditional Gymnasium. The Gesamtschule has an all-inclusive curriculum for students ages ten to eighteen
and a good deal of freedom to choose coursework. Some schools of this type have
been established as all-day schools, unlike theGymnasium, which is a part-day school
with extensive homework assignments. The popularity of the Gesamtschule has been mixed. It has
been resisted in more conservative areas, especially in Bavaria, where only one
such school had been established by the beginning of the 1990s. A few more were
established in Bavaria in the next few years; their presence is marginal when
compared with the Gymnasium, of which there were
395 in 1994. Even North Rhine-Westphalia, Germany's most populous Land and an outspoken
supporter of theGesamtschule,
had only 181, compared with 623 of the traditional Gymasium.
Senior Secondary
Education
The variety of educational programs, tracks, and opportunities
available to students increases at the senior secondary level. The largest
single student group attends the senior level of theGymnasium, the Gymnasiale Oberstufe. This level includes the traditional academically orientedGymnasium, the vocational Gymnasium, the occupation-specific Fachgymnasium, and theGesamtschule.
Graduation from these
schools requires passing the Abitur, the qualifying
examination for studying at the university level. Until the late 1970s, nearly
everyone who passed the Abitur had access to an institution of
higher education. However, in the 1980s the numerus clausus, a
restrictive quota system that had been introduced for the study of medicine in
the late 1960s, began to be used for other popular fields of study. Strict
selection criteria limiting access to higher education had become necessary
because the demand for places at universities had become much greater than the
supply.
Vocational Education and
Training
The German education system has been praised for its ability to
provide quality general education combined with excellent specific training for
a profession or a skilled occupation. In 1992 about 65 percent of the country's
workforce had been trained through vocational education. In the same year, 2.3
million young people were enrolled in vocational or trade schools.
Building upon the junior secondary program, the Berufsschulen are two- and three-year
vocational schools that prepare young people for a profession. In the 1992-93
academic year, there were 1.8 million enrolled in these schools. About 264,000
individuals attendedBerufsfachschulen,
also called intermediate technical schools (ITS). These schools usually offer
full-time vocation-specific programs. They are attended by students who want to
train for a specialty or those already in the workforce who want to earn the
equivalent of an intermediate school certificate from a Realschule. Full-time programs take between twelve and eighteen months, and
part-time programs take between three and three-and-one-half years. Other types
of schools designed to prepare students for different kinds of vocational
careers are the higher technical school (HTS), the Fachoberschule, attended by about 75,000 persons in 1992-93, and the advanced
vocational school (AVS), the Berufsaufbauschule, attended by about
6,500 persons in the same year. Students can choose to attend one of these
three kinds of schools after graduating with an intermediate school certificate
from a Realschule or an equivalent
school.
The method of teaching used in vocational schools is called the
dual system because it combines classroom study with a work-related
apprenticeship system. The length of schooling/training depends on prior
vocational experience and may entail one year of full-time instruction or up to
three years of part-time training.
Students can earn the Fachhochschulreife after successfully completing vocational education and passing a
qualifying entrance examination. The Fachhochschulreife entitles a student to enter a Fachhochschule, or a training college, and to continue postsecondary
occupational or professional training in engineering or technical fields. Such
programs last from six months to three years (full-time instruction) or six to
eight years (part-time instruction). Some students with many years of practical
experience or those with special skills may also attend aFachhochschule.
Vocational education and training is a joint government-industry
program. The federal government and the Laender share in the financing
of vocational education in public vocational schools, with the federal
government bearing a slightly higher share (58 percent in 1991) than the Laender. On-the-job vocational training, whose cost is entirely borne by
companies and businesses, is more costly to provide than vocational education.
In the early 1990s, companies and businesses annually spent 2 percent of their
payrolls on training.
Tertiary or Higher Education in Germany
In the 1992-93 academic year, higher education
was available at 314 institutions of higher learning, with about 1.9 million
students enrolled. Institutions of higher learning included eighty-one
universities and technical universities, seven comprehensive universities (Gesamthochschulen),
eight teacher-training colleges, seventeen theological seminaries, 126
profession-specific technical colleges, thirty training facilities in public
administration (Verwaltungsfachhochschulen), and forty-five academies for art, music, and
literature. Nearly 80 percent, or 250, of these institutions were located in
the old Laender, and sixty-four were in the new Laender.
Baden-Wuerttemberg and North Rhine-Westphalia had the largest share of these
institutions, sixty-one and forty-nine, respectively. In 1990 about 69.7
percent of students at tertiary-level institutions went to universities and
engineering schools, and another 21.7 percent attended vocational training
colleges (Fachhochschulen).
German university students can complete their first degree in about five years,
but on average university studies last seven years. Advanced degrees require
further study. Because tuition at institutions of higher education amounts to
no more than a nominal fee except at the handful of private universities, study
at the university level means only meeting living expenses. An extensive
federal and Land program provides
interest-free loans to students coming from lower-income households. Half of the
loan must be paid within five years of graduation. Students graduating in the
top third of their class or within a shorter time than usual have portions of
their loans forgiven. Loans are also available to students receiving technical
and vocational training. In the early 1990s, about half of all students were
obliged to work while attending university.
Unlike the United States, Germany does not have a group of elite
universities; none enjoys a reputation for greater overall excellence than is
enjoyed by the others. Instead, particular departments of some universities are
commonly seen as very good in their field. For example, the University of
Cologne has a noted economics faculty. Also in contrast to the United States,
German universities do not offer much in the way of campus life, and collegiate
athletics are nearly nonexistent. Universities generally consist of small
clusters of buildings dispersed throughout the city in which they are located.
Students do not live on university property, although some are housed in
student dormitories operated by churches or other nonprofit organizations.
German Economy
The Germans proudly label their economy a "soziale
Marktwirtschaft ," or "social market economy," to show that the
system as it has developed after World War II has both a material and a
social--or human--dimension. They stress the importance of the term
"market" because after the Nazi experience they wanted an economy
free of state intervention and domination. The only state role in the new West
German economy was to protect the competitive environment from monopolistic or
oligopolistic tendencies--including its own. The term "social" is
stressed because West Germans wanted an economy that would not only help the
wealthy but also care for the workers and others who might not prove able to
cope with the strenuous competitive demands of a market economy. The term
"social" was chosen rather than "socialist" to distinguish
their system from those in which the state claimed the right to direct the
economy or to intervene in it.
Beyond these principles
of the social market economy, but linked to it, comes a more traditional German
concept, that of Ordnung, which can be directly translated to mean order but
which really means an economy, society, and polity that are structured but not
dictatorial. The founders of the social market economy insisted that Denken in
Ordnungen --to think in terms of systems of order--was essential. They also
spoke of Ordo-Liberalismus because the essence of the concept is that this must
be a freely chosen order, not a command order.
Over time, the term
"social" in the social market economy began to take on a life of its
own. It moved the West German economy toward an extensive social welfare system
that has become one of the most expensive in the world. Moreover, the West
German federal government and the states (Länder) began to compensate for
irregularities in economic cycles and for shifts in world production by
beginning to shelter and support some sectors and industries. In an even
greater departure from the Erhard tradition, the government became an
instrument for the preservation of existing industries rather than a force for
renewal. In the 1970s, the state assumed an ever more important role in the
economy. During the 1980s, Chancellor Helmut Kohl tried to reduce that state
role, and he succeeded in part, but German unification again compelled the
German government to assume a stronger role in the economy. Thus, the
contradiction between the terms "social" and "market" has
remained an element for debate in Germany.
Given the internal
contradiction in its philosophy, the German economy is both conservative and
dynamic. It is conservative in the sense that it draws on the part of the
German tradition that envisages some state role in the economy and a cautious
attitude toward investment and risk-taking. It is dynamic in the sense that it
is directed toward growth--even if that growth may be slow and steady rather
than spectacular. It tries to combine the virtues of a market system with the
virtues of a social welfare system.
Germany's Thirty Largest
Industrial Firms, 1993
|
Firm
|
Sales (in billions of deutsche marks)
|
Employees (in thousands)
|
|
Daimler-Benz
|
97.7
|
366.7
|
|
Siemens
|
81.6
|
391.0
|
|
Volkswagen
|
76.6
|
253.0
|
|
VEBA
|
66.3
|
128.3
|
|
RWE
|
55.8
|
118.0
|
|
Hoechst
|
46.0
|
172.5
|
|
BASF
|
43.1
|
112.0
|
|
Bayer
|
41.0
|
151.9
|
|
Thyssen
|
33.5
|
141.0
|
|
Bosch
|
32.5
|
156.6
|
|
BMW
|
29.0
|
71.0
|
|
Mannesmann
|
28.0
|
127.7
|
|
Metallgesellschaft
|
26.1
|
42.6
|
|
VIAG
|
23.7
|
80.7
|
|
Ruhrkohle
|
23.4
|
111.2
|
|
Preussag
|
23.3
|
73.3
|
|
Adam Opel
|
23.0
|
50.8
|
|
Deutsche Shell
|
21.4
|
3.2
|
|
Ford
|
21.2
|
43.8
|
|
Hoesch-Krupp
|
20.5
|
78.4
|
|
ESSO
|
19.4
|
2.4
|
|
MAN
|
19.0
|
57.8
|
|
Bertelsmann
|
17.2
|
50.5
|
|
Degussa
|
14.9
|
32.1
|
|
Deutsche BP
|
14.7
|
2.8
|
|
Ruhrgas
|
14.3
|
11.6
|
|
Henkel
|
14.1
|
40.5
|
|
IBM Deutschland
|
12.6
|
25.0
|
|
Ph. Holzmann
|
12.5
|
43.8
|
|
Agiv
|
10.0
|
42.7
|
Domestic Economy and
International Economic Relations
The Domestic Economy of
Germany
The German economy is full of contradictions. It is modern but
old-fashioned. It is immensely powerful but suffers from serious structural
weaknesses. It is subject to national laws and rules but is so closely tied
into the European Union that it is no longer truly independent. It has a
central bank that controls European monetary policy and has a deepening impact
on the global economy but that also insists on making its decisions mainly on
the basis of domestic considerations. Finally, although Germany must compete
against highly efficient economies outside its own continent, it continues to
carry the expense and burden of traditional industries that drain resources
that could be better used elsewhere.
The German economy as it is known today is an outgrowth of the
1990 merger between the dominant economy of the Federal Republic of Germany
(FRG, or West Germany) and that of the German Democratic Republic (GDR, or East
Germany). This merger will one day produce a massive economic entity that will
constitute the fulcrum of Europe as a production center, as well as a
transportation and communications center. But each partner brings different
elements to the mix, and the merger has proved difficult and costly. The merger
will dominate Germany's economic policy and reality until well into the next
century.
The record of the West German economy during the four decades
before unification shows a signal achievement. The first decade, that of the
1950s, had been that of the "economic miracle." The second decade,
that of the 1960s, had seen consolidation and the first signs of trouble. The
1970s had brought the oil shocks, the generous social programs, the rising
deficits, and finally a loss of control. In the 1980s, new policies at home and
a more stable environment abroad had combined to put West Germany back on the
path of growth.
The East German economy had been a powerhouse in Eastern Europe,
where Moscow had relied on it to produce machine tools, chemicals, and
electronics. But it had grown increasingly inefficient, and its currency had
become worthless outside its own borders. East Germans had felt frustrated at
their lack of true material well-being, as well as their lack of freedom. They
joined their economy enthusiastically with that of West Germany in 1990. The
merger gave them a rude shock, however, in part because of the simultaneous
collapse of East Germany's markets in the Soviet empire and in part because of the
inefficiencies that the communist system had left behind.
The united German economy is a dominant force in world markets
because of the strong export orientation that has been part of the German
tradition for centuries. Although the burdens of unification have cut into West
Germany's traditional export surplus, German industry continues to
produce some of the best machine tools, automobiles, trucks, chemicals, and
engineering products in the world. Its management culture, which mingles
competition and cooperation, stresses quality and durability above all other
virtues. Because many German companies are small or medium-sized, they are able
to concentrate on a few production lines that compete effectively even if they
are expensive.
The German culture of cooperation also extends to the relations
between the private sector and the government. The social market economy, in
which all elements of the system cooperate, stresses the importance of having
all parties to the social contract work together. Workers play a role in
management. Managers mingle with workers. The bureaucracy attempts to create an
environment in which all parties serve a common purpose. Although the rules
intended to prevent the recurrence of the German cartel system of the last
century are strictly enforced by the Bundeskartellamt (Federal Cartel Office),
certain practices that would be forbidden under United States antitrust laws
are widely tolerated in Germany.
The dominant force in the German economy is the banking system.
The central bank, the Bundesbank, is deeply committed to maintaining the value
of the nation's currency, the deutsche mark, even at some potential cost to
economic growth. It fears inflation above all other ills and is determined to
prevent the recurrence of Germany's ruinous Great Inflation of the early 1920s.
Private banks also play an important role. German industrial and service
companies rely much more on bank finance than on equity capital. The banks
provide the money and in turn sit on the supervisory boards of most of
Germany's corporations. From that vantage point, they stress the traditional
banking virtues of slow but steady and nonrisky growth. Their influence and
thinking permeate the economy.
German agriculture is not as strong as German industry. It is a
relatively small part of the gross domestic product (GDP) and is heavily
subsidized by the EU's Common Agricultural Policy (CAP) and by the German
government itself. The accession of East Germany to a united Germany expanded
the relative size of the agricultural sector and somewhat improved its
efficiency, but Germany is not an agricultural producer like Spain or
Italy.
West Germany developed a system of high wages and high social
benefits that has been carried over into united Germany. The extent and the
generosity of its social programs now leave Germany at a competitive
disadvantage with respect to the states of Eastern Europe and Asia. German
labor costs are above those of most other states, not because of the wages
themselves--which are high by global standards but not out of line with German
labor productivity--but because of social costs, which impose burdens equal to
the wages themselves. Thus, German companies and German workers must
decide either to abandon some of the social programs that are at the core
of the revered social market economy or to risk losing out in the increasingly
intense global competition of the 1990s and beyond. The Germans have not solved
this problem, but they are beginning to address it more seriously than before.
International Economic
Relations
Ever since its creation in 1949, the Federal Republic of Germany
(FRG), or West Germany, as it was also called until its unification in 1990
with the German Democratic Republic (GDR, or East Germany), has played an
increasingly important role in the world economy. Consistently among the most
important trading nations in the world, Germany often derives a higher share of
its gross domestic product (GDP) from exports than any other major state. The
Federal Republic plays an even more important role in international financial
matters. Its currency, the deutsche mark, is the second most important currency
in the world after the United States dollar.
Germany does not act alone in international economic matters.
Instead, it usually acts through Europe. West Germany was a founding member of
the European Coal and Steel Community (ECSC) and of the follow-on European
Community (EC), known since late 1993 as the European Union (EU). Germany
increasingly makes its international policies in conjunction and consultation
with other EU members. More than half of its trade is with other EU states, and
the deutsche mark is the anchor of the European Monetary System (EMS) and of
its planned follow-on, the European Monetary Union (EMU).
Despite its central role in the world economy, Germany has never
developed nor sought a high profile as a major international economic player.
It receives much less attention than Japan in United States newspapers and
economic journals, even though it wields as least as much influence in global
financial affairs. This relative discretion reflects Germany's general
reticence about projecting itself on the world stage in economic matters and
the consistent German wish to integrate its economy into the EU. Germany
has benefited from a strikingly benign international economic climate for the
past half-century. Despite occasional crises--such as the effects of the United
States decision to end the dollar's link to gold in 1971 and of the "oil
shocks" of the 1970s that resulted from exporters' sharp increases in the
price of petroleum--the global economic scene has been remarkably stable in
comparison with that of the 1920s and 1930s. This stability has favored the
kind of international trading state that West Germany represented and that
united Germany is expected to become once unification is complete.
Under United States leadership, the Western world with free-market
economies established the International Monetary Fund (IMF) and the World
Bank in 1944. In 1947 these nations created a virtually universal trade
structure, the General Agreement on Tariffs and Trade (GATT). The combination
of open financial and trade systems has helped promote continuous and even
dramatic expansion since World War II of world trade and the liquidity of
international capital. Nothing could have better suited West Germany and now
united Germany. The productive capacities of both East Germany and West Germany
always exceeded the absorptive capacity of their respective domestic markets.
From the West German standpoint, this characteristic helped to fuel the German
export drive and to generate investment capital. It also strengthened the
deutsche mark and helped make the German economy internationally
prominent.
Although Germany has a global currency and a world-class trade
sector, the German economy remains essentially continental in focus. Because
the economy lacks the size necessary to deal with the effects of truly massive
currency flows, Germany has looked for partners in international economic
matters as it has in international strategic and political matters.
The German government and the Bundesbank, Germany's central bank,
are active participants in formal and informal international institutions and
arrangements concerned with global finance and the coordination of national
economic policies. West Germany was a founding member of the association of
free-market economies known as the Group of Five (G-5), which later became the
Group of Seven (G-7). But the German government has also had to acknowledge
that it cannot direct the policies of the independent Bundesbank, which are
more often based on Germany's domestic needs than on the wishes of the outside
world.
Bundesbank
The single most important economic institution in Germany outside
the federal government is the central bank, the Deutsche Bundesbank (commonly
called the Bundesbank). It has the dominant voice in German monetary policy.
Through that voice, it establishes and maintains a firm policy in favor of
solid currency value within Germany and increasingly within the EU and even the
world at large.
If a central bank's reputation is its most precious asset, the
Bundesbank is among the world's most highly endowed institutions. Its
contribution to the economic and political stability of West Germany and
Western Europe in the postwar years was almost legendary and was given due
respect even by those who disagreed with some or many of its policies.
Although the Bundesbank often appears to be the principal maker of
German economic policy, its exact powers are carefully set forth and
circumscribed in the 1957 law establishing the bank. The law assigned to the
bank the responsibility for "the preservation of the value of German
currency," a mandate that was so important that it was clearly intended to
override the bank's other principal task, "to support the general economic
policy of the federal government." Even the latter task was carefully
limited by the specific provision that the bank "shall be independent of
instructions from the federal government."
The government does have a role, if it wishes to exercise it.
Government representatives can and at times do attend the meetings of the
bank's governing board, the Central Bank Council, although the government
cannot block the bank's actions but is authorized only to delay them for no
longer than two weeks. There are also informal contacts between the government
and the bank, and it is not unusual for senior officials at the Chancellory or
the Ministry of Finance to know in advance what the council might be expected
to decide at its next meeting.
The bank has more authority in the realm of monetary policy than
any other major European central bank. It is most closely based, at least in
its structure although not in its formal mandate, on the United States Federal
Reserve Bank. It exercises more functions than the Federal Reserve, however, in
part because it carries out some exchange responsibilities that are assigned to
the United States Department of the Treasury. The Bundesbank issues money and
makes monetary policy by controlling short-term interest rates such as the
discount rate for loans to other banks and the Lombard rate for short-term
funding for business.
As of mid-1995, the president of the Bundesbank was Hans
Tietmeyer, who made his mark in the economics and finance ministries as a
career official and then as a state secretary. Kohl appointed him Bundesbank
president in 1993. The Bundesbank's Central Bank Council has seventeen members,
with the majority of nine being the presidents of regional or Land
central banks. The representatives of these banks can, therefore, outnumber the
eight members of the Central Bank Council who work out of the bank's executive
office in Frankfurt am Main, the Direktorium (Directorate, giving the bank a
strong orientation toward developments in the country as a whole, while public
and foreign attention usually concentrates on the Directorate. Land central
bank presidents are nominated by Land governments. They do not serve at any
government's pleasure, including that of the Land that nominated them. The
members of the council who are in the Directorate are appointed by the
president upon the nomination of the chancellor, but even these members are not
subject to government direction.
The single most important fact about the Bundesbank, however, is
its powerful and consistent anti-inflationary philosophy. That philosophy,
grounded in its absolute determination to avoid the social upheaval caused by
the Great Inflation of the early 1920s, is central to the bank's thinking on
every occasion and has given it enormous influence. Although a number of
economists, especially some in the United States, have long argued that the
Bundesbank's policies are excessively restrictive and potentially deflationary,
the bank is popular with most German voters and with much of German business.
The voters do not wish to see their savings eroded by inflation. Businessmen
are inclined to believe that a lower inflation rate will permit them to hold
down their costs and remain highly competitive over the long run although
others might receive some temporary advantage from devaluation. Germans believe
that a country with a stable currency will be able to have lower capital and
labor costs because lower inflation expectations make lower interest rates and
stable wages acceptable.
German demographic realities have added further reasons for
anti-inflationary policies. As the population ages and as more Germans live on
pensions or on fixed investment incomes, the importance of price stability has
become a powerful consideration for a growing sector of the electorate. That
sector of the electorate fully supports the Bundesbank's anti-inflationary
policies.
The Economic Miracle of
Germany
The economic reforms and the new West German system received
powerful support from a number of sources: investment funds under the European
Recovery Program, more commonly known as the Marshall Plan; the stimulus to
German industry provided by the diversion of other Western resources for Korean
War production; and the German readiness to work hard for low wages until
productivity had risen. But the essential component of success was the revival
of confidence brought on by Erhard's reforms and by the new currency.
The West German boom that began in 1950 was truly memorable. The
growth rate of industrial production was 25.0 percent in 1950 and 18.1 percent
in 1951. Growth continued at a high rate for most of the 1950s, despite
occasional slowdowns. By 1960 industrial production had risen to two-and-one-half
times the level of 1950 and far beyond any that the Nazis had reached during
the 1930s in all of Germany. GDP rose by two-thirds during the same decade. The
number of persons employed rose from 13.8 million in 1950 to 19.8 million in
1960, and the unemployment rate fell from 10.3 percent to 1.2 percent.
Labor also benefited in due course from the boom. Although wage
demands and pay increases had been modest at first, wages and salaries rose
over 80 percent between 1949 and 1955, catching up with growth. West German
social programs were given a considerable boost in 1957, just before a national
election, when the government decided to initiate a number of social programs
and to expand others.
In 1957 West Germany gained a new central bank, the Deutsche
Bundesbank, generally called simply the Bundesbank, which succeeded the Bank
Deutscher Länder and was given much more authority over monetary policy. That
year also saw the establishment of the Bundeskartellamt (Federal Cartel
Office), designed to prevent the return of German monopolies and cartels. Six
years later, in 1963, the Bundestag, the lower house of Germany's parliament,
at Erhard's urging established the Council of Economic Experts to provide
objective evaluations on which to base German economic policy.
The West German economy did not grow as fast or as consistently in
the 1960s as it had during the 1950s, in part because such a torrid pace could
not be sustained, in part because the supply of fresh labor from East Germany
was cut off by the Berlin Wall, built in 1961, and in part because the
Bundesbank became disturbed about potential overheating and moved several times
to slow the pace of growth. Erhard, who had succeeded Konrad Adenauer as
chancellor, was voted out of office in December 1966, largely--although not
entirely--because of the economic problems of the Federal Republic. He was
replaced by the Grand Coalition consisting of the Christian Democratic Union
(Christlich Demokratische Union--CDU), its sister party the Christian Social
Union (Christlich-Soziale Union--CSU), and the Social Democratic Party of
Germany (Sozialdemokratische Partei Deutschlands--SPD) under Chancellor Kurt
Georg Kiesinger of the CDU.
Under the pressure of the slowdown, the new West German Grand
Coalition government abandoned Erhard's broad laissez-faire orientation. The
new minister for economics, Karl Schiller, argued strongly for legislation that
would give the federal government and his ministry greater authority to guide
economic policy. In 1967 the Bundestag passed the Law for Promoting Stability
and Growth, known as the Magna Carta of medium-term economic management. That
law, which remains in effect although never again applied as energetically as
in Schiller's time, provided for coordination of federal, Land , and local
budget plans in order to give fiscal policy a stronger impact. The law also set
a number of optimistic targets for the four basic standards by which West
German economic success was henceforth to be measured: currency stability,
economic growth, employment levels, and trade balance. Those standards became
popularly known as the magisches Viereck, the "magic rectangle" or
the "magic polygon."
Schiller followed a different concept from Erhard's. He was one of
the rare German Keynesians, and he brought to his new tasks the unshakable
conviction that government had both the obligation and the capacity to shape
economic trends and to smooth out and even eliminate the business cycle.
Schiller's chosen formula was Globalsteuerung, or global guidance, a process by
which government would not intervene in the details of the economy but would
establish broad guidelines that would foster uninterrupted non-inflationary
growth.
Schiller's success in the Grand Coalition helped to give the SPD
an electoral victory in 1969 and a chance to form a new coalition government
with the Free Democratic Party (Freie Demokratische Partei--FDP) under Willy
Brandt. The SPD-FDP coalition expanded the West German social security system,
substantially increasing the size and cost of the social budget. Social program
costs grew by over 10 percent a year during much of the 1970s, introducing into
the budget an unalterable obligation that reduced fiscal flexibility (although
Schiller and other Keynesians believed that it would have an anticyclical
effect). This came back to haunt Schiller as well as every German government
since then. Schiller himself had to resign in 1972 when the West German and
global economies were in a downturn and when all his ideas did not seem able to
revive West German prosperity. Willy Brandt himself resigned two years
later.
Helmut Schmidt, Brandt's successor, was intensely interested in
economics but also faced great problems, including the dramatic upsurge in oil
prices of 1973-74. West Germany's GDP in 1975 fell by 1.4 percent (in constant
prices), the first time since the founding of the FRG that it had fallen so
sharply. The West German trade balance also fell as global demand declined and
as the terms of trade deteriorated because of the rise in petroleum
prices.
By 1976 the worst was over. West German growth resumed, and the
inflation rate began to decline. Although neither reached the favorable levels
that had come to be taken for granted during the 1950s and early 1960s, they
were accepted as tolerable after the turbulence of the previous years. Schmidt
began to be known as a Macher (achiever), and the government won reelection in
1976. Schmidt's success led him and his party to claim that they had built
Modell Deutschland (the German model).
But the economy again turned down and, despite efforts to
stimulate growth by government deficits, failed to revive quickly. It was only
by mid-1978 that Schmidt and the Bundesbank were able to bring the economy into
balance. After that, the economy continued expanding through 1979 and much of
1980, helping Schmidt win reelection in 1980. But the upturn proved to be
uneven and unrewarding, as the problems of the mid-1970s rapidly returned. By
early 1981, Schmidt faced the worst possible situation: growth fell and
unemployment rose, but inflation did not abate.
By the fall of 1982, Schmidt's coalition government collapsed as
the FDP withdrew to join a coalition led by Helmut Kohl, the leader of the
CDU/CSU. He began to direct what was termed die Wende (the turning or the
reversal). The government proceeded to implement new policies to reduce the
government role in the economy and within a year won a popular vote in support
of the new course.
Within its broad policy, the new government had several main
objectives: to reduce the federal deficit by cutting expenditures as well as
taxes, to reduce government restrictions and regulations, and to improve the
flexibility and performance of the labor market. The government also carried
through a series of privatization measures, selling almost DM10 billion in
shares of such diverse state-owned institutions as VEBA, VIAG, Volkswagen,
Lufthansa, and Salzgitter. Through all these steps, the state role in the West
German economy declined from 52 percent to 46 percent of GDP between 1982 and
1990, according to Bundesbank statistics.
Although the policies of die Wende changed the mood of the West
German economy and reinstalled a measure of confidence, progress came unevenly
and haltingly. During most of the 1980s, the figures on growth and inflation
improved but slowly, and the figures on unemployment barely moved at all. There
was little job growth until the end of the decade. When the statistics did
change, however, even modestly, it was at least in the right direction.
Nonetheless, it also remained true that West German growth did not
again reach the levels that it had attained in the early years of the Federal
Republic. There had been a decline in the growth rate since the 1950s, an
upturn in unemployment since the 1960s, and a gradual increase in inflation
except during or after a severe downturn. Global economic statistics also
showed a decline in West German output and vitality. They showed that the West
German share of total world production had grown from 6.6 percent in 1965 to
7.9 percent by 1975. Twelve years later, in 1987, however, it had fallen to 7.4
percent, largely because of the more rapid growth of Japan and other Asian
states. Even adding the estimated GDP of the former East Germany at its peak
before unification would not have brought the all-German share above 8.2
percent by 1989 and would leave all of Germany with barely a greater share of
world production than West Germany alone had reached fifteen years
earlier.
It was only in the late 1980s that West Germany's economy finally
began to grow more rapidly. The growth rate for West German GDP rose to 3.7
percent in 1988 and 3.6 percent in 1989, the highest levels of the decade. The
unemployment rate also fell to 7.6 percent in 1989, despite an influx of
workers from abroad. Thus, the results of the late 1980s appeared to vindicate
the West German supply-side revolution. Tax rate reductions had led to greater
vitality and revenues. Although the cumulative public-sector deficit had gone
above the DM1 trillion level, the public sector was growing more slowly than
before. The year 1989 was the last year of the West German economy as a
separate and separable institution. From 1990 the positive and negative
distortions generated by German unification set in, and the West German economy
began to reorient itself toward economic and political union with what had been
East Germany. The economy turned gradually and massively from its primarily
West European and global orientation toward an increasingly intense concentration
on the requirements and the opportunities of unification.
Impact of Unification on
German Economy
The East German and West German economies at the time of
unification looked very similar. They both concentrated on industrial
production, especially machine tools, chemicals, automobiles, and precision
manufactures. Both had a well-trained labor force and an important export
component, although their exports went largely in opposite directions. But the
East German economy was highly centralized and guided by a detailed and
purportedly precise planning system, with virtually no private property and
with no room for decision or initiative. On July 1, 1990, the economies of the
two Germanys became one. It was the first time in history that a capitalist and
a socialist economy had suddenly become one, and there were no precise
guidelines on how it could be done. Instead, there were a number of problems,
of which the most severe were the comparatively poor productivity of the former
East German economy and its links to the collapsing socialist economies of the
Soviet Union and Eastern Europe.
Even before economic unification, the West German government had
decided that one of its first tasks was to privatize the East German economy.
For this reason, it had taken over in June the Treuhandanstalt (Trust Agency,
commonly known as Treuhand), which had been established by the GDR to take over
East German firms and to turn them over to new management through
privatization. The agency assumed the assets and liabilities of about 8,000
East German enterprises in order to sell them to German and other bidders. By
the time the Treuhand was disbanded at the end of 1994, it had privatized some
14,000 enterprises.
As economic unification proceeded, issues that had been recognized
but inadequately understood in advance began to surface. There was massive
confusion about property rights. As wave after wave of Nazi, Soviet, and later
GDR expropriations had taken place between 1933 and 1989, there was often
little knowledge of the actual ownership of property. More than 2 million
claims on properties in the territory of the former GDR were filed by the
December 31, 1992, deadline. As more claimants emerged, with many winning cases
in the courts, potential investors were often scared off. Another problem was
that East German production costs had been very high. The conversion rates of
East German marks to deutsche marks often kept those costs high, as did the
early wage negotiations, which resulted in wages far above the productivity
level. Western German firms found it easier and cheaper to serve their new
eastern German markets by expanding production in western facilities. A third
problem was that the inadequate infrastructure also became a problem for many
potential investors. Telephone service was improved only very slowly. Many
investors also complained about energy shortages, as many East German power
stations were shut down for safety and other reasons. Roads and railroads had
to be virtually rebuilt because they had been so badly maintained.
In addition to these practical problems, there was also a deep
policy dilemma that underlay the entire process of unification. From the
beginning, there had been a pernicious link between the earlier and later
phases of the East German transition to a free-market economy. Policies
calculated to make the initial adjustment as painless as possible hampered
long-run growth and prosperity. Real economic efficiency could only be achieved
by permitting and even forcing considerable immediate dislocations, whereas
temporary compromises might lead to permanent structural burdens. However,
excessive disruptions could jeopardize the economic and political stability
required for a smooth unification process and might also cause streams of East
Germans to move west. The government was never able to solve this dilemma. When
it was forced to choose, it usually selected the more expensive and slower
course to encourage persons to stay in the east.
Despite these problems, the process of unification moved ahead,
albeit slowly. The Treuhand, staffed almost entirely by Germans from the west,
became the virtual government of eastern Germany. In the course of
privatization, the agency decided which companies would live and which would
die, which communities would thrive and which would shrivel, and which eastern
Länder would be prosperous and which would not. It also decided who might or
might not buy eastern firms or services.
Whether correct or not, reports persisted throughout the first
years of unification that foreign enterprises were being screened more
carefully and more skeptically than German firms even as they were being
invited to invest. Less than 5 percent of all investment in eastern Germany was
non-German, and most of that was from companies with subsidiaries in western
Germany who were expanding them to the east. The Japanese did not invest,
although they had earlier expressed some interest, and the offices Treuhand
established in New York and Tokyo found few investors. As might have been expected,
the economy of eastern Germany went into a deep and precipitous slump
immediately after unification. Within a year after unification, the number of
unemployed rose above 3 million. Industrial production in eastern Germany fell
to less than half the previous rate, and the total regional product fell
precipitously through 1991. One estimate was that in 1991 the entire production
of eastern Germany amounted to less than 8 percent of that of western
Germany.
Because the process of unification was managed by persons from
western Germany, new eastern firms were usually subsidiaries of western firms,
and they followed the western ownership and management patterns. Bank
participation became customary, especially because the large Frankfurt banks
assumed the assets of the former East German State Bank, and most eastern firms
thus owed money to those Frankfurt banks. The banks installed their
representatives on the boards of the new firms and assumed some supervisory
functions--either directly or through control by western firms with bank
representation. The Treuhand had close contacts with western German banks. Many
of its employees came from those banks and planned to return to their jobs at
the banks.
Because of these circumstances, private investment and economic
growth came to eastern Germany at a relatively slow rate. Little new equity
capital flowed in. Investment during the early years of unification was only 1
percent of the all-German GDP, when much more was needed to jump-start the
economy of eastern Germany. Much of the investment was for the purchase of
eastern German companies, not yet for their rehabilitation. Many western German
firms bought eastern firms on a standby basis, making sure they could produce
in the east when the time came and paying enough wages to satisfy the Treuhand
but not starting production. Many others, including Daimler-Benz, did not even
meet the commitments that they had made when they had purchased the eastern
German firms from the Treuhand. Thus, western German private investment was not
strong enough to boost the eastern German economy.
As private funds lagged, and in part because those funds lagged,
federal budget investments and expenditures began flowing into eastern Germany
at a consistently high rate. Government funds were used essentially for two
purposes: infrastructure investment projects (roads, bridges, railroads, and so
on), and income maintenance (unemployment compensation, social security, and
other social costs). The infrastructure projects sustained employment levels,
and the income maintenance programs sustained income. But neither had an early
growth payoff.
Although the precise level of German official expenditures in
eastern Germany has been difficult to estimate because funds appropriated in
one year might have been spent in another, it is beyond dispute that the
federal government expended well over DM350 billion in eastern Germany during
the first three years after economic, or monetary, unification. After 1992 this
requirement has continued at an annual level of around DM150 billion, so that
the sum of private and public funds put into eastern Germany during the
half-decade between monetary unification in 1990 and the end of 1995 would
probably amount to at least DM750 billion and perhaps as much as DM850 billion.
Between one-fifth and one-fourth of those funds were private, and the remainder
were government funds. This constituted an infusion of outside money of about
DM50,000 for every resident of eastern Germany, a far greater level of
assistance than contemplated for any other area that had been behind the Iron
Curtain and a token of German determination to bring eastern Germany to western
levels as quickly as possible.
As eastern Germany went into a deep recession during the first
phase of unification, the western German economy went into a small boom.
Western German GDP grew at a rate of 4.6 percent for 1990, reflecting the new
demand from eastern Germany. The highest growth rate came during the second
half of 1990, but growth continued at only a slightly slower pace into early
1991. Prices, however, remained relatively stable because the cost of living
grew at only 2.8 percent despite some high wage settlements in some industries.
Employment rose during the year, from 28.0 million to 28.7 million, and the
unemployment rate sank to 7.2 percent. Notably, the number of registered
unemployed in western Germany only declined by about 300,000, showing that at
least half of the new jobs in western Germany had been taken by persons who had
moved to or were commuting from eastern Germany. The dramatic improvement
in the western German figures resulted from the opening in eastern Germany of a
large new market of 16 million persons and the simultaneous availability of
many new workers from eastern Germany. Many easterners did not want the shoddy
goods produced at home, preferring western consumer products and food.
Moreover, many easterners were coming to the west to work. By the end of 1990,
as many as 250,000 were commuting to work in the west, and that number was
estimated to have grown to 350,000 or even 400,000 by the middle of 1991.
This meant that western Germany not only had a vast new market but
also a growth of over 1 percent in its workforce, as sharp an increase as since
the days of the economic miracle. It also increased its capital base because
eastern German deposits were placed in western German banks that had come east
and because those deposits moved back to the central German financial market at
Frankfurt. The Bundesbank became worried about three elements of the sudden
boom: the sudden financial shifts between east and west, which led to a jump in
money supply; government deficits resulting from large expenditures in eastern
Germany; and the potentially inflationary effects of a rapid growth rate in the
west. The bank warned that interest rates would have to remain high to keep
price increases under control. The bank raised short-term interest rates
sharply through 1991 and 1992, with the average rate of short-term interest
climbing from 7.1 percent in 1989 to 8.5 percent in 1990, to 9.2 percent in
1991, and to 9.5 percent in 1992. The Bundesbank permitted rates to begin
falling only in 1993--to 7.3 percent--when it believed that the inflationary
pressures had been contained by the recessionary effects of the credit
squeeze.
As the Bundesbank's policies began to take hold, growth slowed in
western Germany, from 4.2 percent in the first quarter of 1991 to 0.8 percent
in the last quarter of 1992. For all of 1992, the western German growth rate was
1.5 percent, a decline from the 3.7 percent rate of 1991 and even more from the
4.6 percent rate of 1990. The eastern German growth rate was 6.1 percent during
1992, well below the 7 percent to 10 percent growth rate originally anticipated
for the region. The number of employed in western Germany fell for the first
time in ten years, by 89,000 persons.
Despite the slowdown, during 1992 the German economy reached a
milestone of sorts. With the addition of eastern German production, Germany's
GDP rose for the first time above DM3 trillion. Of that total, the new Länder
contributed a gross regional product of DM231 billion, or 7.7 percent. However,
the total of German unemployed also reached a record number, 4 million.
Two-thirds of that number were unemployed in western Germany; the other
one-third were unemployed in eastern Germany. Eastern Germany contributed more
to unemployment than to production. The 1992 depression continued into 1993, so
that the economy actually registered a negative growth rate of -1.2 percent. By
1994, however, after the Bundesbank had been lowering short-term interest rates
for over a year, German growth resumed at an annual rate of about 2.4 percent,
but unemployment declined only very slowly despite the uptrend in GDP growth.
It was expected that stronger growth would begin reducing the numbers of
unemployed by 1995 and that Germany would return to its postwar path toward
prosperity. But the absorption of eastern Germany, and the methods by which it
had been accomplished, had exacted a high price throughout all of
Germany.
Germany in the World Economy
Along with the United
States and Japan, Germany has one of the world's biggest economies and most
dominant central banks. Of the three, Germany has the smallest and most
vulnerable economy. Germany's GDP of DM3 trillion is less than one-third of
United States GDP and less than one-half of Japan's. Despite Germany's
relatively small size, it has consistently exerted a powerful influence on the
world economy. Since the end of World War II, the Federal Republic has played a
key role in beginning, managing, or ending each crisis and each phase
experienced by the global monetary system.
The first phase was the Bretton Woods era, named after the New
Hampshire resort where the Allied monetary conference of July 1944 created the
IMF and shaped the global postwar order. The dollar was pegged to gold at a
fixed rate of US$35 per troy ounce, constituting the official backing of the
global monetary system; other currencies were linked to the system through
their own fixed, dollar-pegged exchange rates. Countries could devalue or
revalue with respect to the dollar, and the dollar price of gold could at least
theoretically remain constant even as rates of exchange between separate
currencies fluctuated.
By the late 1960s, there was a surplus of dollars in the
international financial system. Largely for domestic reasons, the United States
had put far more emphasis on expanding dollar liquidity than on maintaining
dollar value. Growing fear of United States inflation had made those dollars
less desirable, and many central banks held more dollars than they wanted. The
United States proposed that other countries revalue their currencies as
provided under the Bretton Woods Agreement. But those other countries, and West
Germany in particular, were not prepared to revalue. Money poured into
purchases of the deutsche mark, sometimes for the purchase of German goods, but
more often to hedge against the dollar or to make a profit when--as was widely
expected--the deutsche mark would have to be revalued. West German
foreign-exchange reserves rose from US$2.7 billion in December 1969 to US$12.6
billion by December 1971, and to US$28.1 billion by September 1973. The steady
flow of foreign money into deutsche marks not only undercut the Bretton Woods
system but also threatened to import inflation into Germany by expanding the
German money supply.
West Germany tried to help support the dollar during the late
1960s and early 1970s. Bundesbank president Karl Blessing sent a letter to the
chairman of the United States Federal Reserve Board pledging not to purchase
United States gold but to maintain West German reserves in dollars. West German
chancellor Ludwig Erhard (1963-66) agreed to make large purchases of United
States dollar instruments and to make "offset" payments to lessen
demands in the United States Congress for a reduction in United States forces
stationed in West Germany. The United States and several other nations pressed
West Germany to revalue in order to compensate for the dollar glut. Although
the Bundesbank would have favored revaluation to reduce the risk of inflation,
the West German government was afraid that a revaluation would cut into West
Germany's global competitiveness and curtail exports.
Finally, after intensifying waves of speculation, the Bretton
Woods system collapsed in August 1971. The United States stopped the sale of
gold at US$35 per troy ounce and thus removed the fixed link between the dollar
and gold. With that step, the system lost its anchor.
The deutsche mark remained under strain throughout the
post-Bretton Woods period. It was alternately used in interventions to support
the dollar or as a hedge against it. Other currencies again flooded into
purchases of deutsche marks. To ease pressure within Europe, West Germany and
other European states agreed to peg their currencies to a special system of
relatively narrow exchange-rate bands formally entitled the "European
narrow-margins agreement" but informally known as the "snake."
But the snake also failed to hold. The domestic policies and even the economic
philosophies of its leading member states--West Germany, France, Britain, and
Italy--diverged too widely. The deutsche mark was the strongest currency, and
others could not hold their value against it.
The United States and West Germany played key roles in trying to
arrange a new global monetary system. But they had opposite objectives: the
United States was determined not to have the dollar reassume responsibility for
maintaining an international arrangement, fearing the great cost to its exports
and economic stability. The United States government believed that countries
with a trade surplus, such as West Germany, should accept part of the
responsibility for solving exchange-rate crises and should be prepared to
revalue, and it insisted on advance agreement for sanctions against any country
that refused to do so. Despite its readiness to make minor exchange-rate
adjustments for the sake of new currency alignments, West Germany refused to
commit itself to any arrangement that would oblige it to revalue in the
future.
In March 1973, the United States and other governments and central
banks gave up trying to preserve the Bretton Woods system by setting new fixed
exchange rates. With that decision, the next phase of the postwar international
system, "floating," began. With floating, the relationship between
the United States dollar and the deutsche mark became subject to market forces
rather than official negotiations. West Germany was not certain whether
floating would serve its needs but was not prepared to pursue any
alternative.
Floating did not insulate domestic economies from international
events and global economic forces. Although the floating era may have ended the
period of fixed links to the dollar and to gold, it did not give countries
complete monetary freedom. It only meant that adjustments would be made by the
markets, not by government decree or agreement. Those adjustments would, at
least theoretically, occur in reaction to trade and payments imbalances,
correcting them over time. However, the situation did not work out as expected
or planned. The increasingly important role played by capital flows,
speculative or not, undercut the theoretically self-regulating mechanism of
trade flows as the basis of currency values.
The economic consequences of floating for Germany were not
uniformly beneficial. The Bundesbank welcomed floating because it gave the bank
more flexibility. The bank, in fact, could virtually control the deutsche
mark's exchange rate if it was prepared to manipulate interest rates to that
end. But West German industry, and especially West German exporters, did not
welcome the unpredictability that flexible exchange rates introduced into
commercial arrangements and production plans.
West German exporters also faced a particular problem that
persisted in the 1990s. The Bundesbank's favorite instrument for fighting
inflation, a high real domestic interest rate, is also the instrument that
attracts capital to the deutsche mark and keeps the currency valuable. Many
businesspeople feared then, as they have since, that the Bundesbank's
anti-inflationary policy would always keep the deutsche mark stronger than most
other currencies and would thus jeopardize exports.
German exchange-rate policy has been constantly caught on the
horns of that dilemma. When a decision absolutely needed to be made during the
floating era, however, German governments and the Bundesbank have almost always
chosen an anti-inflationary course of action. They have preferred a strong
currency, which might adversely affect trade, to a weak one, which would
jeopardize the stability of the German monetary system. With that choice, they
set policy for others as well as for themselves. As long as the deutsche mark
is strong and German interest rates remain high, even the United States can
diverge from German policy only at the risk of seeing its own currency fall in
value. Because of Germany's monetary dilemma, and because the German government
as well as the nation's bankers and industrialists have recognized German
limitations and vulnerabilities, all have been anxious to establish the highest
possible level of international predictability. The Germans have become regular
participants in international economic consultations, and they have emphasized
the value of such consultations at every opportunity.
Global economic coordination after the end of the Bretton Woods
system has resulted in the development of a number of coordinating
institutions. One, first known informally as the Group of Five (G-5), consisted
of the United States, West Germany, Japan, Britain, and France. After Canada
and Italy joined, the association became known as the Group of Seven (G-7). The
G-7 includes the finance ministers and central bankers of the principal
economic powers, who meet periodically and consult regularly between
meetings.
In addition to the meeting of G-7 finance ministers, there is an
annual G-7 economic summit at which the heads of state or government of the
same seven countries meet to coordinate economic and political policies or at
least to attempt to understand each other better. The summits have been held
annually since 1975 on a rotating basis among the summit states, usually in the
capital. At the Naples summit of the G-7 in 1994, Russia joined the political
discussions, essentially turning the gathering into the Group of Eight
(G-8).
Three summits, those of 1978, 1985, and 1992, took place in
Germany. Each was significant for different reasons. In 1978 Chancellor Helmut
Schmidt (1974-82) committed West Germany to a more reflationary policy, to his
later regret. Seven years later, Chancellor Helmut Kohl (1982- ) and other
summit principals made commitments toward supply-side policies that most
participants agreed were then necessary and that both Kohl and United States
president Ronald Reagan wanted to use to reduce the role of government in their
national economies. Seven years later, at Munich in 1992, the G-7 agreed to
provide aid to Russia. However, the summit did not reach agreement on the
Uruguay Round of the GATT negotiations, and Chancellor Kohl did not carry out
what the United States had regarded as his promise to persuade the French to
reduce their insistence on large EC agricultural export subsidies.
German bankers and financial officials have usually spoken
skeptically about possible results from the summits, making abundantly clear
that the meetings do not affect their views, although they may subsequently
adjust specific policies. Bundesbank president Hans Tietmeyer has stated that
West Germany sees them as occasions for "cooperation," not
"coordination." German global policy has thus been guided by broad
efforts to coordinate specific policies, but with a firm wish to preserve
German interests and its friendships with the EU members it considers its
principal economic partners.
Deutsche Mark - National
German Currency
At the core of Germany's success and influence lies its currency.
The deutsche mark gave concrete expression to West Germany's international
financial and economic success and also contributed to it. Since unification,
it has become even more important as a symbol as well as an instrument of
Germany's new central role in Europe. The success of the deutsche mark has been
anchored in the success of West German exports, in the Bundesbank's solicitous
management of the currency's value, and in the confidence generated by the
country's prosperity.
The deutsche mark has been a model of stability since it became
fully convertible in 1958. No other major currency, including the Japanese yen
or the Swiss franc, has been stronger. The United States dollar, the cornerstone
of the global system, has lost about two-thirds of its value against the
deutsche mark since 1958.
The deutsche mark has become the second-largest currency component
of global monetary reserves, second only to the United States dollar. Less than
10 percent of the world's monetary reserves were held in deutsche marks
throughout most of the 1970s, but the amount rose to 15 percent by the end of
1987. By the end of 1989, around 20 percent of all global monetary reserves
were in deutsche marks. The deutsche mark's position in global monetary
reserves largely reflects the extensive deutsche mark holdings in European
foreign-exchange reserve accounts as well as the desire among all industrial
state treasuries and central banks to hold a stable currency in their reserves.
According to the United States Federal Reserve Board, the United States
government holds more than US$13 billion of its reserves in deutsche marks, an
amount greater than its holdings in Japanese yen.
The deutsche mark is not used as widely for transactions as it is
to supply central-bank reserves. Global commodity prices are still largely
denominated in United States dollars. Whatever the deutsche mark's strengths
may be, it does not offer the kind of liquidity that the dollar does. Invoicing
in deutsche marks is concentrated on Germany's own commerce, but almost 15
percent of world trade is conducted on a deutsche mark basis. The deutsche mark
figures much less significantly than the dollar in the creation of
international credits or in debt servicing. But a growing quantity of
international bond issues--including some being floated in the United
States--are denominated in deutsche marks. Major United States banks offer
deutsche mark accounts for Americans who want to hedge some of their assets
against a fall in the dollar. The World Bank has floated Eurodeutsche mark
bonds, as have various United States corporations. In Europe the deutsche mark
has virtually become a parallel currency, with prices in Western Europe and
Eastern Europe increasingly quoted in deutsche marks as well as in local
currencies.
Bundesbank officials worry constantly that the growing circulation
of the deutsche mark makes it difficult to control the supply of the central
bank's own currency. Deutsche marks held abroad, circulating abroad, and
perhaps even used for currency intervention abroad are still part of the total
German money supply. Sudden, large flows could have undesirable impacts on
German interest rates or German prices, materially complicating the execution
of German monetary policy. The bank fears that any decline in the deutsche
mark's value or in the German current-account surplus could set off a selling
wave that would force it to intervene massively and perhaps unsuccessfully.
Bundesbank president Tietmeyer has warned that the high deutsche mark holdings
abroad place a particular burden on the Bundesbank because any loss of faith in
the German currency could provoke large-scale selling. The deutsche mark has
thus become a burden for Germany as well as a blessing. The Bundesbank stated
in May 1991 that one reason it had to maintain high interest rates was to avoid
the kind of decline and subsequent market effects that Tietmeyer had cited. The
German currency risks finding itself on a treadmill where the stronger it gets,
the stronger it must remain until the German monetary authorities no longer
dare to reduce interest rates significantly for fear that they might spark a
deutsche mark sell-off.
The IMF recognized the reality of German monetary power in 1990,
when it promoted Germany and Japan to share the second rank just below the
United States and ahead of Britain and France. German government and banking
officials were not certain that they welcomed such prominence, but they were
prepared to accept it as a reflection of international appreciation of German
monetary policies.
The West German role in the development of the global financial
and monetary system has been replete with ironies. No state consistently had a
greater interest in developing a stable system and in cooperating in such a
system. Nonetheless, West German policy helped undermine and even destroy some
of the arrangements that West Germany wanted to maintain. During the Bretton
Woods era, pressures on the dollar almost always expressed themselves in
massive purchases of deutsche marks. The strength of the deutsche mark weakened
the system because any currency--including the United States dollar--could come
under attack if it were not defended and preserved as solicitously as the
deutsche mark was by Germany. The only currencies and systems that survived
this pressure were those whose governments determined from the beginning that
they would follow a strict monetary discipline similar to that applied by the
Bundesbank to the deutsche mark.
Culture of German
Management
German management, as it has evolved over the centuries and has
established itself since World War II, has a distinct style and culture. Like
so many things German, it goes back to the medieval guild and merchant
tradition, but it also has a sense of the future and of the long term.
The German style of competition is rigorous but not ruinous.
Although companies might compete for the same general market, as Daimler-Benz
and BMW do, they generally seek market share rather than market domination.
Many compete for a specific niche. German companies despise price competition.
Instead, they engage in what German managers describe as Leistungswettbewerb,
competition on the basis of excellence in their products and services. They
compete on a price basis only when it is necessary, as in the sale of bulk
materials like chemicals or steel.
The German manager concentrates intensely on two objectives:
product quality and product service. He wants his company to be the best, and
he wants it to have the best products. The manager and his entire team are
strongly product oriented, confident that a good product will sell itself. But
the manager also places a high premium on customer satisfaction, and Germans
are ready to style a product to suit a customer's wishes. The watchwords for
most German managers and companies are quality, responsiveness, dedication, and
follow-up.
Product orientation usually also means production orientation.
Most German managers, even at senior levels, know their production lines. They
follow production methods closely and know their shop floors intimately. They
cannot understand managers in the United States who want only to see financial
statements and "the bottom line" rather than inspect a plant's
production processes. A German manager believes deeply that a good-quality
production line and a good-quality product will do more for the bottom line
than anything else. Relations between German managers and workers are often
close, because they believe that they are working together to create a good
product.
If there is a third objective beyond quality and service, it is
cooperation--or at least coordination--with government. German industry works
closely with government. German management is sensitive to government standards,
government policies, and government regulations. Virtually all German products
are subject to norms--the German Industrial Norms (Deutsche Industrie
Normen--DIN)--established through consultation between industry and government
but with strong inputs from the management associations, chambers of commerce,
and trade unions. As a result of these practices, the concept of private
initiative operating within a public framework lies firmly imbedded in the
consciousness of German managers.
The German management style is not litigious. Neither the
government, the trade unions, nor the business community encourages litigation
if there is no clear sign of genuine and deliberate injury. Firms do not
maintain large legal staffs. Disagreements are often talked out, sometimes over
a conference table, sometimes over a beer, and sometimes in a gathering called
by a chamber of commerce or an industrial association. Differences are usually
settled quietly, often privately. Frequent litigation is regarded as reflecting
more on the accuser than on the accused. Because of these attitudes, Germany
has comparatively few lawyers. With one-third the population and one-third the
GDP of the United States, Germany has about one-twentieth the number of
lawyers.
German managers are drawn largely from the ranks of engineers and
technicians, from those who manufacture, design, or service, although more
non-engineers have risen to the top in recent years. They are better paid than
other Europeans (except the Swiss), but on average receive about two-thirds of
the income that their American counterparts expect. Because managers
usually remain in one firm throughout their careers, rising slowly through the
ranks, they do not need a visible bottom-line result quickly. Managers do not
need to be concerned about how their careers might be affected by a company's
or a division's progress, or lack of progress, for each year and certainly not
for each quarter.
German taxation also induces management toward long-term planning.
German tax legislation and accounting practices permit German firms to allocate
considerable sums to reserves. German capital gains tax rules exempt capital
gains income if the assets are held for more than six months or, in the case of
real estate, for more than two years.
Because management has not been regarded in Germany as a separate
science, it was rare until the 1980s to find courses in management techniques
such as those taught at schools of management in the United States. Germans
believed that management as a separate discipline bred selfishness, disloyalty,
bureaucratic maneuvering, short-term thinking, and a dangerous tendency to
neglect quality production. Instead, courses at German universities
concentrated more on business administration, or Betriebswirtschaft , producing
a Betriebswirt degree. Despite this, two West German schools for business
administration, the Hochschule für Unternehmensführung and the European
Business School, were established during the 1980s, but they teach in ways that
reinforce rather than overturn traditional German ways of
management.
Out of this compendium of business practices arises what might be
termed a German management style, with the following characteristics:
collegial, consensual, product- and quality-oriented, export-conscious, and
loyal to one company and committed to its long-term prospects. One could
legitimately conclude from this that the German system could stifle change
because it is not as innovative, aggressive, or results-oriented as the United
States management style. That, however, would not be correct, for change can
and does take place. It occurs gradually, not always obviously, under the
mottoes of stability and permanence, with the least dislocation possible, and
often under competitive pressures from abroad. German managers themselves
occasionally speculate that change might come too slowly, but they are not
certain whether or how to alter the system and its incentive structures.
German Government and
Politics
As of mid 1995, Germany was a country coming to terms with the
recent unification of its western and eastern portions following four decades
of Cold War division. Achieved in October 1990, German unification consisted,
in effect, of the incorporation of the German Democratic Republic (GDR, or East
Germany) into the Federal Republic of Germany (FRG, or West Germany). Thus, the
unified country, rather than reflecting a mix of both states' systems, largely
represented a continuation of the West German political and economic system.
West German chancellor Helmut Kohl preferred this "fast track" to
unification, outlined in Article 23 of the West German Basic Law, or
constitution, because he feared that international circumstances might change
and the chance for unification might be missed. The alternative path to
unification, detailed in Article 146, would have required the replacement of
the Basic Law with a constitution developed specifically for a unified Germany.
During the summer of 1990, the governments of the two German
states drafted a 1,000-page treaty outlining the terms of political union. The
document explained how the political structures and policies of West Germany
would be extended to the east, how other institutions--such as the education
system--would be coordinated, and which issues would be resolved later--for
instance, abortion policy. The parliaments of both German states ratified the
treaty, and the territory of East Germany joined the Federal Republic under
Article 23 on October 3, 1990.
The West German system of government, outlined in the Basic Law,
reflects in particular a desire to transcend the interwar period of democratic
instability and dictatorship. A federal system of government, considered vital
to a stable, constitutional democracy, was put in place as a direct response to
lessons learned from the Nazis' misuse of centralized structures. After four
years of Allied occupation, the FRG was established in 1949. The country
attained sovereignty in 1955 when the Allies transferred responsibility for
national security to the newly formed armed forces, the Bundeswehr.
Creating a climate of political stability was a primary goal of
the authors of West Germany's Basic Law. Among other things, the Basic Law
established the supremacy of political parties in the system of government. In
the resulting "party state," all major government policies emanated
from the organizational structure of the political parties. In the decades
since 1949, West Germany's parties have tended toward the middle of the
political spectrum, largely because both the historical experience with fascism
and the existence of communist East Germany greatly diminished the appeal of
either extreme. This reigning political consensus, challenged briefly in the
late 1960s by the student protest movement and in the early 1980s by economic
recession, has led many observers to judge the "Bonn model" a
success. However, it remains an open question whether the legal, economic, and
political structures of the past will serve the unified Germany as well in the
future.
The Chancellor of
Germany
The federal government consists of the chancellor and his or her
cabinet ministers. As explained above, the Basic Law invests the chancellor
with central executive authority. For that reason, some observers refer to the
German political system as a "chancellor democracy." The chancellor's
authority emanates from the provisions of the Basic Law and from his or her
status as leader of the party or coalition of parties holding a majority of
seats in the Bundestag. Every four years, after national elections and the
seating of the newly elected Bundestag members, the federal president nominates
a chancellor candidate to that parliamentary body; the chancellor is elected by
majority vote in the Bundestag.
The Basic Law limits
parliament's control over the chancellor and the cabinet. Unlike most
parliamentary legislatures, the Bundestag cannot remove the chancellor simply
with a vote of no-confidence. In the Weimar Republic, this procedure was abused
by parties of both political extremes in order to oppose chancellors and
undermine the democratic process. As a consequence, the Basic Law allows only
for a "constructive vote of no-confidence." That is, the Bundestag
can remove a chancellor only when it simultaneously agrees on a successor. This
legislative mechanism ensures both an orderly transfer of power and an initial
parliamentary majority in support of the new chancellor. The constructive
no-confidence vote makes it harder to remove a chancellor because opponents of
the chancellor not only must disagree with his or her governing but also must
agree on a replacement.
As of 1995, the
Bundestag had tried to pass a constructive no-confidence vote twice, but had
succeeded only once. In 1972 the opposition parties tried to replace Chancellor
Willy Brandt of the SPD with the CDU party leader because of profound
disagreements over the government's policies toward Eastern Europe. The motion
fell one vote shy of the necessary majority. In late 1982, the CDU convinced
the FDP to leave its coalition with the SPD over differences on economic policy
and to form a new government with the CDU and the CSU. The constructive
no-confidence vote resulted in the replacement of Chancellor Helmut Schmidt
with Helmut Kohl, the CDU party leader. Observers agree that the constructive
no-confidence vote has increased political stability in Germany.
The chancellor also may
make use of a second type of no-confidence vote to garner legislative support
in the Bundestag. The chancellor can append a simple no-confidence provision to
any government legislative proposal. If the Bundestag rejects the proposal, the
chancellor may request that the president dissolve parliament and call new
elections. Although not commonly used, this procedure enables the chancellor to
gauge support in the Bundestag for the government and to increase pressure on
the Bundestag to vote in favor of legislation that the government considers as
critical. Furthermore, governments have employed this simple no-confidence
motion as a means of bringing about early Bundestag elections. For example,
after Kohl became chancellor through the constructive no-confidence vote in
August 1982, his government purposely set out to lose a simple no-confidence
provision in order to bring about new elections and give voters a chance to
validate the new government through a democratic election.
Article 65 of the Basic
Law sets forth three principles that define how the executive branch functions.
First, the "chancellor principle" makes the chancellor responsible
for all government policies. Any formal policy guidelines issued by the
chancellor are legally binding directives that cabinet ministers must
implement. Cabinet ministers are expected to introduce specific policies at the
ministerial level that reflect the chancellor's broader guidelines. Second, the
"principle of ministerial autonomy" entrusts each minister with the
freedom to supervise departmental operations and prepare legislative proposals
without cabinet interference so long as the minister's policies are consistent
with the chancellor's larger guidelines. Third, the "cabinet
principle" calls for disagreements between federal ministers over
jurisdictional or budgetary matters to be settled by the cabinet.
The chancellor
determines the composition of the cabinet. The federal president formally
appoints and dismisses cabinet ministers, at the recommendation of the
chancellor; no Bundestag approval is needed. According to the Basic Law, the
chancellor may set the number of cabinet ministers and dictate their specific
duties. Chancellor Ludwig Erhard had the largest cabinet, with twenty-two
ministers, in the mid-1960s. Kohl presided over seventeen ministers at the
start of his fourth term in 1994.
The power of the smaller
coalition partners, the FDP and the CSU, was evident from the distribution of
cabinet posts in Kohl's government in 1995. The FDP held three ministries--the
Ministry of Foreign Affairs, Ministry of Justice, and Ministry for Economics.
CSU members led four ministries--the Ministry of Finance, Ministry for Health, Ministry
for Post and Telecommunications, and Ministry for Economic Cooperation.
The staff of a cabinet
minister is managed by at least two state secretaries, both of whom are career
civil servants responsible for the ministry's administration, and a parliamentary
state secretary, who is generally a member of the Bundestag and represents the
ministry there and in other political forums. Typically, state secretaries
remain in the ministry beyond the tenure of any one government, in contrast to
the parliamentary state secretary, who is a political appointee and is viewed
as a junior member of the government whose term ends with the minister's. Under
these top officials, the ministries are organized functionally in accordance
with each one's specific responsibilities. Career civil servants constitute
virtually the entire staff of the ministries.
Governments of the
Federal Republic of Germany, 1949-
|
Date Formed
|
Reason for Change
|
Coalition Partners
|
Chancellor
|
|
September 1949
|
Election
|
CDU/CSU, FDP, DP
|
Konrad Adenauer (CDU)
|
|
October 1953
|
-do-
|
CDU/CSU, FDP, DP, All German Bloc/Federation
of Expellees and Displaced Persons
|
Konrad Adenauer (CDU)
|
|
October 1957
|
-do-
|
CDU/CSU, DP
|
Konrad Adenauer (CDU)
|
|
November 1961
|
-do-
|
CDU/CSU, FDP
|
Konrad Adenauer (CDU)
|
|
October 1963
|
Chancellor retirement
|
-do-
|
Ludwig Erhard (CDU)
|
|
October 1965
|
Election
|
-do-
|
Ludwig Erhard (CDU)
|
|
December 1966
|
Coalition change
|
CDU/CSU, SPD
|
Kurt Georg Kiesinger (CDU)
|
|
October 1969
|
Election
|
SPD, FDP
|
Willy Brandt (SPD)
|
|
December 1972
|
-do-
|
-do-
|
Willy Brandt (SPD)
|
|
May 1974
|
Chancellor retirement
|
-do-
|
Helmut Schmidt (SPD)
|
|
December 1976
|
Election
|
-do-
|
Helmut Schmidt (SPD)
|
|
November 1980
|
-do-
|
SPD, FDP
|
Helmut Schmidt (SPD)
|
|
October 1982
|
Constructive no-confidence vote
|
CDU/CSU, FDP
|
Helmut Kohl (CDU)
|
|
March 1983
|
Election
|
-do-
|
Helmut Kohl (CDU)
|
|
January 1987
|
-do-
|
-do-
|
Helmut Kohl (CDU)
|
|
December 1990
|
-do-
|
-do-
|
Helmut Kohl (CDU)
|
|
November 1994
|
-do-
|
-do
|
Helmut Kohl (CDU)
|
|
September 1998
|
Election
|
-do
|
Gerhard Schroeder (SPD)
|
The President in German
Government and Politics
The Basic Law creates a dual executive but grants most executive
authority to the federal chancellor, as head of government, rather than to the
president, who acts as head of state. The presidency is primarily a ceremonial
post, and its occupant represents the Federal Republic in international
relations. In that sphere, the president's duties include signing treaties,
representing Germany abroad, and receiving foreign dignitaries. In the domestic
sphere, the president has largely ceremonial functions. Although this official
signs legislation into law, grants pardons, and appoints federal judges,
federal civil servants, and military officers, each of these actions requires
the countersignature of the chancellor or the relevant cabinet minister.
The president formally
proposes to the Bundestag a chancellor candidate and formally appoints the
chancellor's cabinet members, but the president follows the choice of the
Bundestag in the first case and of the chancellor in the second. If the
government loses a simple no-confidence vote, the president dissolves the
Bundestag, but here, too, the Basic Law limits the president's ability to act
independently. In the event of a national crisis, the emergency law reforms of
1968 designate the president as a mediator who can declare a state of
emergency.
There is disagreement
about whether the president, in fact, has greater powers than the above
description would suggest. Some argue that nothing in the Basic Law suggests
that a president must follow government directives. For instance, the president
could refuse to sign legislation, thus vetoing it, or refuse to approve certain
cabinet appointments. As of mid-1995, no president had ever taken such action,
and thus the constitutionality of these points had never been tested.
The president is
selected by secret ballot at a Federal Convention that includes all Bundestag
members and an equal number of delegates chosen by the Land legislatures. This
assemblage, which totals more than 1,000 people, is convened every five years.
It may select a president for a second, but not a third, five-year term. The
authors of the Basic Law preferred this indirect form of presidential election
because they believed it would produce a head of state who was widely
acceptable and insulated from popular pressure. Candidates for the presidency
must be at least forty years old.
The Basic Law did not
create an office of vice president. If the president is outside the country or
if the position is vacant, the president of the Bundesrat fills in as the
temporary head of state. If the president dies in office, a successor is
elected within thirty days.
Usually one of the
senior leaders of the largest party in the Bundestag, the president nonetheless
is expected to be nonpartisan after assuming office. For example, President
Richard von Weizsaecker, whose second term expired in June 1994, was the former
Christian Democratic mayor of Berlin. Upon becoming president in 1984, he
resigned from his party positions. Weizsaecker played a prominent role in urging
Germans to come to terms with their actions during the Third Reich and in
calling for greater tolerance toward foreigners in Germany as right-wing
violence escalated in the early 1990s. Although the formal powers of the
president are limited, the president's role can be quite significant depending
on his or her own activities. Between 1949 and 1994, the Christian Democratic
Union (Christlich Demokratische Union--CDU) held the office for twenty-five
years, the Free Democratic Party (Freie Demokratische Partei--FDP) for fifteen,
and the Social Democratic Party of Germany (Sozialdemokratische Partei
Deutschlands--SPD) for five.
Elected by the Federal
Convention in May 1994, Roman Herzog succeeded Weizsäcker as President on July
1, 1994. Previously president of the Federal Constitutional Court in
Karls-ruhe, Germany's highest court, he was nominated for the presidency by the
CDU and its sister party, the Christian Social Union (Christlich-Soziale
Union--CSU).
Presidents of the
Federal Republic of Germany, 1949-
|
President
|
Years in Office
|
Former Party Affiliation
|
|
Theodor Heuss
|
1949-59
|
FDP
|
|
Heinrich Lübke
|
1959-69
|
CDU
|
|
Gustav Heinemann
|
1969-74
|
SPD
|
|
Walter Scheel
|
1974-79
|
FDP
|
|
Karl Carstens
|
1979-84
|
CDU
|
|
Richard von Weizsäcker
|
1984-94
|
CDU
|
|
Roman Herzog
|
1994-
|
CDU
|
The Legislature in
German Politics
The heart of any parliamentary system of government is the
legislature. Germany has a bicameral parliament. The two chambers are the
Bundestag (Federal Diet or lower house) and the Bundesrat (Federal Council or
upper house). Both chambers can initiate legislation, and most bills must be
approved by both chambers, as well as the executive branch, before becoming
law. Legislation on issues within the exclusive jurisdiction of the federal
government, such as international treaties, does not require Bundesrat
approval.
The federal government
introduces most legislation; when it does so, the Bundesrat reviews the bill
and then passes it on to the Bundestag. If a bill originates in the Bundesrat,
it is submitted to the Bundestag through the executive branch. If the Bundestag
introduces a bill, it is sent first to the Bundesrat and, if approved there,
forwarded to the executive. The Joint Conference Committee resolves any
differences over legislation between the two legislative chambers. Once the
compromise bill that emerges from the conference committee has been approved by
a majority in both chambers and by the cabinet, it is signed into law by the
federal president and countersigned by the relevant cabinet minister.
Bundestag
The Bundestag is the principal
legislative chamber, roughly analogous to the United States House of
Representatives. The Bundestag has grown gradually since its creation, most
dramatically with unification and the addition of 144 new representatives from eastern
Germany, for a total of 656 deputies in 1990. A further expansion in 1994
increased the number to 672. Elections are held every four years (or earlier if
a government falls from power). Bundestag members are the only federal
officials directly elected by the public. All candidates must be at least
twenty-one years old; there are no term limits.
The most important
organizational structures within the Bundestag are parliamentary groups (Fraktionen ; sing., Fraktion), which are formed by each political party represented in the
chamber. The size of a party's Fraktion determines the extent of its representation on legislative
committees, the number of committee chairs it can hold, and its representation
in executive bodies of the Bundestag. The head of the largest Fraktion is named president of
the Bundestag. The Fraktionen, not the members, receive the bulk of government funding for
legislative and administrative activities.
The leadership of each Fraktion consists of a
parliamentary party leader, several deputy leaders, and an executive committee.
The leadership's major responsibilities are to represent theFraktion, enforce party
discipline, and orchestrate the party's parliamentary activities. The members
of each Fraktion are distributed among working groups focused on specific
policy-related topics such as social policy, economics, and foreign policy. The Fraktion meets once a week to
consider legislation before the Bundestag and formulate the party's position on
it.
The Bundestag's
executive bodies include the Council of Elders and the Presidium. The council
consists of the Bundestag leadership, together with the most senior
representatives of eachFraktion, with the number of these representatives tied to the strength of
the party in the chamber. The council is the coordination hub, determining the
daily legislative agenda and assigning committee chairpersons based on party
representation. The council also serves as an important forum for interparty
negotiations on specific legislation and procedural issues. The Presidium is
responsible for the routine administration of the Bundestag, including its
clerical and research activities. It consists of the chamber's president and
vice presidents (one from eachFraktion).
Most of the legislative
work in the Bundestag is the product of standing committees. Although this is
common practice in the United States Congress, it is uncommon in other
parliamentary systems, such as the British House of Commons and the French
National Assembly. The number of committees approximates the number of federal
ministries, and the titles of each are roughly similar (e.g., defense,
agriculture, and labor). Between 1987 and 1990, the term of the eleventh
Bundestag, there were twenty-one standing committees. The distribution of committee
chairs and the membership of each committee reflect the relative strength of
the various parties in the chamber. In the eleventh Bundestag, the CDU/CSU
chaired eleven committees, the SPD eight, the FDP one, and the environmentalist
party, the Greens (Die Gruenen), one. Unlike in the United States Congress,
where all committees are chaired by members of the majority party, the German
system allows members of the opposition party to chair a significant number of
standing committees. These committees have either a small staff or no staff at
all.
Although most
legislation is initiated by the executive branch, the Bundestag considers the
legislative function its most important responsibility. The Bundestag
concentrates much of its energy on assessing and amending the government's
legislative program. The committees play a prominent role in this process.
Plenary sessions provide a forum for members to engage in public debate on
legislative issues before them, but they tend to be well attended only when
significant legislation is being considered. The Bundestag allots each Fraktion a certain amount of
time, based on its size, to express its views.
Other responsibilities
of the Bundestag include selecting the federal chancellor and exercising
oversight of the executive branch on issues of both substantive policy and
routine administration. This check on executive power can be employed through
binding legislation, public debates on government policy, investigations, and
direct questioning of the chancellor or cabinet officials. For example, the
Bundestag can conduct a question hour (Fragestunde), in which a government representative responds to a previously
submitted written question from a member. Members can ask related questions
during the question hour. The questions can concern anything from a major
policy issue to a specific constituent's problem. Use of the question hour has
increased markedly over the past forty years, with more than 20,000 questions
being posed during the 1987-90 Bundestag term. Understandably, the opposition
parties are active in exercising the parliamentary right to scrutinize
government actions.
One striking difference
when comparing the Bundestag with the United States Congress is the lack of
time spent on serving constituents in Germany. In part, that difference results
from the fact that only 50 percent of Bundestag deputies are directly elected
to represent a specific geographic district; the other half are elected as
party representatives. The political parties are thus of great importance in
Germany's electoral system, and many voters tend not to see the candidates as
autonomous political personalities but rather as creatures of the party.
Interestingly, constituent service seems not to be perceived, either by the
electorate or by the representatives, as a critical function of the legislator.
A practical constraint on the expansion of constituent service is the limited
personal staff of Bundestag deputies.
Composition of the
Bundestag by Party, 1949-
|
Year
|
CDU/CSU
|
FDP
|
SPD
|
Greens
|
Alliance 90
|
PDS
|
Other
|
Total Seats
|
|
1949
|
139
|
52
|
131
|
--
|
--
|
--
|
80
|
402
|
|
1953
|
243
|
48
|
151
|
--
|
--
|
--
|
45
|
487
|
|
1957
|
270
|
41
|
169
|
--
|
--
|
--
|
17
|
497
|
|
1961
|
242
|
67
|
190
|
--
|
--
|
--
|
0
|
499
|
|
1965
|
245
|
49
|
202
|
--
|
--
|
--
|
0
|
496
|
|
1969
|
242
|
30
|
224
|
--
|
--
|
--
|
0
|
496
|
|
1972
|
225
|
41
|
230
|
--
|
--
|
--
|
0
|
496
|
|
1976
|
243
|
39
|
214
|
--
|
--
|
--
|
0
|
496
|
|
1980
|
226
|
53
|
218
|
--
|
--
|
--
|
0
|
497
|
|
1983
|
244
|
34
|
193
|
27
|
--
|
--
|
0
|
498
|
|
1987
|
223
|
46
|
186
|
42
|
--
|
--
|
0
|
497
|
|
1990
|
319
|
79
|
239
|
0
|
8
|
17
|
0
|
662
|
|
1994
|
294
|
47
|
252
|
49
|
6
|
30
|
0
|
672
|
Bundesrat of Germany
The second legislative chamber, the Bundesrat, is the federal body
in which the sixteen Landgovernments are
directly represented. It exemplifies Germany's federalist system of government.
Members of the Bundesrat are not popularly elected but are appointed by their
respective Landgovernments. Members tend to be Land government ministers.
The Bundesrat has sixty-nine members. The Laender with more than 7
million inhabitants have six seats (Baden-Wuerttemberg, Bavaria, Lower Saxony,
and North Rhine-Westphalia). The Laender with populations of between 2 million and 7 million have four
seats (Berlin, Brandenburg, Hesse, Mecklenburg-Western Pomerania,
Rhineland-Palatinate, Saxony, Saxony-Anhalt, Schleswig-Holstein, and
Thuringia). The least populous Laender, with fewer than 2
million inhabitants, receive three seats each (Bremen, Hamburg, and the
Saarland). This system of representation, although designed to reflect Land populations accurately,
in fact affords greater representation per inhabitant to the smaller Laender. The presidency of the Bundesrat rotates annually among the Laender. By law, each Land delegation is required to vote as a bloc in accordance with the
instructions of theLand government.
Because the Bundesrat is so much smaller than the Bundestag, it
does not require the extensive organizational structure of the lower house. The
Bundesrat typically schedules plenary sessions once a month for the purpose of
voting on legislation prepared in committee. In comparison, the Bundestag
conducts about fifty plenary sessions a year. Bundesrat representatives rarely
attend committee sessions; instead, they delegate that responsibility to civil
servants from their ministries, as allowed for in the Basic Law. The members tend
to spend most of their time in theirLand capitals, rather than
in the federal capital.
The legislative authority of the Bundesrat is subordinate to that
of the Bundestag, but the upper house nonetheless plays a vital legislative
role. The federal government must present all legislative initiatives first to
the Bundesrat; only thereafter can a proposal be passed to the Bundestag.
Further, the Bundesrat must approve all legislation affecting policy areas for
which the Basic Law grants the Laender concurrent powers and for which the Laender must administer federal
regulations. The Bundesrat has increased its legislative responsibilities over
time by successfully arguing for a broad, rather than a narrow, interpretation
of what constitutes the range of legislation affecting Land interests. In 1949 only
10 percent of all federal laws, namely, those directly affecting the Laender, required Bundesrat approval. In 1993 close to 60 percent of
federal legislation required the upper house's assent. The Basic Law also
provides the Bundesrat with an absolute veto of such legislation.
The political power of the absolute veto is particularly evident
when the opposition party or parties in the Bundestag have a majority in the
Bundesrat. When this is the case, the opposition can threaten the government's
legislative program. Such a division of authority can complicate the process of
governing when the major parties disagree, and, unlike the Bundestag, the
Bundesrat cannot be dissolved under any circumstances.
This bicameral system also has advantages. Some observers
emphasize that different majorities in the two chambers ensure that all
legislation, when approved, has the support of a broad political spectrum--a
particularly valuable attribute in the aftermath of unification, when consensus
on critical policy decisions is vital. The formal representation of the Laender in the federal
government through the upper chamber provides an obvious forum for the
coordination of policy between the Laender and the federal government. The need for such coordination,
particularly given the specific, crucial needs of the eastern Laender, has become only more important.
Electoral System of
Germany
The Basic Law guarantees the right to vote by secret ballot in
direct and free elections to every German citizen eighteen years of age or
older. To be eligible to vote, an individual must have resided in a
constituency district for at least three months prior to an election. Officials
who are popularly elected include Bundestag deputies at the federal level,
Landtag representatives or senate members at the Land level, and council
members at the district and local levels. Executive officials typically are not
chosen in popular, direct elections; however, in a minority of municipalities
the mayor is elected by popular vote. Elections usually are held every four
years at all levels. Elections at the federal, Land, and local levels are not held simultaneously, as in the United
States, but rather are staggered. As a result, electoral campaigns are almost
always under way, and each election is viewed as a test of the federal
government's popularity and the strength of the opposition. All elections are
held on Sunday.
Voter turnout, traditionally high--around 90 percent for national
elections--has been decreasing since the early 1980s. Voters are most likely to
participate in general elections, but even at that level turnout in western
Germany fell from 89.1 percent in 1983 to 84.3 percent in 1987, and to 78.5
percent in 1990. The 1990 general election was the first following unification;
turnout was the lowest since the first West German election in 1949. The most
consistent participants in the electoral process are civil servants, and a
clear correlation exists between willingness to vote and increasing social and
professional status and income. Analysts had been predicting a further drop in
turnout, the result of increasing voter alienation, for the national election
in October 1994; in fact, turnout increased slightly to 79.1 percent.
In designing the electoral system, the framers of the Basic Law
had two objectives. First, they sought to reestablish the system of
proportional representation used during the Weimar Republic. A proportional
representation system distributes legislative seats based on a party's
percentage of the popular vote. For example, if a party wins 15 percent of the
popular vote, it receives 15 percent of the seats in the Bundestag. The second
objective was to construct a system of single-member districts, like those in
the United States. The framers believed that this combination would create an
electoral system that would not fragment as the Weimar Republic had and would
ensure greater accountability of representatives to their electoral districts.
A hybrid electoral system of personalized proportional representation resulted.
Under the German electoral system, each voter casts two ballots in
a Bundestag election. The elector's first vote is cast for a candidate running
to represent a particular district. The candidate who receives a plurality of
votes becomes the district representative. Germany is divided into 328
electoral districts with roughly 180,000 voters in each district. Half of the
Bundestag members are directly elected from these districts. The second ballot
is cast for a particular political party. These second votes determine each
party's share of the popular vote.
The first ballot is designed to decrease the anonymity of a strict
proportional representation system--thus the description "personalized"--but
it is the second ballot that determines how many Bundestag seats each party
will receive. To ensure that each party's percentage of the combined district
(first ballot) and party (second ballot) seats equals its share of the second
vote, each party is allocated additional seats. These additional party seats
are filled according to lists of candidates drawn up by the state party
organization prior to the election. Research indicates that constituency
representatives in the Bundestag are more responsive to their electorate's
needs and are slightly more likely to follow their constituents' preferences
when voting than deputies chosen from the party lists.
If a party wins more constituency seats than it is entitled to
according to its share of the vote in the second ballot, the party retains
those seats, and the size of the Bundestag is increased. This was the case in
both the 1990 and 1994 federal elections. After the 1990 election, the total
number of seats in the Bundestag rose from 656 to 662. In 1994 sixteen extra
seats were added, leading to a 672-member Bundestag; twelve of those seats went
to Kohl's CDU and accounted for Kohl's ten-seat margin of victory.
One crucial exception to Germany's system of personalized
proportional representation is the so-called 5 percent clause. The electoral
law stipulates that a party must receive a minimum of 5 percent of the national
vote, or three constituency seats, in order to get any representation in the
Bundestag. An exception was made for the first all-Germany election in December
1990, with the Federal Constitutional Court setting separate 5 percent minimums
for the old and newLaender . Thus, a party needed
only to win 5 percent of the vote in either western or eastern Germany in order
to receive seats in the Bundestag.
The 5 percent clause was crafted to prevent the proliferation of
small extremist parties like those that destabilized the Weimar Republic. This
electoral hurdle has limited the success of minor parties and consolidated the
party system. Often voters are reluctant to vote for a smaller party if they
are unsure if it will clear the 5 percent threshold. Smaller parties, such as
the FDP, encourage voters to split their ticket, casting their first ballot for
a named candidate of one of the larger parties and their second ballot for the
FDP.
Small parties rarely win the three constituency seats that
automatically qualify a party for parliamentary representation according to its
overall share of the national vote. This rarity occurred in the 1994 national
election. The Party of Democratic Socialism (Partei des Demokratischen
Sozialismus--PDS), the renamed communist party of the former East Germany, won
4.4 percent of the national vote, an insufficient total to clear the 5 percent
hurdle. The PDS surprised seemingly everyone, however, by winning four
districts outright (all in eastern Berlin), entitling it to thirty seats in the
Bundestag.
Germany holds no by-elections; if Bundestag deputies resign or die
in office, they are automatically succeeded by the next candidate on the
party's list in the appropriate Land. There are also no
primary elections through which voters can choose party representatives.
Rather, a small group of official party members nominates constituency
candidates, and candidates appearing on the Land party lists are chosen at Land party conventions held six to eight weeks before the election.
Party officials at the federal level play no part in the nominating procedure.
Roughly two-thirds of the candidates run as both constituent and list
candidates, thus increasing their chances of winning a legislative seat. If a
candidate wins in a constituency, his or her name is automatically removed from
the Land list. There is considerable jockeying among party factions and
various interest groups as candidates are selected and placed on the Land lists. Placement near
the top of the list is usually given to incumbents, party members of particular
political prominence, or members who have the support of a key faction or
interest group. Thus, aspiring politicians are quite dependent on their party,
and successful candidates tend to evince loyalty to the party's policy
platform. Candidates must be at least twenty-one years old.
German Political Parties
Observers often describe political parties as critical stabilizing
institutions in democratic systems of government. Because of the central role
played by German political parties, many observers refer to Germany as a
"party state." The government of this type of state rests on the
principle that competition among parties provides for both popular
representation and political accountability for government action.
On the role of parties, Article 21 of the Basic Law stipulates
that "the political parties shall participate in the forming of the
political will of the people. They may be freely established. Their internal
organization must conform to democratic principles. They must publicly account
for the sources of their funds." The 1967 Law on Parties further
solidified the role of parties in the political process and addressed party
organization, membership rights, and specific procedures, such as the
nomination of candidates for office.
The educational function noted in Article 21 ("forming of the
political will") suggests that parties should help define public opinion
rather than simply carry out the wishes of the electorate. Major parties are
closely affiliated with large foundations, which are technically independent of
individual party organizations. These foundations receive over 90 percent of
their funding from public sources to carry out their educational role. They
offer public education programs for youth and adults, research social and
political issues, and facilitate international exchanges.
Party funding comes from membership dues, corporate and interest
group gifts, and, since 1959, public funds. Figures on party financing from
1992 show that dues accounted for over 50 percent of SPD revenues and 42
percent of CDU revenues. Federal resources accounted for 24 percent of SPD
revenues and 30 percent of CDU revenues; donations accounted for 8 percent and
17 percent, respectively. The parties must report all income, expenditures, and
assets. The government substantially finances election campaigns. Any party
that gains at least 0.5 percent of the national vote is eligible to receive a
set sum. This sum has increased over time and, beginning in January 1984,
amounted to DM5 from the federal treasury for every vote cast for a particular
party in a Bundestag election. Parties at the Land level receive similar
public subsidies. The political parties receive free campaign advertising on
public television and radio stations for European, national, and Land elections. Airtime is
allotted to parties proportionally based on past election performance. Parties
may not purchase additional time.
Several events, including a party-financing scandal in the early
1980s and an electoral campaign in Schleswig-Holstein marked by dirty tricks in
the late 1980s, have contributed to increased public distrust of the parties. A
1990 poll showed that West Germans, in ranking the level of confidence they had
in a dozen social and political institutions, placed political parties very low
on the list.
Although only 3 to 4 percent of voters were members of a political
party, all the major parties experienced a decrease in party membership in the
early 1990s, possibly a result of the increased distrust of political parties.
SPD membership fell by 3.5 percent in 1992 to 888,000. At the end of the 1970s,
the party had had more than 1 million members. CDU membership fell by 5 percent
in 1992 to 714,000, while that of the FDP fell by about one-fifth to 110,000.
Article 21 of the Basic Law places certain restrictions on the
ideological orientation of political parties: "Parties which, by reason of
their aims or the behavior of their adherents, seek to impair or abolish the
free democratic basic order or to endanger the existence of the Federal
Republic of Germany, shall be unconstitutional. The Federal Constitutional
Court shall decide on the question of unconstitutionality." This provision
allowed for the banning of the neo-Nazi Socialist Reich Party in 1952 and the
Communist Party of Germany (Kommunistische Partei Deutschlands--KPD) in 1956.
The decision to regulate the organization and activities of
political parties reflects lessons learned from Germany's experience during the
post-World War I Weimar Republic, when a weak multiparty system severely
impaired the functioning of parliamentary democracy and was effectively manipulated
by antidemocratic parties. After World War II, many parties dotted the West
German political landscape, but electoral laws allowed only parties with at
least 5 percent of the vote to have representation in national and Land parliaments. Over time,
the smaller parties faded from the scene. From 1962 to 1982, the Bundestag
contained representatives from only four parties: the CDU, the CSU, the SPD,
and the FDP. The Greens gained enough of the national vote to win seats in
1983, and unification brought additional parties into the Bundestag in late
1990. At the federal level, the CSU coalesces with the CDU, the largest
conservative party. The SPD is the major party of the left. The liberal FDP is,
typically, the critical swing party, which can form a coalition with either the
CDU/CSU or the SPD to create the majority needed to pass legislation in the
Bundestag.
Extraparty Political
Forces in Germany
German society is highly organized into associations that
represent the occupational, socioeconomic, religious, and recreational
interests of individuals--a tradition that dates back to the corporate guild
system of the Middle Ages. Most Germans belong to at least one voluntary
association, and many belong to several. The vast majority of these
organizations (such as sports clubs) have little political significance, but an
important core of groups combines a strong organizational base with a
particular interest in policy issues. The size of these interest groups varies.
Smaller groups represent subsectors of the population, such as farmers. The
large associations include trade unions, professional associations, and
religious groups. More than 1,000 of these interest groups are registered
formally as lobbyists with the federal government, and hundreds more are active
at the Land level.
The primary interest associations in Germany are organized
differently from interest groups in the United States. The United States offers
a pluralist model of interest groups, in which loosely structured factions
compete within the policy process to represent the same social interests. The
government offers a neutral forum in which these groups vie for influence on
policy. In contrast, many of the major interest associations in Germany reflect
a neocorporatist model of interest articulation that channels interests into a
number of unified, noncompetitive associations.
Four large, national "peak" associations (Spitzenverbaende; sing., Spitzenverband) represent groups of similar interest associations as a whole.
The labor unions, business, the churches, and the agricultural lobbying
organizations each has its own Spitzenverband. Membership in one of
these peak associations is often mandatory for individuals in a given social or
occupational sector. Most peak associations are also organized hierarchically,
with the national office determining the objectives and directing the strategy
of the association as a whole.
The influence of the interest associations is institutionalized in
several ways. Political parties provide one major channel of influence.
Although the associations eschew formal party ties and claim to remain above
partisan politics--for instance, they do not officially endorse a party at
election time--ties between these associations and the parties are close. To
take one example, the labor unions maintain a highly developed relationship
with the Social Democrats, and a large percentage of SPD party activists are
union members. Another forum for interest group activity is the Bundestag. The
interest associations not only monitor legislation, lobby members, and testify
at hearings, but they also maintain formal affiliations with deputies. Since
1972, when the Bundestag first started keeping records, roughly 50 percent of
the members reported either being employed by an interest group or holding an
executive position in a group. About 25 percent of the members are affiliated
with economic groups, such as labor unions or the business lobby, and about 17
percent are affiliated with religious or cultural associations. Members of key
committees such as agriculture, labor, and education are particularly likely to
have ties to the relevant groups. The government ministries themselves provide
yet another means by which interest groups influence the policy process. The
neocorporatist system encourages formal ties between the two. For instance,
ministries are required by law to consult with the peak associations about
draft legislation that would affect them. To fulfill this obligation, the
federal ministries have established standing advisory committees, which include
representatives of the relevant interest groups.
Newspapers in Germany
West Germany has always had highly developed mass media. The
independence of the press and its freedom from censorship are guaranteed in
Article 5 of the Basic Law. Conversely, the communist regime in East Germany
tightly controlled the media. Despite government censorship, East Germans were
voracious newspaper and magazine readers. More than three dozen newspapers
enjoyed a combined circulation of almost 10 million in the GDR.
The complexion of the print media in eastern Germany changed
markedly with unification. By mid-1991 only 100,000 copies of East Germany's
most widely circulated newspaper, Neues Deutschland, the newspaper of the
communist party, were being printed daily, down from roughly 1 million in the
recent past. Western consortia bought many of the other established urban
newspapers and brought in new management. According to a public opinion survey
during the 1990 national election, 68 percent of western Germans and 88 percent
of eastern Germans read a newspaper on a regular basis. Not surprisingly,
Germany boasts among the highest per capita newspaper circulations within
Europe.
The press is privately owned, and most Germans rely on local or
regional newspapers for their information. Five daily newspapers enjoy good
reputations nationally because of their sophisticated domestic and
international coverage: Frankfurter Allgemeine
Zeitung (FAZ),Sueddeutsche
Zeitung, Frankfurter Rundschau, Handelsblatt, and Die Welt. The FAZ is probably
Germany's most prestigious daily newspaper and is the one newspaper read by
virtually all members of the political and business establishment. Although
independent of any political party, its views are similar to those of the
right-of-center CDU. Handelsblatt is the leading business daily. Die Zeit, a weekly newspaper, provides an erudite review of news and
culture from a perspective sympathetic to Social Democratic views. Weekly
editions of Die Zeitare often more than 100 pages, with in-depth articles filling an
entire page. Former chancellor Schmidt is one of its publishers; the paper's
circulation is 493,000. Because these newspapers appeal to an elite readership,
their circulation figures are much lower than that of the tabloid press. Bild Zeitung, with a daily circulation of close to 5 million, is Germany's
most widely circulated daily. It puts a sensationalist spin on topical issues
and tends to support right-of-center policies.
Both Bild Zeitung and Die Welt are published by the Axel Springer Group, based in Hamburg. Axel
Springer, now deceased, built an enormous media empire, which also includes the
two largest Sunday newspapers, Bild am Sonntag and Welt am Sonntag, two Berlin daily newspapers,
and many popular magazines. Springer publications are generally considered to
have a strong conservative bent.
The liberal counterpart to Axel Springer and his successors has
been Rudolf Augstein, founder and publisher of the weekly Der Spiegel, a highly respected and influential newsmagazine combining news
coverage with investigative journalism. The magazine's decidedly liberal
critique of politics and politicians has often steeped it in controversy. In
1994 its circulation stood at over 1 million copies. Der Spiegel is distributed in 165
countries, and close to 15 percent of its sales are outside Germany.
In 1993 competition for market share held by Der Spiegel emerged with the
publication of Focus , a newsmagazine
fashioned after Time and Newsweek , with shorter articles and a more colorful layout than that
offered by Der Spiegel. Focus appeared on newsstands
in January 1993, was less expensive than Der Spiegel, and, after a few months, was faring better than expected. By
mid-April Focus was maintaining a
circulation of 600,000 and had exceeded its annual target for pages of
advertising sold. Since its founding in 1946, Der Spiegel has successfully faced
down competition from more than fifty publications. However, the circulation of Focus is growing while that
of Der Spiegel is falling.
Although newspapers owned by political parties were common during
the Weimar period, the partisan press is much less significant in the Germany
of the 1990s. Vorwaerts is the official
newspaper of the SPD, and Bayernkurier serves the CSU. Rheinischer Merkur has informal links to the CDU, and Neues Deutschland offers views of the PDS.
Radio and Television in
Germany
Radio and television are administered in a decentralized fashion
as prescribed in the Basic Law. The intent behind the pattern of regional
decentralization is to prevent the exploitation of the media by a strong
national government, as had happened under the Nazi dictatorship. Germany has
two public broadcasting corporations. The first, ARD, was established in 1954
and encompasses eleven regional public television and radio stations. ARD
employs roughly 23,000 people and has an annual budget of about US$6 billion.
The second, ZDF was founded in 1961 and is structured as a single corporation,
not as a consortium. A third channel broadcasts cultural and educational
programs for all Land corporations.
The Land broadcasting corporations have similar organizational structures.
Each governs itself under the direction of a broadcasting council
consisting--in most Laender--of representatives of
the major social, economic, cultural, and political groups, including political
parties, churches, unions, and business organizations. The broadcasting
corporations are financed largely through monthly fees (DM23.80 per household
as of late 1994) charged to television and radio owners. Public television is
allowed to devote no more than thirty minutes per day to commercial
advertisements. No advertisements are aired after 8:00 P.M. on weekdays or on
Sundays. Advertising provides roughly one-third of television revenues and
one-fourth of radio revenues. What distinguishes public television from
commercial television is the ability to offer greater coverage of public
service activities and cultural events.
Most eastern Germans were familiar with western German television
even before unification because broadcasts from the west could be received in
most of East Germany. According to a 1990 survey, 49 percent of western Germans
and 70 percent of eastern Germans watched a nightly news program at least five
times each week. Surveys also indicate that television is the most important
source of political information: 51 percent of Germans rank television first,
ahead of newspapers and magazines (22 percent), conversation (16 percent), and
radio (6 percent).
Private broadcasting was virtually nonexistent in West Germany
until 1981, when the Federal Constitutional Court recognized the right of the Laender to grant broadcasting
licenses to private companies. Enabling legislation took the form of a new
broadcasting treaty enacted by theLaender in 1987 that allowed the creation of private broadcasting
companies to compete with public stations. In general, private broadcasters do
not have an internal supervisory council, but the Laender in which they broadcast
can exercise supervisory rights.
Commercial broadcasters finance their operations solely with
advertising revenues. Beyond the substantial capital costs associated with
starting up a new television channel, private broadcasters have to rely on
satellite and cable transmission because the airwaves do not offer unlimited
capacity. Thus, viewers have to pay an additional fee to get access to private
channels. In 1983 the federal post office undertook a large-scale program of
wiring the country for cable television. In March 1993, of the 27 million
households in western Germany that had televisions, 70 percent had access to
cable service; of the 6.4 million households in eastern Germany, 12 percent had
access to cable. However, at that point only about 60 percent of those eligible
households had chosen to subscribe to cable.
In 1985 SAT-1 became Germany's first private satellite television
station. A group of publishing firms, including Springer, owns SAT-1; the
channel offers a program of popular entertainment and news. Other stations
subsequently sprang up, including 3-SAT, a joint production of German, Swiss,
and Austrian national television; RTL, or Radio-Television-Luxembourg; and
various European satellite stations. In early 1993, two all-news channels made
their debut: Time Warner and CNN own one, n-tv; and German publishing giant
Bertelsmann and theSueddeutsche
Zeitung are major financial
backers of Vox, the second news channel. Vox failed quickly, however, closing
its doors in April 1994. On the whole, private channels nonetheless are
prospering. The percentage of Germans watching public channels has dropped to
less than one-half since the start of private broadcasting in 1987.
