Germany debates capitalism... what will happen?

[VetLegion]

Interesting. What is this "Rhenan" capitalism?

[Lawrence of Arabia]

Yeah. They'll extend slave work to private companies, instead of restricting it to public services

its obvious that this way isnt working - if it was, we wouldnt see anemic growth levels of 1.2% per year. obviously the structure of the economy is not conducive to work. therefore, you need to radically change it so that the 10% of the population out of work can find some.

[Spiffor]

"Rhenan" is the French word. Turn the word "Rhine" into an adjective and you have it.

Rhine capitalism was mostly about a few big companies that were the locomotives of German growth. They had a stable relationship with plenty of suppliers (German of course), and had stable customers across the world. The leadership of the companies was a compromise between the companies' bosses, the baks (for they were the real source of capital) and the workers who made half of the board of administrators (such a thing is called Mitbestimmung)

All partners were concious of distributing the growth to everybody, which means that there was a steady rise in the standard of living, without hurting the profits. The system worked, to the point that there were very few strikes.

Anglo-Saxon capitalism is completely different. The main difference is that the shareholder has the full power in an Anglo-Saxon company. When Germany switched to Anglo-saxon capitalism (to the local capitalist's desire, as most wanted to get rid of their bankers, and preferred the shareholders), the balance was offset. And it bit the Germans back in the ass, for example when one of their top companies was utterly buttraped by the English (Mannesmann).

The end of the Rhine capitalism is definitely not the only source of the German woes, but it significantly contributes to it, because there is increasingly less worker/employer cohesion, and because foreign capitalists (completely uninterested in Germany's econmomic well being) have much more of a upper hand.

[Lawrence of Arabia]

hitler ran something similar, and so did mussolini.

[Spiffor]

Originally posted by Lawrence of Arabia
hitler ran something similar, and so did mussolini.

1. Illogical argument. "OMFG Hitler had two legs, therefore all two-legged people are EVIL !!1 "

2. False. Hitler's and Mussolini's systems crushed the workers (in Hitler's Germany, despite the amazing growth, the standards of living were stable, with a little shrinking). They were also far, far more statist than post war Germany's. The employer/worker organizations were here mostly so that the workers yould be kept in line, but they weren't actually associated in the way the business was run, which explains why the stadard of living didn't progress.

[DanS]

I think this is a good discussion for Germany to have. We and the Brits had similar discussions in the early 80s, and the liberal economics viewpoint won out, more or less.

It is too bad that Germany doesn't appear to have a Reagan or Thatcher available for leadership...

[Spiffor]

Originally posted by DanS
It is too bad that Germany doesn't appear to have a Reagan or Thatcher available for leadership...

Yes, I can't wait for Germany's prison population to explode, for the poor population to explode as well, and for the poor paying as much tax -absolute value- as the rich I also can't wait for the utter destruction of the German society. It really only deserves to die

[DanS]

The system they have in place now is slowly grinding the country into poverty. Germany's companies don't even want to reinvest their profits in the country. What's your solution?

[VetLegion]

Thanks Spiffor, I see the difference. When approximately did German banks start to lose ownership of companies to small shareholders? Which type of ownership is dominant now?

[VetLegion]

Originally posted by DanS
The system they have in place now is slowly grinding the country into poverty. Germany's companies don't even want to reinvest their profits in the country. What's your solution?

They seemed to do just fine until SSSR broke up. It's all America's fault

[Spiffor]

Originally posted by VetLegion
Thanks Spiffor, I see the difference. When approximately did German banks start to lose ownership of companies to small shareholders? Which type of ownership is dominant now?

The Banks didn't really lose ownership, they didn't own the companies in the first place. However, when the companies wanted fresh capital, they didn't turn to the stock market, but to the banks. This is why the banks had some extent of power on the companies (not as owners, but as lenders).

The switch to Anglo-Saxon capitalism (which is also called "corporate governance", i.e when the actual power is given to the shareholder) happened in the 1990 I think. The stock market is a very efficient way to get fresh capital, which is why it seduced many companies. Note that it's not the laws that have changed, but the corporate practices (some comapnies haven't switched to corporate governance, like Stuttgart's Porsche).

The German capital doesn't have a strong base of small shareholders like the US'. The most important investors are Institutional Investors, i.e. big companies with loads of money.

[DanS]

Ascribing Germany's problems to a change to an Anglo-Saxon corporate government model is absurd.

[Spiffor]

Originally posted by DanS
The system they have in place now is slowly grinding the country into poverty. Germany's companies don't even want to reinvest their profits in the country. What's your solution?

1. I would make the management of a company accountable to the workers instead of the shareholders. That would seriously discourage foreign investment, and other kinds of pillage of the company's production. But that's the Commie speaking.

2. I would harmonize the EU so that its territory progressively reaches the highest social system (Sweden, Finland), instead of competing for who has the worst conditions. That's because most of the wealth transfer from Germany goes to other European countries (Eastern ones especially). The day germany reacts by using Thatcherite policies is the day where the Easterners will have to have even lower wages, and even worse working conditions in order to remain comparatively attractive. Save for the capitalists (who-'ll make out like bandits), everybody will lose from the situation

[Spiffor]

Originally posted by DanS
Ascribing Germany's problems to a change to an Anglo-Saxon corporate government model is absurd.

It's definitely not the only reason. It's however one of the main reasons why German capital doesn't stick to Germany anymore.

[kronic]

Germany won't go communist. It's just rhetorics. Müntefering, the leader of the Social Democrats (Schröder's party) criticized the Deutsche Bank which wants to cut some 6,000 jobs despite having made 17 % more net profits in the first quarter of 2005 than one year ago (now 1,1 billion €). He called the managers antisocial and investors are now grashoppers (Heuschrecken).

But the actual policies are quite the opposite (as Spiffor pointed out). The current government made several tax cuts for companies and consumers in the past years that sum up to 47,8 billion €/year! They also plan to cut the corporate taxes even more. They have started to make some labour reforms. Just to put that in the right perspective: the tax cuts proposed by the Christian Democrats and Liberals back in 1996 (that were blocked by the Social Democrats) only amounted to some 15 billion €.

The Christian Democrats and Liberals will probably win in 2006 because the job market didn't get better despite welfare cuts.
However, to believe that they will actually make anything better is quite unrealistic. After all, we should look on what they did before 1998. They managed to let the none-wage labour costs go through the roof - from 34 to 42 % in 8 years (current level is ~40,5-41 %). They chose the worst of all possibilities to pay for the reunification costs. We don't suffer from too high taxes but too high social security contributions. And the Christian Democrats and the Liberals are responsible for that.

Now, of course these both parties claim their will to make deep reforms. However, one should analyse the German party system. The Christian Democrats are not a typical Conservative party like the Republicans or the Tories. In fact, the Rhine capitalism and the German welfare state are basically their baby. The Christian Democrats always promoted a strong welfare state and it would probably be their end as a big party if they abandonded their pro welfare stance. Anglosaxon policies can be found in the programs of the Liberals. However, they have to try hard to get 8 % of the votes and without support of actual Christian Democrat voters they'd have problems to get 5 % (5 % are necessary to get into the Bundestag). Given that, the Christian Democrats can't risk to really go for radical reforms.
And also, they could just make them as long as they had a majority in the Bundesrat. They'd quickly lose that majority if they pushed for these deep reforms and would then have to deal with the Social Democrats (again) who then would probably far more hostile to more reforms than they're now. Also they wouldn't have the support of the labour unions.