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A Texas wag once remarked, “Oilmen are like cats. You can’t tell from the sound of them whether they’re fighting or making love.” German industrial relations are not much different. In the heat of collective bargaining, the Federal Republic’s “social partners” (that is, trade unions and employers’ associations) frequently exchange vitriolic barbs in public, while simultaneously engaging in pragmatic, professional negotiations behind closed doors.

Wolfgang Schroeder, Das Modell Deutschland auf dem Prüfstand. Zur Entwicklung der industriellen Beziehungen in Ostdeutschland (1990-2000) (Wiesbaden: Westdeutscher Verlag, 2000)

Abstract

Since German unification, assessments of the German economy have swung from “sick man of the euro” in the early years to dominant hegemon of late. I argue that the German economy appears strong because of its recent positive performance in two politically salient areas: unemployment and the current account. A deeper assessment reveals, however, that German economic performance cannot be considered a second economic miracle, but is at best a mini miracle. The reduction in unemployment is an important achievement. That said, it was not the product of faster growth, but of sharing the same volume of work among more individuals. Germany's current account surpluses are as much the result of weak domestic demand as of export prowess. Germany has also logged middling performances in recent years regarding growth, investment, productivity, and compensation. The article also reviews seven challenges Germany has faced since unification: financial transfers from west to east, the global financial crisis, the euro crisis, internal and external migration, demographics, climate change, and upheavals in the automobile industry. German policy-makers managed the first four challenges largely successfully. The latter three will be more difficult to tackle in the future.

This article investigates the progress that the eastern German economy has made since unification in two areas: unemployment and output. It finds that unemployment has remained persistently higher in eastern than in western Germany and output levels have remained extremely uniform across the eastern states. Keynesian and neoclassical economists have proposed differing explanations for the endurance of high unemployment in the East. The latter have the more convincing argument, which blames high initial wages in eastern Germany for producing a labor "trap," but this account is not without flaws. The best explanation for output uniformity is the content and volume of public investment in eastern Germany since unification. Public policy in the years immediately following unification is in large part responsible for both outcomes. Economic modeling indicates that wage subsidies targeted at low-income employment would be the most effective means to break the current high-unemployment equilibrium in eastern Germany, but the political barriers to adopting such a policy are just as formidable as they were a decade ago, when such a policy was briefly considered.

Among the many striking developments that arose out of the 2008-2009

financial crisis and the subsequent EURO crisis has been the policy divergence

between the United States and Germany. Typically, the two countries

have broadly similar preferences regarding economic policy. To be

sure, this is not the first time that Germany and the U.S. have failed to see

eye to eye on economic matters,1 but the recent gap in perception and

policy does warrant attention because it has been unusually large. Unlike

the famous quarrels between Jimmy Carter and Helmut Schmidt in the

1970s,2 personality does not seem to play a role in this case. What then

does explain the gulf?

Rafaela Dancygier, Dilemmas of Inclusion: Muslims in European Politics (Princeton: Princeton University Press, 2017). Reviewed by Hilary Silver, Sociology, George Washington University

Thomas Großbölting, Losing Heaven: Religion in Germany since 1945; translated by Alex Skinner (New York: Berghahn Books, 2017. Reviewed by Jeffrey Luppes, World Languages, Indiana University South Bend

Hans Vorländer, Maik Herold, and Steven Schäller, PEGIDA and New Right-Wing Populism In Germany (London: Palgrave Macmillan, 2018). Reviewed by Joyce Mushaben, Political Science, University of Missouri St. Louis

Kara L. Ritzheimer, “Trash,” Censorship, and National Identity in Early Twentieth-Century Germany (Cambridge: Cambridge University Press, 2016) Reviewed by Ambika Natarajan, History, Philosophy, and Religion, Oregon State University

Anna Saunders, Memorializing the GDR: Monuments and Memory After 1989 (New York: Berghahn Books, 2018) Reviewed by Jeffrey Luppes, World Languages, Indiana University South Bend

Desmond Dinan, Neill Nugent and William E. Paterson, eds., The European Union in Crisis (London: Palgrave, 2017) Reviewed by Helge F. Jani, Hamburg, Germany

Noah Benezra Strote, Lions and Lambs: Conflict in Weimar and the Creation of Post-Nazi Germany (New Haven: Yale University Press, 2017). Reviewed by Darren O'Byrne, History, University of Cambridge

Chunjie Zhang, Transculturality and German Discourse in the Age of European Colonialism (Evanston: Northwestern University Press, 2017) Reviewed by Christopher Thomas Goodwin, History, University of Illinois, Urbana-Champaign

Marcel Fratzscher, The Germany Illusion: Between Economic Euphoria and Despair (Oxford: Oxford University Press, 2018). Reviewed by Stephen J. Silvia, International Relations, American University

Anna von der Goltz, The Other ‘68ers: Student Protest and Christian Democracy in West Germany (Oxford: Oxford University Press, 2021).

Andrei S. Markovits, The Passport as Home: Comfort in Rootlessness (Budapest: Central European University Press, 2021).

Samuel Clowes Huneke, States of Liberation: Gay Men between Dictatorship and Democracy in Cold War Germany (Toronto: University of Toronto Press, 2022).

Steven Press, Blood and Diamonds: Germany's Imperial Ambitions in Africa (Cambridge, MA: Harvard University Press, 2021).

Larry Frohman, The Politics of Personal Information: Surveillance, Privacy, and Power in West Germany (New York: Berghahn Books, 2020).

Rebecca Pates and Julia Leser, The Wolves Are Coming Back: The Politics of Fear in Eastern Germany (Manchester: Manchester University Press, 2021).

Ulrich Herbert, Wer waren die Nationalsozialisten? (Munich: Verlag C.H. Beck, 2021).

Sean Eedy, Four-Color Communism: Comic Books and Contested Power in the German Democratic Republic (New York: Berghahn Books, 2021).