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Christopher S. Allen

For much of the past two decades since unification, the literature on the German economy has largely focused on the erosion of the German model of organized capitalism and emphasized institutional decline and the corresponding rise of neoliberalism. The first part of the article analyzes the strains unification placed on German economic performance that caused many observers to call for modification of the model in a more neo-liberal direction. The second part takes a different focus and lays out the main rationale of the paper. It inquires why such a coordinated market economy was created in the first place and whether a renewed form of it might still be useful for Germany, the European Union, and other developed democracies in the early twenty-first century. The third section articulates the origins of the institutional and ideational components of these coordinated market economy models, during both the Bismarckian and Social Market Economy periods. The final portion inquires whether the failure of the contemporary liberal market economy approach in the wake of the worldwide financial crisis and severe recession represents a possible opening for the creation of a third coordinated market economy not only for Germany but for a redesigned European Union.

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Hyeong-ki Kwon

The German model of political economy that had been an enviable

alternative to the liberal market until the late 1980s in the literature of

political economy was under serious structural crisis throughout the

1990s, causing serious doubts about its viability. Many neoliberals

and industrial experts in Germany began to doubt whether Germany

was an attractive place for business activity, initiating the Standort

Deutschland debate. Even German Chancellor Gerhard Schröder conceded

“the end of German model.”1 Many political economists and

journalists expected and recommended imitating the American

model of a liberal market. Prominent German newspapers and magazines

such as the Frankfurter Allgemeine Zeitung, Der Spiegel, and Die

Woche ran articles titled “The Discovery of America” and “Jobwunder

in Amerika.” Wolfgang Streeck, one of the main proponents of the

German model, expected the convergence of the German economy

toward an American-led liberal market economy under globalization

because of “a secular exhaustion of the German model.” Streeck

believed that the postwar German model was based on the politics

between labor and capital within a national boundary, but globalization

represents a fluidity of financial and labor markets that extricates

whatever coordination has been nationally accomplished.