Introduction to Germany
Germany's new Wirtschaftswunder
Small and medium-sized enterprises as a driver of the German economy
Germany is a major industrial nation and one of the world’s largest economies. It weathered the economic and financial crisis of 2008 better than most other countries.
The spotlight here must fall squarely on German industry, which has withstood the global downturn and continued to export successful products and services throughout the world. UK business magazine The Economist has spoken admiringly of “Germany’s new Wirtschaftswunder”. Its analysis of the enduring strength of the German economy focuses not merely on the major corporations but also on Germany’s so-called Mittelstand – the legion of highly specialized small and medium-sized enterprises, many of which are based in the German provinces.
The Mittelstand forms the very heart of the German economy and currently offers a variety of interesting job opportunities for applicants from abroad. Of all the companies in Germany, by far the majority (99.7 percent) have annual revenues of less than €50 million and a maximum of 500 employees. According to the German definition, this places them in the category of small and medium-sized enterprises. Over 90 percent of these are family-owned operations, managed by partners with a personal liability for the company’s commercial fate.
The German model
Writing about Germany’s successful economy, Time magazine recently remarked that many German companies have specialized in the “unsexy side of the industrial spectrum: not smart phones or iPads but machinery and other heavy equipment”.
Some German companies, not least carmakers and the world’s third-largest software supplier, might well disagree and insist that their products are very much on the “sexy side” of industry. Yet the analysis is essentially correct: it is highly specialized industrial companies producing highly specialized goods that constitute the engine of growth in the German economy. Following the much-lauded era of virtual wealth creation on the financial markets, it is as well to recall the following principle: industry has always been a major plank of our prosperity. It accounts for as much as 22 percent of the German economy as a whole, a share that compares favourably worldwide. In France, Italy, the UK, and the USA, for example, industry plays a much less important role in the economy.
Almost 90 percent of Germany’s visible exports are industrial goods. German companies are the biggest exporters in many sectors and in many markets worldwide. This applies, for example, to so-called green technologies – i.e., products in the fields of environmental and climate protection. In the burgeoning sector of renewable energy, which includes photovoltaics, wind power, and highly efficient power plant technology, the German economy has a global market share of 30 percent. Moreover, there would appear to be many more innovations in the pipeline here, since almost one-quarter of the patent applications filed with the European Patent Office in the field of environmental technology originate in Germany.
This all goes to explain why Germany has an export ratio of 46 percent, ahead of France, the UK, Japan, and the USA. Europe’s largest economy scores highest with its excellent infrastructure, its highly developed corporate and services sector, its system of higher education, its first-rate vocational training, especially in the skilled crafts and trades, and, last but not least, its capacity to deliver technological innovations.
Germany’s innovative strength is also down to the immense creativity of its researchers and engineers, and to their boldness when it comes to putting new ideas into practice. In short, demand is high, both now and in the future, for clever and skilful people – whether from Germany or elsewhere.
The "hidden champions"
Many of today’s innovations have been produced by specialist teams at companies or in networks with other companies or with research institutes and universities. Here, again, Germany benefits from its special blend of large and small companies, all of which pursue their own research and development activities.
In fact, truly innovative products are often the work of so-called hidden champions. These companies are, in the main, largely anonymous members of Germany’s Mittelstand, yet belong to the top three in their sector worldwide.
As many as 1,200 of these hidden champions help power Germany’s economy. Since many are tucked away in the provinces, their contribution is sometimes overlooked. Quite a number of them employ a workforce of several thousand people. As employers, they are prized, since they tend to take a long-term view and generally provide secure and well-paid jobs.