The Secret To Germany’s Powerful Economy

If you have a vacuum, dishwasher or any other appliance in your home, there’s a chance it was made by German manufacturer Miele. This company has grown considerably over the last century, exporting high-end home appliances all over the world. But its still run by the same two families and its products are largely made within German borders. Miele is one of roughly three and a half million businesses that make up Germany’s Mittelstand. This is a fairly broad concept, but in general, Mittelstand businesses are small or medium sized manufacturers. They tend to be family run, specialize in one kind of product, and they are the backbone of Germany’s economy – comprising of an estimated 99 percent of businesses and employing nearly 80 percent of the workforce. Germany specifically designed its economy to center around the mittelstand.

After undergoing an industrial revolution in the late 1800’s, it became one of the world’s major exporters. Roughly a century later, when other world powers were chasing the dot com boom, Germany stuck to manufacturing. The country also developed a unique process of regulating the private sector. Employers were held accountable to workers and their community, minimum wage was high and employees had a larger role in decision making. This garnered a significant amount of criticism from economists and other world powers, who predicted that their highly regulated, manufacturing-focused economy would be left behind. But in fact, the opposite has happened. Germany has become the richest country in Europe and one of the top exporters in the world. It recovered faster from the global recession than any other world power, and has ranked among the best in terms of innovation, sustainability and growth. This is due, in no small part, to mittelstand.

So what makes this model so successful? Well, it starts with robust vocational training. After high school, many german students go directly into job training or technical school, and from there, into a mittelstand company. Because of this, Germany’s youth employment rate is the highest in Europe. Unlike most manufacturing jobs in the US or other developed nations, German workers generally receive a fair salary, benefits and even health care. This, combined with their respected roles in the company, cultivates a high degree of employee loyalty. Many German workers stay with the same company for decades or even a lifetime. Mittelstand companies tend to be more focused on long-term success and stability rather than quick profits. Instead of making risky investments or going into debt, these firms invest in research and development which often yield long term benefits.

And, because they are independent or family-owned, mittelstand companies are better able to control the quality of their products and respond to a sudden surge in demand. This model has been so successful that other countries have attempted to emulate it. The South Korean government has established German-style vocational schools, and China has sent officials to Germany to observe business practices. President Barack Obama plugged the mittelstand model in his 2013 State of the Union address, and Prime Minister Tony Blair once asked German Chancellor Angela Merkel about her country’s secret to success, to which she famously replied “We still make things.” But the Mittelstand model is uniquely German, and experts say it is nearly impossible to outright copy. The mittelstand is built on deep rooted relationships between vocational schools and companies, long family lineages and trust between employers and employees.

When it comes to economic models, Germany’s mittelstand is truly the sum of its parts. Germany’s economy is not only a manufacturing powerhouse, it’s a model for sustainability and green energy. Want to find out what other countries are leading in energy efficiency? Watch this video. Thanks for watching Seeker Daily! Don’t forget to like and subscribe for new videos..