Short-term shocks and long-term trends are strangling Germans’ cooperative economy.
The German word mitmachen has no exact English translation because the concept sits uncomfortably in the Anglo-Saxon mindset. It’s a verb that means “to get involved” or “do your bit,” and it depends on a sense of communitarianism, something deemed to be lacking in more individualistic societies.
The so-called economic miracle that defined postwar Germany was based in the concept of mutual responsibility. The army of family-run small- and medium-sized businesses, the fabled Mittelstand, was usually based in small- and medium-sized towns. The chief executive would sponsor the local soccer club or youth orchestra, helping out with community events on a Saturday morning. In theory, everyone felt they belonged.
Large global companies had their own version of collective endeavor, a cooperation between management and workers that played out at the board table, where trade union representatives had a strong voice. Annual pay bargaining was conducted respectfully; differences tended to be ironed out. Everyone was in it together. Again, in theory, at least.
German industry has been uniquely shaped by the system of Mitbestimmung, or “co-determination,” which gives workers at companies with more than 500 employees the right to elect representatives to supervisory boards that appoint executives and oversee strategy. The unions’ argument that the German approach makes for more stable companies and encourages faith in democracy is widely accepted. Management and workers have combined to buck the global trend in recent decades to outsource supply chains.
Last December, Manager Magazin—a Hamburg-based publication—inducted into its hall of fame the leader of the energy and chemical union IGBCE. The influential business monthly described Michael Vassiliadis, only half in jest, as “the smartest class warrior in the republic,” praising his “ideology-free pragmatism.”
That was then. The first three months of 2024 have seen a wave of strikes that have disrupted large swaths of German life and led many to wonder if the postwar consensus is coming to an end. By some measures, this period has seen more industrial action than at any time in 25 years. Doctors have walked out of hospitals. Bank employees have stopped working for days. The year started with irate farmers, who blocked roads of major cities with their tractors. Workers in a number of sectors feel they no longer have skin in the game.
The most visible effects have been in the transport system. At a recent international event in Berlin that I attended, each speaker began their remarks with a quip about how much effort it had taken them to get there, and how much of a struggle it would be to get home. They were not wrong. The trains were shut down that Tuesday. Frankfurt and Munich airports were hit by a lightning strike on Wednesday; Berlin and Hamburg and others the day after. The running gag wore thin, as did people’s patience.
Lufthansa has been particularly badly affected. The airline’s holding company claims it has lost more than 250 million euros (about $272 million) as a result of the strikes, with passengers turning elsewhere. Meanwhile, the state-run Deutsche Bahn failed in an urgent application before a labor court to prevent the unions from walking out at short notice. While expressing regret at the disruption, Chancellor Olaf Scholz said he did not want to legislate to toughen rules, citing strike action as a fundamental human right. The Deutsche Bahn strikes have since been resolved, with workers winning various concessions from their employer—but which the company announced would come at the expense of service cuts for the public.
The change in mood is marked. Between 2012 and 2021, just 18 out of every 1,000 workdays were disrupted by industrial action in Germany, compared with 92 out of every 1,000 in France. Other countries from the United Kingdom to Spain have also seen a spate of strikes, but Germany has overtaken them.
There have been previous periods of unease. Labor-market and other reforms introduced by then-Chancellor Gerhard Schröder led to a series of protests in the early 2000s, but under Chancellor Angela Merkel’s more gradualist approach, industrial relations returned to their more harmonious norm.
Matters of war and peace and long-term demographic trends are undermining the consensus. While Russia’s invasion of Ukraine shattered energy security (and citizens’ sense of their own financial security), the hardening of relations with China has undermined Germany’s unique selling point as the world’s most dependable (and dependent) manufacturing exporter.
At the same time, Germany is facing an ever more severe shortage of labor and an aging population, with officials estimating that there will be a shortage of 7 million workers by 2035. That spells trouble on two fronts. Given the political toxicity of immigration, politicians struggle to summon the courage to make the economic case for foreign workers. Furthermore, without increased tax revenues, the generous welfare system that has cushioned Germans for decades will become unsustainable.
With fewer workers to do the jobs, it might seem that employees hold the upper hand, at least in the short term. Set against that, however, and focusing the minds of the more pragmatic trade union leaders, is the prospect of German companies shifting production abroad, something that they have done increasingly in recent years, to keep labor costs down.
The mood is sour, even by the standards of a country that takes self-criticism and complaining about its lot to an extreme. While nowhere in Europe could be described as flourishing, Germany’s economy continues to stagnate. The only major European industrial power to contract in 2023, the prospects for 2024 are forecast to be only marginally better. The International Monetary Fund predicts that Germany will be the slowest-growing major economy this year, eking out an expansion of just 0.5 percent.
Unemployment has edged up slightly, to annualized rate of 5.7 percent, but that remains on the low side compared to the previous period. As for inflation, it has come down markedly, to 2.5 percent, compared to more than 8 percent in 2023.
The sense of gloom is pervasive, explicable in part—but only in part—by anemic growth. One glimmer of hope emerged in March when Deutsche Bahn and the GDL union finally struck a deal. Yet some industrialists worry openly about a German version of the gilets jaunes (yellow vest) protests in France in 2018, aided and abetted by the far-right Alternative für Deutschland party.
Anyone with a long memory can recall the pessimism of the late 1990s, and all the talk of Germany as “the sick man of Europe.” Statistics ebb and flow. Germany’s growth will bounce back, as it has done whenever written off before. What is more uncertain is whether the societal bonds that underpinned the successful economic model of the past will return.
As Germany is engulfed in the populist sense of grievance that is afflicting much of the world, as it succumbs to the easy rhetoric of the political fringes, that sense of mitmachen, of social solidarity, appears to be waning.
According to data produced by the Organization for Economic Cooperation and Development, inequality in Germany remains more pronounced than it does in countries such as the Netherlands and the Nordic states, is roughly equivalent to that of France, and below that of the United Kingdom, Italy, Spain and particularly the United States (one of the most unequal societies). In other words, it is not too bad.
But statistics can belie the lived experience, and as the global picture darkens, Germans become more insecure about their place in the world and about the principles that have underlain the postwar consensus, so that sense of paternalism and cooperation is diminishing.
This particular strike wave will eventually run its course, but “doing your bit” for the wider community is gradually being replaced by getting what you can when you can.
