From the TUC

German Lessons: A major new report from the TUC

18 Jan 2012, by in Economics

This morning, the TUC has launched ‘German Lessons’. This report (which is also available in a shorter summary) is the result of a year-long research project, that took us to major manufacturing companies in Germany and the UK. We spoke to senior managers, works council members and trade union officials in world class organisations such as Volkswagen, Bentley, Siemens, BMW, ThyssenKrupp and Airbus. These firms are either straightforward German companies or are British companies that are owned by German parents. Enormous thanks are due to everyone who gave their time and shared their expertise with us to make this report possible.

These companies are world-leaders. Germany is the strongest economy in Europe, one of the biggest in the world and is best-known for its leadership in engineering and wider manufacturing. There has been much talk about rebalancing the British economy. How much of this is just talk remains to be seen, but if our politicians are serious about a renaissance for manufacturing, there are obvious lessons to learn from German companies.

‘German Lessons’ contains too many recommendations for me to attempt to summarise them here. I urge you to download the report and read them for yourself. But our major call is for a new manufacturing eco-system for the UK. Tinkering at the edges will not work. Individual initiatives, however worthy and even if partially successful, cannot deliver the change that we need, unless they work alongside other policies to support manufacturing. In Germany, the overall industrial policy is greater than the sum of the parts.

‘German Lessons’ contains specific recommendations for policy around issues like skills, procurement and growing small firms into medium sized enterprises, issues that the TUC has long sought to influence, and rightly so. But if we really want to learn the lessons from Germany, we need to take a hard look at their economic model, their industrial philosophy and their political approach. Some of what we found has long been politically unfashionable in the UK, but if we are serious about a rebalanced economy, we may need to move out of our comfort zone.

Britain is an unequal society that is becoming more unequal. As if that isn’t bad enough, some believe that that is the inevitable consequence of a vibrant capitalism. Yet Germany’s social market model is deliberately calibrated to ensure that entrepreneurs, managers, employers, trade unions and ordinary workers have a stake in its success. Managers and trade unions negotiate vigorously – some things are the same the world over! – but they fundamentally believe that, at base level, they are operating in an economic model that is broadly fair.

Germany welcomes trade unions as social partners. Trade unions can influence company policy and are sometimes strong enough to completely block change, but with that power comes responsibility. Unions know that standing in the way of change simply leads to slow decline. So they support change, while influencing it to ensure that their members are protected in the process.

Germany understands that industrial policy is, to a point, political. That’s the message I know our politicians will find most difficult, but leading industrial nations are strong in certain sectors because their governments have targeted those sectors. In the UK, we have tried to ensure that the economic foundations are in place, only to “let the market decide”, as if concepts like ‘perfect competition’ and ‘enlightened self interest’ on the part of companies and shareholders were real and always present, rather than theories in an economic textbook. Countries target the motor industry, or aerospace, or environmental technology, partly because they know they are good at those sectors and partly because, looking to the future, they can see which way the wind is blowing. Either way, politicians make decisions. Other policies, around skills, or investment, or grants for research and development, follow targeted industries. There is enough flexibility for new industries to grow, but free market fundamentalism was never embraced in Germany and it’s hard, looking at where Germany and the UK are now, to argue with that approach

I hope Ministers take a hard look at ‘German Lessons’, with a view to a rebalanced economy. I hope the Labour Party takes an interest too. But I also want to start a debate. Our report challenges government, employers … and trade unions. Over the coming months, the TUC will be fleshing out some of its ideas in discussions, policy seminars and on Touchstone, as part of our wider search for an alternative economic narrative. I hope you come with us.

4 Responses to German Lessons: A major new report from the TUC

  1. Markus petz
    Jan 18th 2012, 11:48 am

    Having read the report I see the TUC still predicates success on growth. Where is the concept of degrowth and a steady state economy based on a more localized system. Such a system being both more ecologically and financially sustainable in a world With lower oil availability?

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  4. Matt
    Jan 24th 2012, 11:35 am

    I’d be interested – do German Unions affiliate to political parties?