From the TUC

Chuka, Germany and the need for a modern industrial strategy

24 Feb 2012, by in Economics

There’s very little in Chuka Umunna’s excellent Telegraph piece today, seeking to learn economic lessons from Germany, that I would disagree with. In highlighting the importance of the ‘mittelstand’, the medium sized firms that are often called the backbone of the Germany economy, along with Germany’s vocational education system, its banks and its public institutions that support industry, Chuka hits all the right notes.

I visited Germany three times to research the TUC’s own paper, ‘German Lessons’, which we published last month. There is much about Rhineland Capitalism to be admired. Germany’s training system is, indeed, of a very high quality. I was very impressed with the fact that some major German companies take on more apprentices than they need and some of those apprentices then go to work in the company’s supply chain. I thought the whole dialogue about medium sized companies was worthwhile: in the UK we laud the role of small firms but, over many years, we haven’t been ambitious enough in helping or encouraging them to grow. The UK also sorely lacks any kind of strategic investment bank: I’m pleased that Chuka writes of Labour exploring plans to establish a British investment bank; the TUC is looking at this as well.

The one thing Chuka didn’t mention was the role of Germany’s Social Market Economy and, with it, the valued contribution that trade unions make to German economic success. In our report, we described the Social Market Economy as “culturally cherished”, in the way that perhaps the NHS is culturally cherished in the UK. It may not be perfect, but we value it beyond words and, as Andrew Lansley has recently discovered, woe betide any politician that is even suspected of threatening it. The Social Market Economy is underpinned by the co-determination system, which allows works council members (who are usually trade unionists) seats on supervisory boards, exercising real influence on company decisions. Is that a threat to company success? Martin Rosik, Volkswagen’s Human Resources Manager at the company’s plant in Wolfsburg, told me: “Labour representatives expect the company to be competitive, they force the company to be competitive, and take care of the interests of their members. Here you don’t have the classic understanding of what is whose role in this game.”

I’m not sure it’s quite fair of Chuka to say the Coalition Government has no interest in industrial strategy. I was at the Government’s Manufacturing Summit in Bristol yesterday and I think both Nick Clegg and Vince Cable are starting to get the message (I will blog some more on that shortly). But it would be really heartening to see the Coalition and Labour set out competing visions of the kind of industrial policy the UK needs. We will have come a long way from the ridiculous “market always knows best” philosophy that characterised the Conservative Governments of the 1980s and 1990s and, frankly, too much of the New Labour era as well. Industry would be well served by such a debate. For my part, the best industrial strategy will be the one which recognises the positive trade union contribution. I hope we get there before too long.


2 Responses to Chuka, Germany and the need for a modern industrial strategy

  1. Iain Snowden
    Feb 24th 2012, 1:00 pm

    you gotta larf!!!!

  2. E Firman
    Feb 25th 2012, 2:02 am

    Germany regulates its land market so less investment diverted into land speculation as here. Rent controls and a property tax including a land element help steer investment into the real economy.