Continuity and Change: Making Sense of the German Model

Over the past two decades the concept of a ‘German model ’ of economic organization and production has been debated hotly. In the 1980s this model was, for the most part, viewed positively, largely because German export and labour market performance was signifi-cantly better than the Organization for Economic Co-operation and Development (OECD) average. For social democrats and trade unionists the model was particularly attractive because it seemed to demonstrate that strong unions and works councils, high wages and good working conditions were not incompatible with low unemployment and economic competitiveness. Even a number of mainstream economists and manage-ment consultants became enamoured of the German model and argued for its adoption in less-well performing countries. Most academic work attempting to understand the German model at that time attributed economic success to a particular linkage between institutions and a production system capable of creating products which were competitive with mass produced goods on world markets. For Piore & Sabel (1984), Germany’s regional economies such as Baden-Württemberg, which were dominated by small and medium-sized firms, prove