Does It Exist? Can It Survive?

Drawing on extensive comparison with the United States, Japan and Britain, the pa-per describes the “German model ” of advanced capitalism as an institutionalized high-wage economy combining high competitiveness in world markets with strong social cohesion and, in particular, low levels of inequality along a variety of dimen-sions. This combination is explained by a unique set of socio-economic institutions, in particular socially instituted and circumscribed markets, negotiated firms commanding long-term attachment of both labor and capital, a facilitating state relying mainly on indirect means of intervention, widespread associational self-governance by organized groups in civil society, and institutionalized cultural patterns that promote long-term commitments and continuity. These institutions are shown to call forth and support a particular pattern of production, sometimes referred to as diversified quality produc-tion, that has in the 1970s and 1980s made possible both high wages and a low dis-persion of wages and incomes. In its second part, the paper proceeds to analyze in detail the performance problems of an institutionalized high-wage economy of the German kind, and specifies a set of conditions that must be met for such an economy to remain simultaneously competi-tive and socially cohesive. The present crisis of the German “social market economy” is discussed in terms of a coincidence of three factors: a possible secular exhaustion of the model as such, the shock of unification, and the constraints imposed by growing globalization of the capitalist economy on national economic governance