Throwing out the ballast: growth models and the liberalization of German industrial relations

Abstract

This article proposes a new interpretation of the evolution of German industrial relations focusing on the interaction between macroeconomic dynamics and industrial relations developments and specifically on 'growth models'. It argues that there has been a shift in the German growth model from growth pulled by net exports and consumption simultaneously to almost exclusively export-led growth. In addition, exports of machinery and transportation equipment have become more pricesensitive, implying that wage and price increases now pose a greater threat to growth than in the past. These macroeconomic developments have spurred a set of adjustments in the industrial relations sphere with export-oriented firms seeking cost reductions and liberalizations. Industrial relations changes have in turn contributed to entrench export-led growth by augmenting the systemic importance of the foreign sector and reducing the relevance of domestic demand. The export sector has thrived at the expense of real wage stagnation, particularly (but not exclusively) in labour-intensive service sectors, and pattern bargaining has lost its ability to redistribute across sectors and boost domestic demand. The new German model is much leaner and meaner than in the past. Contrary to recent literature, its erosion and liberalization are not limited to the service periphery but affect the manufacturing core as well.Key words: Germany, industrial relations, institutional change, varieties of capitalism, growth models JEL classification: P16 political economy, E02 institutions and the macroeconomy, J52 collective bargaining

Economic causes of the Eurozone crisis: the analytical contribution of Comparative Capitalism

“…On the other side, some CCC scholars find their prime source of inspiration not in ( post-)VoC, but in the (institutionalist) Regulation perspective, Dependency theory and post-Kaleckian macroeconomics. Still they come to similar conclusions about the fragile interdependence between nationally distinct capitalisms within the EMU (Stockhammer, 2011(Stockhammer, , 2013Armingeon and Baccaro, 2012;Becker and Jäger, 2013;Regan, 2013Regan, , 2015Becker, 2014b;Gambarotto and Solari, 2015;Jessop, 2014;Stockhammer et al, 2014;Baccaro and Benassi, 2015;Baccaro and Pontusson, 2015;Johnston and Regan, 2015;Suau Arinci et al, 2015). Here, however, the focus is not only on supply-side institutions (and companies), but also on demand-side institutions such as collective bargaining and unemployment insurance (and household indebtedness), and these scholars often do not speak of CMEs, but of export-led or profit-led growth regimes (or models), in contrast to the demand-/ consumption-/debt-/wage-led growth regimes that typically can be found in LMEs and MMEs.…”

“…5-6;Gambarotto and Solari, 2015, p. 803). Thus, a broadening of the 6 In comparison with the UK and Sweden, however, German exports are more price-sensitive, due to their focus on manufacturing, instead of high value-added services (Baccaro and Benassi, 2015;Baccaro and Pontusson, 2015).…”

One-size-fits-some! Capitalist diversity, sectoral interests and monetary policy in the euro area

“…First, I use a variety of empirical sources to show that firms in the traded sectors in CMEs increased profit margins in response to the relative decline in their ULC instead of lowering product prices. This lack of 'pass-through' of ULC changes onto product prices implies that wage restraint and price competitiveness have been less important for the 75 export performance of CME traded sectors than previous analyses in the CC literature have argued (Baccaro & Benassi, 2017;Hanck e, 2013;H€ opner & Lutter, 2014;Johnston et al, 2014). Rather, it is a reflection of their strong non-price competitiveness based on their comparative specialization in the production of quality-differentiated goods, demand for which is relatively price-inelastic.…”

“…The same 365 table shows that there was considerable variation among the CMEs in terms of annual growth in labor compensation in the non-traded sectors. Germany was a clear outlier in this regard, which is usually explained by the liberalization of industrial relations and wage setting institutions especially in the labor-intensive services sectors (Baccaro & Benassi, 2017;Dustmann, Fitzenberger, Sch€ onberg, & Spitz-Oener, 2014). Accord-370 ingly, its export-led growth models coincided with weaker private consumption growth than in the other CMEs, as shown in Table 2D 4 2 .…”

“…A common interpretation in the CC literature is that the repression of wages in the non-420 traded sectors boosted Germany's exports by strengthening the price competitiveness of its manufacturing firms (e.g. Baccaro & Benassi, 2017;Baccaro & Pontusson, 2016;Dustmann et al, 2014;Hassel 2014). Table 3 shows the growth in merchandise trade between the CMEs with the world and the rest of the Eurozone between 1999 and 2008: what set Germany apart from the other CMEs during this period was not higher 425 export growth but weaker import growth.…”