Dong Yifan: "The German model has collapsed"? This statement is exaggerated

Source: Global Times

Squeezed by multiple factors such as energy prices, inflation, and tight supply chains, the locomotive of the European economy, germany's recent downward pressure on the economy has increased, and some indicators have shown unprecedented negative signals, such as the first single-month deficit in German exports in 30 years in May, and the inflation rate has reached a high level in 30 years. Some voices believe that these signs not only represent short-term pressure on the German economy, but even indicate that the "German model has collapsed". However, from the analysis of history and the current situation, this statement may be exaggerated.

The German economy is a typical example of the "Rhine model". The "Rhine Model" is a european economic and social development model that is very different from the "Anglo-Saxon model" and the "Japanese model" in the United States and Britain, and is also significantly different from the new economic model that has emerged in Emerging Markets and Regions in Asia in recent years. Germany's "social market economy" is a path explored by the Federal Republic of Germany after World War II, and its main feature is to try to balance the capitalist market economy with social security and fairness. It was laid and planned by Ludwig Ehaad, the economic adviser to the first Chancellor of the Federal Republic of Germany, Adenauer, who later served as Chancellor of the Federal Republic of Germany, and implemented this philosophy as the philosophy that guides the German economy to this day.

This "social market economy" regards market competition and social fairness as the two major balancing forces that the economy cannot be abandoned. On the one hand, it emphasizes the importance of free competition in the domestic and international markets, constantly removes the obstacles that hinder the flow of production factors, stimulates the creativity and competitiveness of enterprises to drive economic development, and does a good job as a "referee" in market competition. On the other hand, it also emphasizes limited state intervention, which must maintain "normal order" in the field of monopoly and competition, and at the same time tilt economic rules to small and medium-sized enterprises through tax reform and other means to cultivate market players. In terms of industrial relations, Germany emphasizes the principle of fair negotiation and taking into account the interests of all parties to build a reasonable and sustainable mode of coexistence between the two sides, so as to avoid the impact of the imbalance in the interests of workers on the socio-political level. In addition, Germany has deepened and improved the tradition of the social security system derived from the Bismarck era, and gradually formed a socio-economic "safety net".

After the establishment of the basic economic philosophical framework, Germany has also summarized historical lessons in specific areas of economic affairs and formed a unique set of economic governance traditions. In the financial field, Relying on the tradition of "industrial nation-building", Germany has built a financial system with large comprehensive banks as the core, and financial enterprises and industries hold shares in each other and form a community of interests, giving play to the role of finance in injecting credit power into the real industry. In the fiscal field, Germany has long adhered to a prudent and adequate fiscal policy, the fiscal balance and budget and public debt health and sustainability as an important principle, although since the European debt crisis in order to stimulate demand and increase investment in key areas at the national and EU levels, the German fiscal has some expansion, but the overall level of fiscal health in the EU is still clearly "excellent students". In terms of monetary policy, the historical memory of hyperinflation has been engraved in the DNA of Germany, and after World War II, Germany took inflation control as the most important monetary policy goal, which is also an important reason for the stability and good reputation of the German mark before the establishment of the euro.

In fact, the influence of Germany's economic model and ideas has long exceeded its national borders, and due to the influence of ideas and actions on the construction of the European Union and the development of the European integration process, Germany's fiscal, monetary, market competition, social security and other concepts have been rooted in various institutions and policy areas of the European Union, and have played a fundamental role in shaping the European common market, common currency and fiscal rules.

At present, the public opinion and public awareness of the German economic model is concentrated in the industrial sector, such as the global reputation and competitiveness of manufacturing, the "hidden champions" of small and medium-sized enterprises, and the huge contribution of exports to the economy. On the one hand, these advantages stem from the long historical tradition and development trajectory of the German real industry and the unique culture of German business operations, on the other hand, they also benefit from the continuous seizing of opportunities and consolidating the advantages of Germany in the process of building the world economic market and the European Common Market after the war. The competitiveness of real industries and export sectors is not only a significant manifestation of the German economic model, but also an important support for Germany's socio-economic security and fiscal health.

The sustainability of the economic model in Germany and even on the European continent was discussed as early as the 1980s when Europe fell into "European rigidity", and later in the European debt crisis and other major European challenges have been constantly speculated. To be sure, in the context of decades of surging economic globalization, continuous updating and iteration of science and technology and emerging industries, and the continuous rise of emerging economies, Germany has a certain disadvantage in terms of innovation power, labor costs, and investment in emerging industries, which is one of the main reasons why Germany and the EU have emphasized the intervention and support of government departments and increased protection in economic and trade, competition, investment and industrial policies in recent years.

The difficulties faced by the German and European economies since the beginning of this year have also become an important basis for some public opinion to question the sustainability of the German economic model. But overall, the main disadvantages facing the German economy are more from external inputs, which are also common problems and challenges faced by all countries in the world. Taking Germany's monthly trade deficit for the first time in 30 years as an example, if you look at the import and export structure of Germany and even the entire EU, the trade deficit is mainly due to soaring energy prices, and Germany is the largest foreign energy importer in the EU, and one of its manufacturing pillars, the chemical industry, is more dependent on natural gas. In fact, Germany's exports rose 13% year-on-year in the first five months of this year, and there is still a surplus of 47.6 billion euros, showing the resilience of the competitiveness of its traditional industries. At the same time, in the context of soaring inflation and energy prices, Germany still maintains a certain vitality in terms of unemployment and social security, and although people's lives are seriously affected by price factors, the socio-economic order is still relatively stable.

Of course, the current energy and food crisis, supply chain problems, and global inflation problems have also sounded the alarm for Germany and the European Union, prompting them not only to make timely policy adjustments, but also to strengthen cooperation with all parties from the perspective of solving global common challenges, abandoning the politicization of economic problems and the Cold War mentality, otherwise Germany and even Europe's own road sustainability will face more and more challenges. (The author is associate researcher at the Institute of European Studies, China Institute of Contemporary International Relations)