New Varieties of Capitalism
Chapter 5: Germany: the Modell Deutschland between stagnation and reform
The German economy has traditionally been presented as the classic contrast model to the liberal market capitalism of the US and the UK. Following Hall and Soskice's firm-based approach, it is emphasised that coordinated market economies are characterised by an institutional set-up which 'reflects higher levels of non-market coordination' than liberal models. This includes a system where companies are less reliant on stock market finance and are generally orientated towards a consensual approach in relations between the management and workers (Hall and Soskice 2001: 19 and 24). Coordinated economies also usually show 'incremental' innovation and change, which stands in stark contrast to the 'radical' changes to the economy in liberal models (Ibid.: 38). This is because the emphasis lies on building up a reputation for innovative and high quality production through 'product differentiation and niche production' (Ibid.: 27). Workers in these models tend to have higher skills levels than in liberal models as a result of a sophisticated education and training system which includes the availability of in-house apprenticeships for trainee workers (Ibid.: 25). The Varieties of Capitalism (VoC) approach has lost nothing of its value in supporting the analysis of the German economy. It adequately determined the obvious competitive advantage of Germany as an exportorientated model which is based on product innovation and reputation of quality in the form of the renowned Made in Germany label.
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