By Jonathan Nemetz
On September 12th, the technology juggernaut, Apple, revealed its newest generation of iPhones, including the iPhone X. The phone comes with facial recognition, a 5.8 inch retina screen, and a controversial one thousand dollar price tag. Most of the people taking selfies and texting on their new phones never think once about the complex machinery beneath their new super retina screens. Complex machinery made in… Germany?
On the back of many iPhones you will find a label that boasts its assembly from the People’s Republic of China. And that is not incorrect, finished iPhones come almost exclusively out of Chinese factories. However, if you were to open up your iPhone, you might find circuits and machinery proudly manufactured by companies like Blaupunkt and Metz. These are Germany’s economic powerhouses, headed by refined manufacturers and engineers who create electronics, robotics and machinery that power and assemble everything from the country’s famous automobiles to the parts in refrigerators, air conditioning units, and iPhones.
This economic model is a strange case for a European economy, especially one that has such wealthy and powerful prospects. Many people would agree that moving away from manufacturing and into creative or service industries is a sign of economic progress for a nation. Yet, Germany seemingly rejects this idea, as one of the richest and most influential nations in Europe with a manufacturing-powered economy. Despite being roughly 1/90th of the world’s population, German exports make up about 1/10th of global exports. Germany has also achieved astonishingly low unemployment rates even by European standards. However, this dominance is beginning to wane. An aging population and economy is causing many to worry about Germany’s future as a competitive part of the manufacturing world.
Many of Germany’s problems stem from the often praised system of Mittelstadt. These are small, manufacturing-based businesses that often specialize in high-quality, precision manufacturing. These companies will train youths in an apprentice-like school, from which the students are often hired into the manufacturing companies for those they apprenticed. Mittelstadts are also often praised for their willingness to work with labor unions. These compromises with labor unions allowed Germany’s employment level to stay relatively stable during the 2008 financial crisis. In addition, a calm and steady German currency made investment into the country easy for many years. Then, when Germany joined the Eurozone and adopted the Euro, Germany’s high-tech companies were released with no tariffs on the rest of Europe, turning even small companies into powerful and profitable businesses around the world.
However, even with successes in the past, the system of Mittelstadt is beginning to show its cracks. Most importantly, the economy and people are beginning to age. For many years, jobs in manufacturing were more respected and seen as “true” work as opposed to jobs in finance and large corporations. However, more and more, the German youth are looking for white collar jobs like those in the United States and United Kingdom. Students have begun pursuing more degrees in finance and business, leaving many Mittelstadts without apprentices who would become the next generation of workers. Despite the new demand, German public schools are unprepared to teach subjects like finance and business in the depth required for those planning on attending university for those degrees.
The problematic lack of workers is amplified by Germany’s decreasing population. Although German birth rates have been on the rise in the past few years, they’ve only passed a low bar.. For decades, birth rates in Germany, especially on the eastern side, have been at rock-bottom. Now they have risen to 1.5 births per woman, which is still below the rate for a stagnant population at 2 births per woman4. It is expected that this trend will continue, and the population of Germany will end up decreasing by about 10 million people by 20604. The German economy will have to adjust to stay viable and relevant with fewer and fewer people working every year.
Merkel’s government is attempting to address many of these issues. With her recent re-election as Chancellor, she has promised to continue to build upon many programs aimed at modernizing the infrastructure and economy of Germany. She has decided to increase programs that promote the construction of renewable resources. Not only do these programs drive growth in more modern industries, but they also help combat the country’s problems of high energy bills and poverty. For many years, German power has come from coal plants that have begun to age and are now inefficient and expensive to maintain. This has led to many problems with providing sufficient and affordable power, something that renewable energy has a real chance of remedying. In addition, problems with internet availability are being fixed with bipartisan support for legislation which will make broadband internet more widely available. This may help German students pursue more advanced education opportunities and provide another method of schooling for students, ultimately impacting the economy positively.
These are certainly great starts but many see it as too little too late. With a changing population and an outdated system of education, the German economy is beginning to face its biggest challenge since the reunification.