German Crisis Response: Entrepreneurship and Hard Work

Professor David Audretsch visited Swedish Entrepreneurship Forum to present his new book The Seven Secrets of Germany: Economic Resilience in an Era of Global Turbulence on 7 September 2016. An entrepreneurial culture, flexible labor market, openness, and improved image were mentioned as some of the success factors.

Johan Eklund, Managing Director Swedish Entrepreneurship Forum and Professor JIBS, gave an introduction and welcomed David Audretsch, Professor Indiana University on stage. Audretsch, Eklund continued, has extensive experience and knowledge of the German economy and have worked on both sides of the Atlantic for many years.

In the book The Seven Secrets of Germany: Economic Resilience in an Era of Global Turbulence, Audretsch and his co-author Erik E. Lehmann, maps the economic success of Germany since the last economic crisis. Audretsch started off with a comparison to America: Looking back two election cycles, in 2008, in the depth of the great recession, there was a fierce debate about how to best stimulate the economy. The Democrats rallied for government spending to increase demand while the Republicans suggested that the money to increase demand should be put in the hands of people and corporations. However, both sides agreed that stimulus was necessary to go forward. This discussion was never seen in Europe, Audretsch said.

– Is there even a German word for stimulus? In Germany the crisis brought the insight that opportunities at home were scarcer, therefore they needed to create and search for new opportunities.

david-audretschDavid Audretsch

This show a very different approach to economic crisis, Audretsch continued. The German way is more entrepreneurial – find or create opportunities. Fact is, the countries that have enjoyed success in Europe the last couple of years are the ones that have found entrepreneurial ways forward. Less ingenious countries have thus suffered more difficulties (Spain, Italy and Greece for example). The main success factor for Germany has been their Mittelstand politics.

Audretsch gave an overview of Germany’s”seven secrets” outlined in the book: First, the Mittelstand politics including an apprentice system, technical colleges and a strong local connection which has resulted in a strong entrepreneurship culture. Second, targeted efforts on R&D combined with a strong knowledge culture and focus on skills sought after on the labor market has paid off.  Third, Germany has a strong connection to localization, both regionally and nationally, while they’ve simultaneously managed to create business relationships abroad and found opportunities on export markets. In addition, foreign language skills and the interest for foreign culture have risen significantly in Germany since the turn of the century. Audretsch also mentioned infrastructure, local manufacturing and the fact that it’s again “cool” to be German and live in Germany among the German secrets.

– What has made Germany successful is a combination of old and new factors.

Germany has transformed from being ”The Sick Man of Europe” to a success story, Audretsch said. Again, he made a parallel with USA. In America, success after the 80’s did not come from a revived manufacturing industry but from entrepreneurs driving the new economy forward. The same pattern can be seen in Germany after the 2004 regulation reform which made it easier to start and run businesses, reformed the education sector and strengthened support for R&D.

david-audretsch-2

– The secret behind Germany’s successful entrepreneurship culture is interaction. Furthermore, they have very efficient local governance with mandate to create and deliver results. The German people are highly invested in their regions.

Regarding identity and image, Berlin has transformed from a place where the city had to pay people to live to a hub for start-ups and young entrepreneurs, Audretsch pointed out.

– The best thing about the German example is that it’s not about exceptionalism. They made great efforts, set goals and worked hard to accomplish those goals. Hard work pays off, which means more countries can do it.

 

Increase labor market flexibility

The seminar’s first commentator was Bettina Kashefi, Chief Economist at Confederation of Swedish Enterprise; she saw the apprenticeship system in Germany as one of the country’s great strengths. She also saw differences in the perception of work – all the jobs are seen as good jobs in Germany, which is not the case in Sweden.

bettina-kashefiBettina Kashefi

– We need to reduce the risk for companies when hiring immigrants in Sweden, she continued.

In conclusion, Kashefi identified a need for a more flexible labor market, as well as more efficient job centers.

 

Germany’s Eight Secret (they got money)

Per Tryding, Vice President Southern Sweden’s Chamber of Commerce, pointed to the fact that the German work culture – which is very results oriented – is difficult to imitate.

– One of Germany’s greatest secrets is in their bank accounts – they have money there.

per-trydingPer Tryding

On average a German has considerably more in the savings account than a Swede – In Germany you are expected to save up money before you buy something. There is a greater focus on long term solutions in German society.

– In Sweden, we prefer to subsidize loans instead, Tryding ended.

 

Integrating immigrants; the German and the Swedish case

Irene Wennemo, State Secretary at the office of Labor Minister Ylva Johansson, commented that Germany is a conservative country where change does not happen quickly. The German labor market is stable and characterized by consensus rather than conflict, as opposed to, for example, the French labor market.

– When changes come about in Germany the citizens have already accepted them.

irene-wennemoIrene Wennemo

Wennemo noted that relatively few women work in Germany and that the country is good at integrating new immigrants into the labor force, while Sweden has had more success getting second-generation immigrants out from poverty and into the workforce. We must learn from each other, she concluded.

 

Germany: more hieratic and less innovative

Last to comment was Ulf Kristersson, Vice Chair The Committee on Finance (M), he noted that Sweden and Germany are similar, however Germany is more hierarchic and less innovative than Sweden. Nonetheless, Germany is good at producing high-tech products.

ulf-kristerssonUlf Kristersson

– It is important to remember that it is difficult to cherry pick ideas when it comes to an entire culture, Kristersson said.

panel-1Per Tryding, Ulf Kristersson, Irene Wennemo, Bettina Kashefi, David Audretsch and Johan Eklund

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