How Germany became a Manufacturing Powerhouse?
The ‘Made in Country Index 2017’ unanimously has Germany as the number 1 country for manufacturing. A recent poll from YouGov, too, confirms this. Here are some world-class German brands and amongst the top 10 players in their respective industries.
- Mercedez Benz
- BMW
- Audi
- Volkswagen
- Lufthansa
- Adidas
- Siemens
- Bosch
- Deutsche Bank
- Deutsche Bahn
- SAP
The modern-day Germany was founded in 1871. It is a much younger nation than the United Kingdom, France, Italy, Greece, Spain or the Netherlands. The foundations for the success Germany economy currently enjoys were placed in the 1830s and 1840s when Germany began laying the foundations towards becoming an industrious nation. They initiated a textile industry in 1834, and they had the railroad revolution in the 1840s.
A new religious sect among Christians called ‘Pietists’ had formed by this time, tired of the sluggish nature of the then Lutheran Church. The Pietists were keen on creating an environment for their children to succeed spiritually and materially. They set up schools and technical colleges and introduced rigid timetables, which became the foundation for the educational system as we know it today.
The Prussians (old Germans) made Education mandatory for their children. They set up publishing houses, pharmaceutical companies and breweries that eventually transformed them into a major supplier for all of central and eastern Europe. Even though the Brits had a head start compared to them, the Prussians were soon able to replicate what Britain did better, become more productive, and establish new industries. German firms such as Siemens, AEG, Bayer and Bosh were able to capitalize on early discoveries in chemicals and engineering made by British Scientists and profit more from these.
The old Germans were not just copying the global superpowers but were also able to pioneer new industries. The world’s first car was German, built by Daimler and Benz.
These resulted in solid foundations for Germany's emergence when they eventually became ‘Germany’ in 1871. After the new country ‘Germany’ was formed, the country had more people and more resources in the form of coal and iron, and they soon turned into a world industrial leader. By 1914, Germany was producing 2 times more steel than Britain. Steel manufacturing capacity in that day and age was a telling sign of a nation's prosperity and economic growth. Even when manufacturing was dwindling from the major industrial powerhouses Britain and USA – manufacturing in Germany was booming!
Then came the tumultuous years of the 2 world wars and great strife the Germans had to face before, during and after the world wars. This includes entire German cities getting flattened, their factories destroyed, having to pay war reparations, facing hyperinflation and eventually Germany getting split into East and West Germany following the end of the 2nd World war.
But Germany once again rose from the ashes. They rebuilt the destroyed factories – better. The German people were resilient, persisted through tough times, and created better times. Many experts believe the humiliation faced by the Germans during the 2 world wars made their employees accept lesser wages compared to their British and French counterparts. The Germans companies too generously invested profits in research and development to create superior product design and technology.
Several other factors contributed towards the German Economic Miracle. Unlike in Britain, where most of its economy was connected and largely dependent on its main city London, Germany had a different system. Even though they didn’t have a London equivalent, they had many German cities evenly distributed throughout the country, which equally contributed to the nation's economy. These cities and communities have enormous amounts of local pride, dating back to when Germany was a collection of states.
A higher preference was given to technical training and apprenticeship over formal Education, as seen in other western countries such as the USA or UK. This was another key ingredient of German success, and this emphasis on skills, meant German employees were better skilled than their counterparts.
Another major factor that results in strong German manufacturing performance is that there are simply more manufacturing jobs available in Germany due to the large number of successful manufacturing companies in the country.
An interesting fact to note here is that Exports account for 52% of the German GDP. In contrast, Exports as a % of GDP is only 14% in USA. In 2021, the German economy showed a surplus of 173.3 Billion Euros. USA in 2021 had a trade deficit of 845.05 Billion USDs. This is truly remarkable and is very much suitable to call this turnaround the German Economic Miracle.