The Erosion of the German Model

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German underwent a remarkable economic transformation in the postwar era. The economy moved from stagnation to revival which was the rise of the German Model.

‘Patient capital’ and the traditional banking system. The patient capital is a funding mechanism that has been widely used in the international development and has achieved greater results than the traditional banking system. Patient capital is a contemporary method for investment and funding that has a greater social impact particularly in the new era of development.

Industry unionism and corporatism. Industry unionism is a big union involving all workers of all trades and industries that are focused and devoted to one burning ideal towards accomplishing final and complete industrial emancipation (Industrial Workers of the World 2018, online). Corporatism considers unions as political and public organisms which have co-responsibility for the stability of the state and the continuity of the socioeconomic system.

Co-determination and the works councils. German codetermination has gone through considerable changes as actors used relatively stable institutions in creative ways in response to new challenges. Otto, Berndt, and Walther (1992, p. 242) define work councils as a representation of the entire workforce of an establishment. The works councils are centralized and supra-national bodies.

The dual training system

The dual system means that that structural conflict between capital and labor can be broken down and dealt with in two arenas separated according to models of enforcement, actors, interests (Bartlett 2013, online)

The erosion of the German model: the rise in inequality and the decline of codetermination.

Doellgast (2008, p.28) argues that German codetermination has gone through considerable changes. The decline of the codetermination rights began within the unions. They had uneven access to resources important in work restructuring including member mobilization, external coalitions, and internal coordination (Doellgast 2008, p.28).

The formation of the European Union. `German employers view the single European market and monetary union as necessary responses to intensified competition with Japan and the U.S.

The ‘German model’ and its influence on Europeanisation. The German Model is based on four principles with the dual structure of interest representation being the most important (Otto, Berndt, and Walther 1992, p.218). The German Model supported the establishment of the worker’s representation which had a strong influence on Europeanisation.

Post-Austerity labor market segmentation Questions

1. What are the important (for our purposes) features of German political-economic institutions, and how do they affect employment relations?

The organization of the political economy is the institutional infrastructure supporting coordination among firms and other actors in spheres such as those of industrial relations, corporate governance, technology transfer, standard-setting, and skill formation.

2. What is ‘Co-Determination' and the ‘works councils'? In what way do these key aspects of German ER shape the processes of German industry and the decisions of foreign firms in Germany?

German codetermination has gone through considerable changes as actors used relatively stable institutions in creative ways in response to new challenges. Otto, Berndt, and Walther (1992, p. 242) define work councils as a representation of the entire workforce of an establishment. Works councils shape the processes of German industry as they operate through coordinated bargaining with the unions as an internal coordination between different worker representatives. The coordination determines the decisions of foreign firms in Germany as the unions’ strength is enhanced by the work councils. Strong work councils can be able to negotiate collective agreements and elect agents to represent them.

3. What are the signs of ‘breakdown’ or ‘erosion’ in the German model? What are the causes of the breakdown?

Signs of breakdown and erosion in the German model were the political debates. Union activists and academics socialists condemned the German industrial relations system for suppressing class conflict and stifling industrial militancy.


Bartlett, B. (2013, June 18). How the Revival of Postwar Germany Began. Retrieved from

Doellgast, V. (2008). National Industrial Relations and Local Bargaining Power in the US and German Telecommunications Industries. European Journal of Industrial Relations. 14, 1-36.

Industrial Workers of the World. (2018). Industrial Unionism: The Road to Freedom | Industrial Workers of the World. Retrieved from

Otto, J., Berndt, K., and Walther M. (1992). "Germany: Codetermining the future?", in Anthony Ferner and Richard Hyman (eds.): Industrial relations in the new Europe. Oxford, Blackwell Publishers.

January 19, 2024
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Company Labor Germany

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