Can Germany Make Globalization Work?

Can Germany Make Globalization Work?

On March 16, 2017, the Transatlantic Academy published a policy paper by Senior Fellow Harold James entitled "Can Germany Make Globalization Work?," the fifth in its 2017 Paper Series.

It is often argued that Germany — perhaps with China – is left as the defender of globalization and an open commercial order, in the face of disarray in the international order, structural changes in the world economy, and even the possibility of an end or a reversal of globalization. But both countries are often said to be “cheating” in their approach to globalization. Germany has long sought to multilateralize its diplomacy, but has been more selective and more hesitant in its approach to international governance issues. Like China, Germany has many vulnerabilities. These include inflexible corporate governance, a bank-based financial model, the fading of the small- and medium-sized enterprise (Mittelstand) dream and problems of continuity in family businesses, a proclivity for incremental rather than fundamental technical innovation, ageing and demographic decline, and a more hostile international environment.

In order to continue to be a force for stability Germany needs to demonstrate that it is not cheating and should also show that it is “smart” as well as hardworking. That requires a skillful response to the modern vulnerabilities of globalization. Much of that response will require careful coordination — by governments, firms, and indeed individuals — on a European and international level. This paper suggests using global business linkages as a way of modernizing German corporate governance, developing fundamental research as a partial answer to security threats, acting collectively to solve migration issues, and taking a more active role in reforming European and global financial institutions through a move to more Europeanization and less insistence on national mandates and national representation.