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What is often overlooked is this: Germany was export-oriented before the Euro, during the transition and with the Euro. Germany was export-oriented before reuni

by lispm 7y ago

What is often overlooked is this: Germany was export-oriented before the Euro, during the transition and with the Euro. Germany was export-oriented before reunification, during reunification and after reunification. The industry will adopt to those external factors: Germany was 'Exportweltmeister' with the super strong DM (which dominated European currencies) and it is a leading export nation with the Euro. There are a lot more factors that support the German model. For example Germany is not a centralized economy (like the UK or France, which are grouped around London and Paris). Thus lots of federal states and cities have strong economies: Munich, Hamburg, Düsseldorf, Frankfurt, Berlin, ... The extreme angle is the concept of 'unknown medium-sized world market leaders' - so-called hidden champions. Germany probably has almost 50% of all hidden champions world-wide: https://www.forbes.com/sites/rainerzitelmann/2019/07/15/the-leadership-secrets-of-the-hidden-champions/ https://www.forbes.com/sites/rainerzitelmann/2019/07/15/the-... You'll find many of these companies in rural regions. Many of these companies are export-oriented, based on a long tradition and they don't care what the current currency in Germany is.

cosmodisk 7y ago
Was half way through your post when I was about to write my comment about hidden champions,glad you mentioned it. This is something that tends to be overlooked quite often. Very very few countries have a model like this.Take the UK, as an example.An average town or even small city rarely has anything that isn't just for local market. For a lot of companies it's kind of fine,as the market is big enough to earn comfy living for the owners, but that's it. The default in most countries is something like: " ok,I'll sell this in local area and maybe,just maybe,if I become super big,then we'll start exporting". It's shame really. I see this mentality in my own country, Lithuania,where an average purchasing power is relatively low and the market is super small(1/5 of London population) ,yet the default option is to start locally. Luckily the IT sector is different,where most businesses default to foreign markets.
- jotm 7y ago
  It's absolutely baffling. I've been looking into it for cheeses and ales, so many UK producers flat out say "We only ship within the UK" even though the cost of shipping is covered by the buyer and it would cost nothing, not even extra paperwork, to ship to the EU (for now).
  - cosmodisk 7y ago
    Sometimes owners deliberately wabt to stay small,I do understand it, however I don't get it as well when people refuse extra orders,as in your case.
  - gandalfian 7y ago
    Bonded warehouses exist for a reason. Internationally shipping alcohol or (tobacco) is genuinely complicated even within the eu. Cheese probably just a perishable pain to post far.
- NeedMoreTea 7y ago
  There used to be tens of thousands. In 1979 there was a policy decision to end UK manufacturing and focus on the City and services. No end of highly successful UK export businesses disappeared. Many of them quietly a world leader. Many of them famous names that had existed for a century or two. Sheffield was the steel city with all the production, infrastructure and suppliers to feed all the cutlers, precision instrument makers, tool makers, scissor makers and all the other specialisms surrounding tool steel and stainless steel. The Potteries, well you can probably guess that one. So it went on around the regions of each city and across the country. I go beyond it being a shame, it's criminal, or bloody well should be. We have had no chance of balanced export books since 1980. If you search around the web, there's a lot of archive sites showing what was lost -- though in truth it was far more an intentional destruction.
  - xadhominemx 7y ago
    Probably a good thing that an effort was made to transition Sheffield to a services-based economy because steel was going away no matter what.
    - NeedMoreTea 7y ago
      Can't agree. Mild steel and bulk wasn't the strategic industry it was once considered by every nation, and was going as it was predicated on price. That's probably fine unless there's a major war. The hugely expensive deep specialisms, and really unusual steels and steel products that were made in just three or four places in the world, one of them Sheffield, need not. cough Iraqi supergun -- though Sheffield Forgemasters are actually one of the few still around, thanks to govt underwriting due to their nuclear capability. Funny that. Nor need the manufacturing of some of the world's finest precision tool and instrument makers. A tiny few survive, despite government best effort, not because. Most were eagerly snapped up by US, German, French or Japanese -- if they still exist at all, it's as name made elsewhere and a fattening of someone's portfolio. Of course many disappeared without trace, and of course a fair selection that weren't worth saving having got fat and lazy, or overly unionised. While morons were cropping up on UK news throughout the eighties and nineties trying to persuade us that making anything was obsolete (and so frequently that it quickly got as overused, tedious and cliched as the recent Theresa May election slogan "strong and stable government"), Germany quietly got on with new services and manufacturing. Their mittelstand(sp?) and technical training regularly cropping up as something for the rest of Europe to envy. UK disassembled the last of the technical colleges, apprenticeships, and all the regional centres of knowledge and excellence. No matter how keen you're unlikely to pick manufacturing for your new UK business, as we are exceptional in the extent of our disassembly of the sector. How did Sheffield's future as a centre of telephone call centres work out? Or Central Belt's reinvention as world centre of electronic and IT manufacture? How did the focus on the City work, when right after the "big bang" Wall Street went on a shopping spree of stupendous size leaving few native survivors?
nostromo 7y ago
I'm reminded of Trader Joe's -- a chain most people think of as a California-based chain of health food stores -- but has actually been owned by a media-shy German family for 40+ years.
- tathougies 7y ago
  Trader joes was not a german export. It was started by a Californian, and sold to a german family.
  - deleted 7y ago
    [deleted]
- chrisco255 7y ago
  Maybe Aldi is a better example? Edit: Didn't know this, but Aldi bought Trader Joe's and currently owns it.
  - leipert 7y ago
    ALDI Nord owns Trader Joe’s. There are two independent conglomerates called ALDI. Aldi Nord and Aldi Süd (North and South). (History: Two Brothers who fought) They devide Germany and the rest of the world between each other. Have a look at the world map: https://commons.m.wikimedia.org/wiki/File:Aldi_world_map.png#mw-jump-to-license https://commons.m.wikimedia.org/wiki/File:Aldi_world_map.png...
    - dboreham 7y ago
      See also Samuel Smith and John Smith.
iSnow 7y ago
There's also one glaring error in the text that can only be explained by hindsight wisdom: >The Single Market launched just four months later, in January 1993, though something like it had been in the works for a while. But on that launch date was there anyone in Europe with any doubts about which nation — which “area” — was ascendant, economically speaking? Germany in 1993 was in no shape or form to be the ascending economic superpower, in fact 1993 was a recession year: https://d3fy651gv2fhd3.cloudfront.net/embed/?s=wgdpgerm&v=201907011545V20191105&d1=19900101&d2=20000101&h=300&w=600 https://d3fy651gv2fhd3.cloudfront.net/embed/?s=wgdpgerm&v=20.... That of course is due to reunification which was extremely costly at the time and the implosion of the former socialist economy hindered growth massively. Germany got extremely lucky with its timing - when the exchange rate for the DM to EUR conversion was fixed, the German economy was still in dire straits, so it was basically undervalued. But the German companies used the sudden strategic location of the country between east and west to massively invest in production capacities in the former eastern block to keep production costs low while selling to the industrialized neighbors in the west.
biztos 7y ago
Some members of my extended family own a company (actually a small family of companies) in that category, and of course it's in Swabia. They are market leaders in some very high-margin things most people never think about, and interestingly they sell a lot in Asia, where one might expect them to be more vulnerable to competition. German Quality is a huge brand worldwide. I also have a friend in Berlin who's sort of inheriting the family business, manufacturing something so random I always forget what it is. Involves rubber I think. High margins, privately-held family business, etc. I really think a lot of these companies, if they were in the US, would either go public (the bigger ones) or be sold up to a bigger concern. But in Germany you'd have to pay a really big premium to get your hands on someone's multi-generational family business. As long as there are kids to inherit the factories then that's what they're gonna do.
- usrusr 7y ago
  Another way how this kind of company would likely fail to continually thrive in the US, even when it's not sold: those niche markets are so small that even when completely dominated the profits would be insufficient to get date-in-Hollywood rich or groom-yourself-for-presidency rich. So if you have bigger ambitions than the niche allows you'd hand over the reins to a "maintenance manager" and focus on something more promising. Those small niche specialist businesses reach excellence through a loyalty to whatever field that made them big that is fueled by limits to ambition. (I think I already posted this idea on some other HN that) (and the businesses tend to be filled with a weirdly self-contradicting mix of nationalistic hybris and massive imposter syndrome)
- DraftDodger67 7y ago
  Therein lies the problem - the current fertility rate for German mothers is only 1.42. How long until there are no more Germans left to run these companies?
  - lispm 7y ago
    Fertility rate in Germany is currently at 1.57.
lifty 7y ago
Very good point! In this video [1], economist Richard Werner rants about the existing central banking influenced economies, but at around the 47th minute he mentions the roughly 1500 "champions" (USA has 300), and he argues that this is the case because of the small local community banks that are present all over the country. [1] https://www.youtube.com/watch?v=8FT-zyTX2nE https://www.youtube.com/watch?v=8FT-zyTX2nE
elfexec 7y ago
> Germany was export-oriented before the Euro, during the transition and with the Euro. Germany was export-oriented before reunification, during reunification and after reunification. Germany was export-oriented even before WW2. It's funny whenever you read about "How germany or japan became industrial powers after ww2". With many crediting the US or whatever aligns with their agenda. The truth is that both germany and japan were industrial powers before ww2 and they just reverted back to what they were after ww2. > For example Germany is not a centralized economy (like the UK or France, which are grouped around London and Paris). Germany is most definitely a centralized economy. Just because it doesn't have the dominant city center like London and Paris doesn't mean it isn't centralized. The reason why germany is a manufacturing power is because german federal government and the state decided to make germany export-oriented manufacturing power. While in the UK, they decided to become finance oriented and service oriented and shifted their manufacturing overseas. Which is smarter in the long run, only time will tell.
- lispm 7y ago
  > doesn't mean it isn't centralized Not really. If you look at successful companies, they are all over the country - though not much yet in the former East Germany, for historical reasons. > because german federal government and the state decided to make germany export-oriented manufacturing power Germany has been manufacturing/trade oriented for centuries. The 'federal government' does not decide these things on their own just now. Germany does not work like that - there is no 'federal government' which decides the economic policy in a centralized manner, WITHOUT involvement of the Bundesländer and/or the companies/employees/... > finance oriented and service oriented Germany is also finance and service oriented, just to a slightly different degree and with slightly different domains. Even the manufacturing companies are often extremely service oriented. Selling not just products, but a lot of services around these products. > While in the UK, they decided to become finance oriented and service oriented and shifted their manufacturing overseas. Good luck with that.
- pjc50 7y ago
  > Just because it doesn't have the dominant city center like London and Paris doesn't mean it isn't centralized. That's .. kind of the definition we were using? If it's centralized, in which city is it centralized? The London dominance of the UK is almost debilitating; it's very hard to get any kind of policy discussion that sensibly includes even Birmingham or Manchester. Let alone all the Brexity post-industrial towns. It's also not entirely true that the UK has lost "manufacturing" - we still make a lot of stuff in £ value terms, but it tends to be small production runs of expensive stuff. Scientific instruments, aerospace, weapons, pharmaceuticals. The industrial relations disaster of the 1970s caused a backlash against vast production lines - not very many of those left apart from Nissan.
flukus 7y ago
> You'll find many of these companies in rural regions. In so much of the developed world we're becoming more and more politically split along urban/rural lines, is this the case in Germany is does their distributed industry even things out?
- usrusr 7y ago
  It has always been a struggle and after reunification federal focus has shifted, naturally thethe rural/urban imbalance took the backseat to the easy/west imbalance, city or not. But a lot of anti-centralistic intertia has remained, and a lot of the political fight against rural/urban split was on state level anyways. The split is growing in Germany just like everywhere else, but it probably hasn't proceeded as far yet.
- lispm 7y ago
  Growing larger cities is also a trend in Germany. Especially the young mobile population moves to cities to study at universities. Cities are also attractive for their infrastructure. Small and medium sized towns often (not always) struggle with that and are looking into ways to become more attractive... Just imagine, Adidas (sports, revenue 21 billion Euro), Puma (sports, 4.6 billion Euro revenue) and Schaeffler (14 billion Euro revenue, from manufacturing) have their home in Herzogenaurach, a small town in Bavaria with 23k population. http://herzo.adidas-group.com/#working/places/intro http://herzo.adidas-group.com/#working/places/intro How do you get people working there? When Munich, Berlin, etc. are trending?

by lispm 7y ago

cosmodisk 7y ago

Was half way through your post when I was about to write my comment about hidden champions,glad you mentioned it. This is something that tends to be overlooked quite often. Very very few countries have a model like this.Take the UK, as an example.An average town or even small city rarely has anything that isn't just for local market. For a lot of companies it's kind of fine,as the market is big enough to earn comfy living for the owners, but that's it. The default in most countries is something like: " ok,I'll sell this in local area and maybe,just maybe,if I become super big,then we'll start exporting". It's shame really. I see this mentality in my own country, Lithuania,where an average purchasing power is relatively low and the market is super small(1/5 of London population) ,yet the default option is to start locally. Luckily the IT sector is different,where most businesses default to foreign markets.

jotm 7y ago
It's absolutely baffling. I've been looking into it for cheeses and ales, so many UK producers flat out say "We only ship within the UK" even though the cost of shipping is covered by the buyer and it would cost nothing, not even extra paperwork, to ship to the EU (for now).
- cosmodisk 7y ago
  Sometimes owners deliberately wabt to stay small,I do understand it, however I don't get it as well when people refuse extra orders,as in your case.
- gandalfian 7y ago
  Bonded warehouses exist for a reason. Internationally shipping alcohol or (tobacco) is genuinely complicated even within the eu. Cheese probably just a perishable pain to post far.
NeedMoreTea 7y ago
There used to be tens of thousands. In 1979 there was a policy decision to end UK manufacturing and focus on the City and services. No end of highly successful UK export businesses disappeared. Many of them quietly a world leader. Many of them famous names that had existed for a century or two. Sheffield was the steel city with all the production, infrastructure and suppliers to feed all the cutlers, precision instrument makers, tool makers, scissor makers and all the other specialisms surrounding tool steel and stainless steel. The Potteries, well you can probably guess that one. So it went on around the regions of each city and across the country. I go beyond it being a shame, it's criminal, or bloody well should be. We have had no chance of balanced export books since 1980. If you search around the web, there's a lot of archive sites showing what was lost -- though in truth it was far more an intentional destruction.
- xadhominemx 7y ago
  Probably a good thing that an effort was made to transition Sheffield to a services-based economy because steel was going away no matter what.
  - NeedMoreTea 7y ago
    Can't agree. Mild steel and bulk wasn't the strategic industry it was once considered by every nation, and was going as it was predicated on price. That's probably fine unless there's a major war. The hugely expensive deep specialisms, and really unusual steels and steel products that were made in just three or four places in the world, one of them Sheffield, need not. cough Iraqi supergun -- though Sheffield Forgemasters are actually one of the few still around, thanks to govt underwriting due to their nuclear capability. Funny that. Nor need the manufacturing of some of the world's finest precision tool and instrument makers. A tiny few survive, despite government best effort, not because. Most were eagerly snapped up by US, German, French or Japanese -- if they still exist at all, it's as name made elsewhere and a fattening of someone's portfolio. Of course many disappeared without trace, and of course a fair selection that weren't worth saving having got fat and lazy, or overly unionised. While morons were cropping up on UK news throughout the eighties and nineties trying to persuade us that making anything was obsolete (and so frequently that it quickly got as overused, tedious and cliched as the recent Theresa May election slogan "strong and stable government"), Germany quietly got on with new services and manufacturing. Their mittelstand(sp?) and technical training regularly cropping up as something for the rest of Europe to envy. UK disassembled the last of the technical colleges, apprenticeships, and all the regional centres of knowledge and excellence. No matter how keen you're unlikely to pick manufacturing for your new UK business, as we are exceptional in the extent of our disassembly of the sector. How did Sheffield's future as a centre of telephone call centres work out? Or Central Belt's reinvention as world centre of electronic and IT manufacture? How did the focus on the City work, when right after the "big bang" Wall Street went on a shopping spree of stupendous size leaving few native survivors?

nostromo 7y ago

I'm reminded of Trader Joe's -- a chain most people think of as a California-based chain of health food stores -- but has actually been owned by a media-shy German family for 40+ years.

tathougies 7y ago
Trader joes was not a german export. It was started by a Californian, and sold to a german family.
- deleted 7y ago
  [deleted]
chrisco255 7y ago
Maybe Aldi is a better example? Edit: Didn't know this, but Aldi bought Trader Joe's and currently owns it.
- leipert 7y ago
  ALDI Nord owns Trader Joe’s. There are two independent conglomerates called ALDI. Aldi Nord and Aldi Süd (North and South). (History: Two Brothers who fought) They devide Germany and the rest of the world between each other. Have a look at the world map: https://commons.m.wikimedia.org/wiki/File:Aldi_world_map.png#mw-jump-to-license https://commons.m.wikimedia.org/wiki/File:Aldi_world_map.png...
  - dboreham 7y ago
    See also Samuel Smith and John Smith.

iSnow 7y ago

There's also one glaring error in the text that can only be explained by hindsight wisdom: >The Single Market launched just four months later, in January 1993, though something like it had been in the works for a while. But on that launch date was there anyone in Europe with any doubts about which nation — which “area” — was ascendant, economically speaking? Germany in 1993 was in no shape or form to be the ascending economic superpower, in fact 1993 was a recession year: https://d3fy651gv2fhd3.cloudfront.net/embed/?s=wgdpgerm&v=201907011545V20191105&d1=19900101&d2=20000101&h=300&w=600 https://d3fy651gv2fhd3.cloudfront.net/embed/?s=wgdpgerm&v=20.... That of course is due to reunification which was extremely costly at the time and the implosion of the former socialist economy hindered growth massively. Germany got extremely lucky with its timing - when the exchange rate for the DM to EUR conversion was fixed, the German economy was still in dire straits, so it was basically undervalued. But the German companies used the sudden strategic location of the country between east and west to massively invest in production capacities in the former eastern block to keep production costs low while selling to the industrialized neighbors in the west.

biztos 7y ago

Some members of my extended family own a company (actually a small family of companies) in that category, and of course it's in Swabia. They are market leaders in some very high-margin things most people never think about, and interestingly they sell a lot in Asia, where one might expect them to be more vulnerable to competition. German Quality is a huge brand worldwide. I also have a friend in Berlin who's sort of inheriting the family business, manufacturing something so random I always forget what it is. Involves rubber I think. High margins, privately-held family business, etc. I really think a lot of these companies, if they were in the US, would either go public (the bigger ones) or be sold up to a bigger concern. But in Germany you'd have to pay a really big premium to get your hands on someone's multi-generational family business. As long as there are kids to inherit the factories then that's what they're gonna do.

usrusr 7y ago
Another way how this kind of company would likely fail to continually thrive in the US, even when it's not sold: those niche markets are so small that even when completely dominated the profits would be insufficient to get date-in-Hollywood rich or groom-yourself-for-presidency rich. So if you have bigger ambitions than the niche allows you'd hand over the reins to a "maintenance manager" and focus on something more promising. Those small niche specialist businesses reach excellence through a loyalty to whatever field that made them big that is fueled by limits to ambition. (I think I already posted this idea on some other HN that) (and the businesses tend to be filled with a weirdly self-contradicting mix of nationalistic hybris and massive imposter syndrome)
DraftDodger67 7y ago
Therein lies the problem - the current fertility rate for German mothers is only 1.42. How long until there are no more Germans left to run these companies?
- lispm 7y ago
  Fertility rate in Germany is currently at 1.57.

lifty 7y ago

Very good point! In this video [1], economist Richard Werner rants about the existing central banking influenced economies, but at around the 47th minute he mentions the roughly 1500 "champions" (USA has 300), and he argues that this is the case because of the small local community banks that are present all over the country. [1] https://www.youtube.com/watch?v=8FT-zyTX2nE https://www.youtube.com/watch?v=8FT-zyTX2nE

elfexec 7y ago

> Germany was export-oriented before the Euro, during the transition and with the Euro. Germany was export-oriented before reunification, during reunification and after reunification. Germany was export-oriented even before WW2. It's funny whenever you read about "How germany or japan became industrial powers after ww2". With many crediting the US or whatever aligns with their agenda. The truth is that both germany and japan were industrial powers before ww2 and they just reverted back to what they were after ww2. > For example Germany is not a centralized economy (like the UK or France, which are grouped around London and Paris). Germany is most definitely a centralized economy. Just because it doesn't have the dominant city center like London and Paris doesn't mean it isn't centralized. The reason why germany is a manufacturing power is because german federal government and the state decided to make germany export-oriented manufacturing power. While in the UK, they decided to become finance oriented and service oriented and shifted their manufacturing overseas. Which is smarter in the long run, only time will tell.

lispm 7y ago
> doesn't mean it isn't centralized Not really. If you look at successful companies, they are all over the country - though not much yet in the former East Germany, for historical reasons. > because german federal government and the state decided to make germany export-oriented manufacturing power Germany has been manufacturing/trade oriented for centuries. The 'federal government' does not decide these things on their own just now. Germany does not work like that - there is no 'federal government' which decides the economic policy in a centralized manner, WITHOUT involvement of the Bundesländer and/or the companies/employees/... > finance oriented and service oriented Germany is also finance and service oriented, just to a slightly different degree and with slightly different domains. Even the manufacturing companies are often extremely service oriented. Selling not just products, but a lot of services around these products. > While in the UK, they decided to become finance oriented and service oriented and shifted their manufacturing overseas. Good luck with that.
pjc50 7y ago
> Just because it doesn't have the dominant city center like London and Paris doesn't mean it isn't centralized. That's .. kind of the definition we were using? If it's centralized, in which city is it centralized? The London dominance of the UK is almost debilitating; it's very hard to get any kind of policy discussion that sensibly includes even Birmingham or Manchester. Let alone all the Brexity post-industrial towns. It's also not entirely true that the UK has lost "manufacturing" - we still make a lot of stuff in £ value terms, but it tends to be small production runs of expensive stuff. Scientific instruments, aerospace, weapons, pharmaceuticals. The industrial relations disaster of the 1970s caused a backlash against vast production lines - not very many of those left apart from Nissan.

flukus 7y ago

> You'll find many of these companies in rural regions. In so much of the developed world we're becoming more and more politically split along urban/rural lines, is this the case in Germany is does their distributed industry even things out?

usrusr 7y ago
It has always been a struggle and after reunification federal focus has shifted, naturally thethe rural/urban imbalance took the backseat to the easy/west imbalance, city or not. But a lot of anti-centralistic intertia has remained, and a lot of the political fight against rural/urban split was on state level anyways. The split is growing in Germany just like everywhere else, but it probably hasn't proceeded as far yet.
lispm 7y ago
Growing larger cities is also a trend in Germany. Especially the young mobile population moves to cities to study at universities. Cities are also attractive for their infrastructure. Small and medium sized towns often (not always) struggle with that and are looking into ways to become more attractive... Just imagine, Adidas (sports, revenue 21 billion Euro), Puma (sports, 4.6 billion Euro revenue) and Schaeffler (14 billion Euro revenue, from manufacturing) have their home in Herzogenaurach, a small town in Bavaria with 23k population. http://herzo.adidas-group.com/#working/places/intro http://herzo.adidas-group.com/#working/places/intro How do you get people working there? When Munich, Berlin, etc. are trending?