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Tuesday, October 12, 2010

 

Political Forces In Germany

As a student of economics, I am an avid reader of The Economist, Forbes, Businessweek, WSJ, and any other publication even remotely economic that I can lay my hands on. For the better part of two years I have been reading about Germany's growth, relatively strong economy, and how they are the backbone of the EU economy. While reading Chapter 4 in Rise and Decline, Olsen speaks to his prediction that Germany's growth should have slowed due to the amount of time the country has been stable since the end of WWII and the growth of distributional coalitions. After reading this, my curiosity was piqued because it conflicts with what I've understood based on my other readings. What I found was fascinating.

I began by looking at Germany's GDP growth from 1970 to present day and comparing it with Japan's. While there has been a slight decline in Germany's real GDP since the late 80's, it is nowhere near what has happened with Japan and not exactly what I expected based on Chapter 4. Post reunification and through present day, Germany has continued to grow at a regular and healthy rate, including having survived the current financial "crisis" better than most.

One aspect of Germany that make its unique to Rise and Decline is the form of government that has been in place since WWII reconstruction and post reunification. Similar to our states rights, Germany maintains a federated union with a weaker central government. The majority of power is held in the 16 federal states with much less overlap of powers than found in the US. More on why this matters in a moment.

I next examined the existence of distributional coalitions. While the German society encompasses more than 1000 registered lobbying organization, they are organized much differently than in the US. Many of the major interest associations in Germany channel their interests into large, encompassing, unified, non competitive organizations with a direct relationship to the legislative bodies. The 4 large, major organizations are also a federation of the looser, more specific type coalitions. The interests of these parties is institutionalized in Germany and they play a large part in policy formation.

So, based on Olsen's writing, how can we explain Germany's rather steady rate of growth? Well, I think between The Logic and Rise and Decline, Olsen very much predicted what has happened in Germany, he just didn't know it would happen in Germany! Based on The Logic, we know that small groups or federated larger ones are more likely to act and to be successful than large latent organizations. Thus the federated nature of both the distributional coalitions and the form of government in Germany are more inclined to act on an agenda. What is the agenda based on? Well, according to implication 5 in Rise and Decline, we know that encompassing distributional coalitions may have an incentive to make their society more prosperous. Furthermore, compared to other EU nations, Germany's social programs and wealth redistribution programs are significantly lower per capita than the other nations present to us in Rise and Decline. Olsen also predicts this in implication 5 because the encompassing coalition will not seek to redistribute in excess of the shared burden. THAT is what I believe has happened in Germany. The extension of the propensity to act given to us in The Logic, combined with the incentive provided in Rise and Decline provide us a tool to view the Rise and Decline of Germany. Although Olsen gives us the example of Sweden to view in this light, I believe Germany may be a better example.

Sources: CIA Worldbook, Worldbank: World Development Indicators, http://www.germanculture.com/

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