Germany is anything but a low-wage country: The average hourly compensation -- wages plus benefits -- of German manufacturing workers is $48, well above the $32 hourly average for their American counterparts. Yet Germany is an export giant while the U.S. is the colossus of imports.
These domestic employee-retention pacts are an outgrowth of Germany's more consensual, stakeholder version of capitalism. German workers' organizations have a far greater say than American workers do in the conduct of their employers. By law, employees in large companies get the same number of seats on corporate boards that management does. Unions and management collaborate to ensure that German manufacturing retains and expands its high-quality products and markets. IG Metall has been working with automakers, for instance, to train workers to mass-produce electric cars. "Our goal is to really retain high-value-added manufacturing in Germany," Martin Allspach, the union's policy director, told me when I visited IG Metall headquarters in Frankfurt in November.
The German experience also shows that the structure of finance can have a profound effect on the retention of manufacturing. An entire stratum of German banking, municipally owned savings banks, provides the funds that enable the nation's prosperous, largely family-owned midsized manufacturers, the Mittelstand, to upgrade themselves into export dynamos.
About two-thirds of Germany's small and midsized businesses get their loans from these banks, which shun capital markets and are restricted to doing business in their own towns. "Over the past decade, banking largely became a self-fulfilling activity," says Patrick Steinpass, the chief economist of the national organization of savings banks. "But our banks are restricted to doing business in their regions; they have to concentrate on the real economy."
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