The German Economy

The German Economy is predominantly a processing industry. This observation has been the case since the time of East and West Germany ahead of the collapse of the Berlin Wall and unification. The processing industry in Germany has been predicted to be dominant for the next coming decades as long as the GDP defined by the unification since the mid 1990s. Prior to the unification, more that two fifths of the Germans labor force were deeply engaged in the manufacturing sector.

The main products in the manufacturing period were mechanization, motor industry, electrical engineering, industrial chemical manufacturing, optics iron and other metal dealership. The German manufacturing industry is developing at very high rate and accounts for one third of the current GDP. (German Country Studies “Industry”). Most parts of Germany have various kinds of industry. The Ruhr area at the North Rhine-Westphalia is known for coal and metal ores as well as other associated industries. The larger German cities are surrounded by industries.

These cities are Munich, Hanover, Stuttgart and Frankfurt and are having major chemical industries around them. The automotive industries are concentrated at Bavaria and Baden –Wurttemberg toward the south of the country. . (German Country Studies “Industry”). In the East of Germany, the industries are concentrated at Saxony and Thuringia among others. Specifically they are found at Hale, Dresden, and Leipzig. Saxony was famous for technology in the period of WWII. The Elbe and Rhine areas are having massive chemical industry investments.

Studies show that the Industries in the South have better growth prospects as compared to those in the North which were only able to employ a quarter of their population. In comparison, the industries at Berlin were able to employ between 25-35% of the adult population. The most promising data came from the South that employed more that 35% of the population. (German Country Studies “Industry”). The success of the German industry lies in the small and medium industries that are popularly referred to as Mittelstand.

These firms have work force not more than 500. The small and middle industries make up 98% of the German firms against the backdrop of the famous industries like Daimler- Benz, Bayer, Volkswagen, and others. These same firms also account for more that four fifth of the total Germany labor force, as well as for the majority of the export for the country. The German Government has in the past decades been assisting the Mittelstand to gain political mileage as well as sustain the countries economy.

The government has come up with policies that encourage cooperation amongst the firms rather than competition so that the prices are affordable by the public. The Mittelsand got an economic boost post unification of Germany in form of tax breaks. This strategy was also used to lure more investors into Germany. (German Country Studies “Industry”). Relevant years: 1988 to 1989; 2006 to 2008 • Collect the data for high cycle • Which industry sectors have been doing well? The German economy that has been strong in the past to overcome inflation showed signs of giving in to the strong inflation from 1988.

This period showed little growth in the economy. The DM was very weak and the good oil prices did not help in the prevailing economic situation. The government’s efforts to boost the economy included a package of $ 2. 8 billion to a previous $ 4. 8 billion tax reduction. These efforts did not trickle down as fast as the people needed it. (Tagliabue, 1) The German economic sector that has been most prosperous is the mechanical engineering sector. This gave Germany a total of DM 240 billion in 1989 but these contributions were traditionally dominated by the Mittelsand.

The mechanical engineering sector has over 4,000 companies who are spread all over the country. Just 3% of these firms employ greater than 1,000 workers. This sector has an output of greater than 18, 000 different units. 66% of these outputs are exported overseas. (German Country Studies “Industry”). The automotive industry is the second best performing sector in Germany with more that DM 217 billion being realized in1989. More that half of the products is marked for export with the famous automaker leading the chain.

The electrical engineering sector has been ranked third in the German Industries. The contributed more than DM 207 Billion in 1991 to the economy. The leaders in this sector are the Siemens, Bosch and other firms. This sector has prime electric generators that are focused on exports. In the same period, the chemical industry turned over DM 166 million. These were attributed to Bayer, BASF and Hoechst. More than 50% of the products from this sector are for export. (German Country Studies “Industry”).