The ABC’s Foreign Correspondent was in Bavaria this week presenting an interesting perspective on the German economy and why it represents something of an anomaly in the trend of struggle in Europe (A Bavarian Fairy Tale). Despite the presenter Eric Campbell’s persistent patronization of Bavarian culture and heritage I was positively transfixed for the half-hour duration of the show.
The central focus of the show was the concept of Mittelstand. Mittelstand businesses are commonly promoted as the basis of Germany’s current economic strength. They represent 99.7% of all companies in Germany, over 70% of German employees in private business work for a Mittelstand and 40% of sales tax revenue is from Mittelstand businesses. Yet the ABC presenter proffers that Mittelstand is a word which is untranslatable. This of course is a nonsense and not only is it possible to translate and understand, it is important that we do so.
Originating from a different time of social classes, a Mittelstand is a family business and typically a business which is a central focus of a community. It can be an SME but it need not be. Typically, a Mittelstand is an export-oriented manufacturer, a fact which belies the common-stay that first world countries can’t compete due to higher overheads and living costs.
An impressive example in the ABC show is Kathrein - a family owned, world leading manufacturer of telecommunications products with a revenue of EUR1.35 billion in 2011, 66% of which was from foreign exports. It’s the tradition of these businesses that impresses me most. They play an important role in their communities and have a conservative financial philosophy - if growth is to be achieved it will be real and based on real effort, not through non-transparent or convoluted financial mechanisms. Professor Anton Kathrein, managing director of the company bearing his name, is personally liable for his enterprise. He promotes this as a powerful motivator. Kathrein holds no debt, has no aspiration to float on public exchanges or to leverage its wealth for anything other than real market penetration. The idea of a personal guarantee is scary but you have to admit this is an impressive, somewhat counter-intuitively cautious and evidentially sustainable approach.
All the while, “austerity” didn’t rear it’s ugly head. A Mittelstand finds the middle of the road, compromises, avoids extremes and lives within its means.
Despite being so engrossed by this story I could not avoid the thought that of course Germany is not blameless in this ongoing crisis. Low interest rates at the ECB were maintained in part to inject cheap finance into a earlier German economy in the doldrums. And so I expect rather than Mittelstand being some panacea, it is the romantic notion of a man making a profit for the effort of producing something real that I am attracted to.
Nevertheless there is a lesson of restraint to be learned from Germany. Eric Campbell and the world might well patronize Germany and Germans for their fashion sense and sense of humor but as struggling economies plot their return to traditional strengths (see the resurrection of Ireland’s agriculture industry) and communities return to humanity, seriously, nobody is laughing at Lederhosen - especially not with business booming.
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