Germans catching up with cut-and-thrust capitalism

East Germans are not the only ones in recent years who have had to learn fast the hard laws of consumer-driven economics. After 50 years of a locked-in, anti-competitive system hidebound by rules and regulations, the whole country is finally catching up with Britain and America's gloves-off capitalism.

"Nothing is as it used to be in Germany," said Joachim Fels, an economist with the Wall Street firm of Morgan Stanley Dean Witter and Co. "Competition has become the new organising principle of large parts of the German society." West Germany once had more sacred cows than India - inviolate rules that banished the cut-and-thrust capitalism of London and New York.

The "social marriage" between wages, regulations, unions and bosses has gone, replaced by choice and customer service. Gone are the behemoth nationalised industries. Germans can now choose their own electricity supplier as prices for energy have plummeted by 30% in a year since regional utility companies lost their monopolies.

Gone, too, is the state-owned telecommunications company and its high prices. Domestic long-distance calls are down 43%.

Gone are the cosy price-fixing cartels run by the supermarket chains - banished by upstart invader Wal-Mart, which began an aggressive expansion here last year. Gone are the attitudes that kept Germany locked in a 19th-century mindset while its industries forge ahead into the new millennium.

Collective bargaining between the giant unions is giving way to individual contracts for workers, while the national retailers' association seems finally set to back demands for Sunday shop opening.

Brussels is slaying other demons, too. The German book-pricing cartel, meant to protect German publishing houses, is under attack from the European Union, while a German news magazine won a landmark court case over its article listing the best doctors in the country - for long an illegal act.

There is a massive upsurge in the demand for private pensions and health coverage.

While Germans fight a rearguard action against Chancellor Gerhard Schroeder's bid to bring in #10 billion worth of welfare budget cuts, the pragmatists in society are trying to bolster an uncertain future with policies of their own.

Gerhard Schber, a Munich-based insurance consultant, said: "Of course, people don't want to swallow bitter medicine but the more sensible elements of society realise that the cushion that was always there looks like being pulled from under them almost immediately."

The demand is for private health, bonds, endowments and private pensions that will top up anything they may get from the state.

Norbert Walter, chief economist of Deutsche Bank, said: "While the changes take place and will ultimately be irreversible for society, there is an old guard determined to cling to the ancien regime. There is still a belief among my generation of Germans that Germany can preserve its prosperity by preserving the system.

"We Germans love this cosy little world because it brought us almost everything we wanted."

Globalisation and the rapid pace of change have done for this insular world, he said. Unions and the established church remain the most intense opponents to change for the simple reason both have the most to lose - the unions their industrial muscle and the church its flocks if consumerism on Sundays lures them into temples of mammon instead of worship.

Change is also coming in the fields of education and insurance, mortgages and personal finance.

Joachim Messer, a financial analyst in Frankfurt, said: "More and more competitive decisions are demanded from Germans - not just over the choice of their retirement or health planning, as these are things they see society no longer doing for them, but also over such things as the schools their children attend and the investment decisions they make.

"East Germany always promoted itself as the cradle-to-grave society but, in reality, it was here in the capitalist west where such a utopian ideal came closest to its reality.

"Now the harsh winds of change are blowing everywhere and Germans, always quick to learn, are having to adapt accordingly."

Copyright 1999
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