German Industrial Policy: An Overview

The German political economy and its comparative advantage in the production of high quality, internationally competitive manufactured goods has long been an object of study. Yet a remarkable lack of consensus exists as to the key institutional features of the German model, particularly regarding the role of the national state in industrial policy. This paper argues, in the face of widespread calls for withdrawal of German state institutional frameworks governing the labour market in particular, that the German framework is not as rigid as claimed, and that the innovative capabilities of German industry would be best served by incremental changes rather than wholesale dismantling of existing structures.