Germany’s Economic Model: Lessons for Ukraine

Germany's economic success story after World War II is well-known, but there is less awareness of its underlying factors. Zeynep Nettekoven, Hansjörg Herr and Petra Dünhaupt shed light on these in our new study “Towards Prosperous Development for Ukraine: Theoretical Considerations and German Experiences”. The paper examines the fundamental approaches to the implementation of economic policy in Germany, and also argues why this model is worth following.

Drawing on German experiences, the authors recommend that Ukraine follow an economic upgrading approach, with horizontal and vertical industrial policies at its core. This entails not only investing in education and infrastructure, but also promoting specific sectors and businesses, both small and large.  Economic upgrading needs to go hand in hand with social upgrading, highlighting the importance of a relatively equal income distribution and a well-developed welfare state.

In the theoretical sections, the concept of “varieties of capitalism” is used to argue that Germany is a coordinated market economy in contrast to the liberal market economy in the USA. The features of “cooperative capitalism” in Germany are, among others, the participation of workers in the management of companies, the existence of development banks, and a comprehensive system of dual education.

As for overcoming such challenges as the oligarchization of power, poverty and mass emigration, time-tested recipes are put forward: the development of the trade union movement, which, in conjunction with other civil society organizations, will seek to increase wages and living standards. The conclusion follows that Ukraine should now prepare a well-thought-out post-war development policy that will allow it to combine economic growth with an equitable distribution of income. When developing the conceptual framework of such a policy, the experience of post-war reconstruction in Germany should be considered.

Overall, the team of authors is optimistic about the future of Ukraine, which can now lay the foundation for long-term prosperity: "With the right policies and support from its international partners, Ukraine can turn crisis into opportunity and build a resilient economy while maintaining control over its own development path".