David Scrimgeour MBE
DS Consulting, Munich
As Scotland heads towards next year’s referendum, there’s a lot of interest in what is happening here across Europe. The EU is one of Scotland’s main trading partners – but how much do we know about our near neighbours? How much to we know about Germany in particular, the powerhouse economy that’s keeping much of the EU afloat? Should the Scottish Government be investing as much effort on Berlin as it does on ‘Tartan Day’ in New York?
David Scrimgeour MBE of DS Consulting is a Scots lawyer and inward investment specialist who’s lived in Munich for many years. From today, he’ll be giving us regular insights into developments in Germany. After all, there could be a German Chancellor with the very Scottish name of David McAllister. We’ll need a ‘special relationship’ with him. (ed.)
Not so very long ago Germany had been effectively written off by Superwoman fund manager Nicola Horlicks who said “I’d rather be the UK than Germany right now with its manufacturing legacy.” Apparently companies that made things were by their nature unable to generate sufficient value for investors.
BMW in Munich
The Economist had numerous covers and leaders over the years depicting Germany as a failing, stumbling, sclerotic basket-case. Private equity pundits also mercilessly derided the miserable single-digit returns which were all that could be squeezed out of a hopeless economy. However, all this economic failure strangely did not deter the Anglo-Saxon investors from invading the property market in droves to gather up the low-hanging fruit which local German investors had spectacularly failed to notice.
How things have changed – or so it seems. In fact everything here is pretty much the same as it was 20 years ago. Cars are still being built by German-owned companies, houses are for living in, machinery is being exported, the saving rate is still 11% and your public utility recycles your electricity payments to invest in community infrastructure. Life was and is good for the vast majority and there has always been enough money around for long foreign holidays, including to Scotland.
Germany has an excellent and integrated
transport infrasturture
What has changed, though, is the European and global context. Suddenly, Germany looks like a winner because other economies are falling behind and is therefore expected to bail out the losers. Unsurprisingly, this expectation has created resentment among Germans. The positive result is that many people from outside, for the first time, are looking more closely at this fascinating country and actually trying to understand how it works.
The answer to this question is necessarily complex for a big diverse country with a population of over 80 million and 16 states or “Länder”. Some aspects are easier to understand. Anyone who came to the World Cup in 2006 experienced fantastic weather, great stadia, impressive transport infrastructure and, crucially, peaceful people and wonderful beer. For many it was like discovering a new continent where fantasies turned out to be true, at least for a few weeks.
The average German rarely moves house
In a similar way anyone who has been living here for long enough or doing business with Germans over the years will have an appreciation of these and other positive qualities. For others though, with no contacts or experience, this nation is a complete mystery which, plainly, can no longer be explained away as inferior or moribund by ill-informed fund managers.
So what are the key cultural characteristics, government policies, economic factors and life philosophies that have created this giant? Everything starts with the individual and what is most striking is their natural homogeny in terms of a collective understanding of the basics. People think the same way and this cuts down the amount of time and effort needed to agree about what to do. Political and industrial disputes tend to be about emphasis and fairness in application rather than endlessly raising questions about ground rules.
There is a common understanding too that it will take time to do things properly so a long term approach is obvious. The average German lives in a house for 17 years compared with the typical Brit who moves house on average 8 times in his/her lifetime. So while the British are spending their time and energy packing and unpacking the Germans are busy building cars or enjoying well-earned holidays.
The main characteristic which drives nearly everything here is an extreme aversion to uncertainty. This explains the excessive use of insurance, the very conservative approach to finance (recently a positive), the massive legal superstructure and predominance of lawyers in society and also the striking lack of entrepreneurial activity. In a rapidly changing and evolving world this need for certainty and predictability may be the German Achilles heel. Although looking rather invulnerable at the moment is Germany heading for the sickbed in the not-too-distant future?
