Insight: The Mittelstand - one German product that may not be exportable

Wed Nov 14, 2012 9:46am EST
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By Sarah Marsh

BERLIN (Reuters) - Philipp Klais, who runs the organ manufacturer in Bonn that his great-grandfather founded in 1882, gets requests every week from foreign officials as far away as Korea to visit his company. This baffles him.

"They want to find the secret to our success," said Klais, whose organs stand in concert halls and churches from Taiwan to Argentina, as well as in Germany. "But we don't see any, we just do what we do, and have been doing for the past 130 years."

Germany's "Mittelstand", the medium-sized and often family-owned manufacturing firms to which the country owes much of its exporting prowess, has become the envy of political and business leaders all over the world and they are keen to emulate it.

"Other countries wouldn't be in as much of a crisis if they had a stronger Mittelstand," said German Deputy Economy Minister Ernst Burgbacher, exuding pride in a sector that accounts for half of national output and has helped Germany to weather the global financial and euro zone crises.

But the Mittelstand, with roots in the disparate statelets of mediaeval Germany and sustained by a conservative, small-town culture, is a model that cannot be automatically exported to fundamentally different societies.

French industrialist Louis Gallois, who oversaw a recent study on boosting competitiveness in France, does not believe in copying the German model. Gallois described the fashionable adulation of the Mittelstand as "a passionate fixation" that ignores its weaknesses.

Others argue that the Mittelstand model is not well suited to the 21st century. Younger generations are increasingly reluctant to take over family firms, which may struggle to find bank funding in an era of more cautious lending.

"Members of the Mittelstand tend to be geographically immobile, inherit professions and companies from one generation to the other, follow rather conservative life-style patterns and usually prefer the status-quo," said Andreas Woergoetter of the Organisation for Economic Co-operation and Development (OECD).   Continued...

German organ builder Philipp Klais is pictured in front of organ pipes in his workshop in Bonn November 13, 2012. REUTERS/Wolfgang Rattay