The coziness of German capitalism

As a proud German (even though I managed to stupidly lose my citizenship), I often point to Germany as a good example of a country that makes successes of things like worker representation on corporate boards and low homeownership rates. But there are problems with the German system too.

What we’re reading: Stanford’s Adrian Daub has a fantastic essay in TNR explaining how Germany’s all-too-cozy corporate sector tends to close ranks around its bad apples, rather than ejecting them.

  • Wirecardis, of course, Exhibit A — the fraudulent payments company that was fiercely defended by, rather than prosecuted by, the country’s stock-market regulator.
  • “The German economic systemtends to socialize scandals, partly because major companies are incorporated into a broader fabric,” writes Daub.
  • “Checks on these companiesoften come from outside Germany. The big scandals of recent years — which in addition to Wirecard included the Volkswagen emissions scandal and Deutsche Bank’s persistent involvement with Russian money laundering — were uncovered by the Financial Times, Californian regulators, and European Union watchdogs, respectively.”

The bottom line: Germany doesn’t produce aggressive, world-beating companies like Uber or Amazon, writes Daub, precisely because its companies are so comfortably coddled within the regulatory apparatus of the state. The state might not have much in the way of teeth, but it tends to smother the animal spirits of capitalism all the same.


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