Can a person cause global inflation

The long shadow of hyperinflation


Germany has some special features when it comes to dealing with financial issues. These include the low income from the extensive international investments of this export-oriented economy, the inadequate provision of risk capital even decades after the first finding, and the very restrictive regulation of public borrowing compared to many similarly developed economies. The three aspects have a common pattern insofar as they indicate a lack of willingness to rely on future growth and thus also make it clear that there is an acceptance of risk. How can this high preference for security be explained? For this purpose, in the tradition of Geert Hofstede, questions are asked about the formative cultural attitudes and the double experiences of hyperinflation in the 20th century are identified as the historical background for Germany. What economic policy options there are despite habitual fixations will be discussed in conclusion. The answer lies in the mobilization of state investments, an innovation infrastructure and a positive image of the entrepreneur.


Germany has some peculiarities when it comes to dealing with financial issues. These include the low return from the extensive international investments out of this export-oriented economy, the inadequate provision of venture capital even decades after the first finding, and the very restrictive regulation of public debt compared to many similarly developed economies. The three aspects have a common pattern insofar as they indicate a lack of willingness to rely on future growth and to accept risks. How can this high preference for stability and security be explained? For this, in the tradition of Geert Hofstede, questions are asked about the formative cultural attitudes and the twofold experience of hyperinflation in the 20th century are identified as the historical background for Germany. What economic policy options there are despite habitual fixations will be discussed in conclusion. The answer lies in the mobilization of state investments, an infrastructure for innovation and a positive image of entrepreneurial spirit.

Inflation is a mass process in the truest and narrowest sense of the word. The confusing effect it has on the populations of entire countries is by no means confined to the moment of inflation itself. It can be said that there is nothing in our modern civilizations other than wars and revolutions that can be compared in scope to inflation. (Elias Canetti 1983, p. 202)

Three observations and an explanation

(1) Despite all the success of its economic system and its business model, Germany is conspicuous in an international comparison when it comes to growth confidence and strategies for action. Three observations in this context suggest the question of their internal connection. First, there is the observation that Germans invest their wealth less profitably than others, both domestically and abroad (Hünnekes et al. 2019a; 2019b). Secondly, there is the finding, which has long been evident in Germany, that the provision of risk capital, especially for the growth phase of a start-up company, is still a considerable problem (Albach 1983; Albach and Köster 1997). Thirdly, there is also the peculiarity that Germans prefer a rather strict credit regulation for public budgets by international comparison, which was anchored in the Basic Law in 2009 with the debt brake (Haffert 2016; Hüther 2019a). The great financial and economic crisis promoted this development through the sudden increase in the debt ratio from 60 to 80%, the exogenous shock of the Covid-19 pandemic did not fundamentally change anything like the repayment plans from the year onwards, despite renewed sudden and massive new borrowing 2023 signal.

All three findings have a common pattern and thus an identical cause in that they can be traced back to a certain attitude and willingness to take risks in German society, which is remarkable in comparison to other countries, for example in the G7 group. The unwillingness to rely on future growth and thus also to make a risk acceptance clear goes hand in hand with a high preference for security. In Germany, these values ​​are right at the top of the scale of socially relevant positions and norms. This can be seen in the investment behavior in times of persistently low interest rates, which is characterized by robust proportions of low-risk and low-return asset typesFootnote 1 (Fig. 1), also on the part of institutional investors: this is where loss aversion and security preference are greatest in a European comparison (Union Investment 2016). It fits in with the fact that, despite the comparatively low returns, German investors are particularly satisfied, i.e. do not struggle with the fact that their pronounced risk aversion comes at a high price in the form of lost income (Das Investment 2017).

(2) These findings are basically not new. Even before the global financial and economic crisis of 2009, the risk aversion of Germans was described as "pathological" (Frankfurter Allgemeine Zeitung 2005). This suggests that the roots go back a long way.

  • One argument is that criticism is justified despite all reliably expanded retirement provisionwhich in Germany, especially in comparison with Anglo-Saxon countries, has long reduced the incentives for private provision and nurtured the illusion of risk-free investments (Fohlin 2016, p. 17 f.). This means that in analyzes of the distribution of wealth, Germany, like other countries with well-developed old-age provision (such as the Scandinavian countries), shows a relatively high concentration (Niehues 2018). In addition, life insurance, which is particularly popular in Germany, has been favored for decades in terms of taxation, which has further strengthened the option of low-risk investments for old age in the eyes of citizens.

  • The is traditionally weak in Germany Stock investment pronounced because on the financing side, other paths have long dominated. A substantial and sustained weakening of the stock markets was connected with the change in rail financing at the end of the 19th century. At first, railway construction had stimulated the stock culture in this country and worldwide, as it was supported by private companies and promoted the emergence of joint stock banks as a financing vehicle; Railways should not be financed from the state budget. But when the railways were largely nationalized by the states in the German Reich up to 1910, shares were replaced by (government) bonds. This significantly weakened the public perception of the share in this country (Breitfeld 1985). In the USA, the railways were run in the form of stock corporations from the beginning, even if the state subsidized the construction considerably (according to recent studies up to 40% of the construction costs; Dobbin and Dowd 2000).

  • Like no other western society, Germans galloped twice in the 20th century Hyperinflation experienced that made private life almost uncontrollable and called the public space of common design of living conditions into question. The fundamental lack of reliability remains a threat to the collective memory of Germans; The collapse of the middle class and the hope for a new center in the second German democracy stand for this, as does the normative positioning of German elites and German economists with regard to macroeconomic governance (Taylor 2013; Hayo and Neumeier 2016; Redeker et al. 2019).

(3) There are obviously socially relevant attitudes and behaviors that are culturally coded and reflect certain traditions. Geert Hofstede determined and illustrated this in his extensive empirical studies (Hofstede et al. 2002). For Hofstede, culture is "the collective programming of the mind distinguishing the members of one group or category of people from others", and "national culture cannot be changed, but you should understand and respect it" (Hofstede Insights undated). The relevant studies aroused a lot of criticism at the time, but in each case made it clear that beyond the specific determinants of a decision (financial incentives, legal status) the cultural coding acts thereby. Hofstede has worked out six cultural dimensions. The following dimensions prove to be significant for the context in question: (1) Avoidance of uncertainty (or risk aversion as an aversion to unforeseeable or contradictory and therefore difficult to resolve developments) and (2) the company's time horizon.

  • The corresponding results show that avoiding uncertainty has a relatively high priority in Germany when comparing societies. Hofstede points out that, based on the ideas of the formative philosophers Kant, Hegel and Fichte, the deductive search for understanding dominates: "[...] be it in thinking, presenting or planning: the systematic overview has to be given in order to proceed. This is also reflected by the law system ". And "Germans prefer to compensate for their higher uncertainty by strongly relying on expertise" (Hofstede Insights undated).

  • In relation to the time horizon of action, the determined value indicates a pragmatic approach. This is associated with a high tendency to thrift and perseverance in achieving goals (Hofstede Insights, no yr.).

These results equip the initial assumption that Germans have a high preference for security, predictability and predictability with empirical confirmation - as far as this is at all possible for such questions. To pursue the thesis that the cultural coding is also the reason for the identified and conspicuous findings seems more than sensible. First, we take a closer look at the preferred financial policy in Germany (Section 2). Then the connection between the experience of hyperinflation, monetary policy and saving behavior is examined (Section 3). This is followed by a consideration of the special features of corporate financing in this country (Section 4). In the end, the question remains what to do (Sect. 5).

The "Swabian housewife" and the "black zero"

(1) The Swabian housewife, who was even chosen by Chancellor Merkel in 2008 as the ideal type of serious business, is emblematic of the security-bound attitude of German financial policy (Merkel 2008): “Here in Stuttgart, in Baden-Württemberg, you just have one Swabian housewife should ask. She would have told us a short as well as correct wisdom, which reads: 'You cannot live beyond your means for the long term.' That is the core of the crisis. ”What is hidden behind this wisdom? Is this wisdom equally meaningful and meaningful for all economic actors - private households, companies and the state?

  • The private households usually experience phases of net indebtedness and phases of net wealth accumulation in the life cycle and have to reconcile this with the different needs during family formation, the development of the family and household in the maturation phase and in the retirement age. Usually people try to take this into account with repayment plans and savings plans in order to have a decent life in old age and to be able to hand over an inheritance to the children. The Swabian housewife is a suitable role model here, if you want - to put it another way - to avoid personal bankruptcy and to pass on the family inheritance responsibly. In the long run, no one can live beyond their capabilities and financial circumstances.

  • At Companies looks different. The theory of optimal leverage alone suggests that a different logic applies here. Under the extreme assumptions of frictionless capital markets, symmetrical distribution of information, a lack of tax distortions and insolvency costs, the capital structure and thus the level of indebtedness are even neutral with regard to the company value (Modigliani and Miller 1958), or to put it another way: indebtedness does not influence the value of an investment. The capital structure becomes more important to the extent that the above assumptions are not fulfilled. But even then, outside financing per se is not an expression of unsound economic activity. It's about paying the debt out of the company's cash flow, which should work well with a strategically based investment strategy. Companies should have sufficient equity to protect themselves against market fluctuations and to be able to meet long-term obligations (company pensions). In the long run, companies can get into debt if it fits the business model and the requirements of the shareholders and is supported by it.

  • The Country Unlike private households and companies, it is viewed as an institution with an eternity guarantee, in which there is a transition from generation to generation in the power of disposal over the public capital stock. The extreme long-term nature of the assumption of existence can be seen on the capital market by the returns on government bonds with long terms. If - as was the case for the first time at the beginning of August 2019 - thirty-year government bonds yield negative interest rates, then the market even expresses a particularly high level of confidence in the existence of the (German) state. For states, for example, it is not a question of definitively paying off debts, but rather a debt level that is sustainable in the long term with a view to macroeconomic performance, the interest rate level and the existing debt ratio, but also the political potency.

(2) The Swabian housewife, who grew up in the life cycle of family housekeeping, cannot do anything with these considerations on the corporate and state sectors. The question of a fair balance between different generations arises from going beyond the perspective of a life biography. The counter-model to the Swabian housewife, who at the time of her death has paid off all debts and leaves behind a respectable net wealth if possible, is the state, which organizes adequate maturity-congruent financing in balance between the generations for the context of its expenditure.

For the state, however, it is not just about growth-theoretical classifications of borrowing, but also about economic arguments. The question of whether the credit financing of government spending stimulates private demand and thus helps to smooth the economy depends largely on whether private households assume that the additional debt will trigger future tax increases and therefore increase the private saving rate (Barro-Ricardo -Equivalence theorem, Barro 1974). In this case, little would be gained from loan financing. However, the supply-side effect of state loan financing is excluded, both in terms of the economy, which can be expected if the uncertainty about the extent of the recessive development and the medium-term potential path is reduced, and with a view to growth, which is the case with productive expenditure (Investments) is positively influenced (on the available empirical studies see Hüther 2019a). The Swabian housewife does not have to worry about government borrowing under these short-term and long-term conditions.

(3) The next question is how a fair balance between the generations can be organized in the actions of the state, and more precisely what should it be based on? The economic argument of pay-as-you-go implies a fair distribution of burdens if each generation participates in the financing equivalent to its increased utility. The loan financing organizes this through the interest payments during the term of the investment project made possible by this. Failure to make capital-preserving investments and non-maturity-congruent financing, which enables investments from tax revenues or only with short-term debt instruments, equally call into question the fair balance between the two generations.

On the grounds of fairness, it can be argued with John Rawls that a fair order “should guarantee the freedom and independence of citizens and continually mitigate tendencies that over time create greater inequalities that can affect social status and wealth as well as the ability to exercise political influence assert and exploit available opportunities ”(Rawls 2006, p. 245). Rawls promotes an appropriate savings principle so that society functions as “a fair system of long-term cooperation between the generations”: “It supports legitimate complaints about our predecessors and legitimate expectations of our descendants” (Rawls 2006, p. 247).

Rawls' central point is not to ignore the generation that precedes his own generation when looking at the future generation. If an earlier generation took the risk of destroying the capital stock, for example through war, this must also be reflected in the legitimate expectations of the descendants, for example with regard to the acceptance of corresponding public debts for the reconstruction of the capital stock. If there is also a need for action in terms of climate policy because previous generations did not react or only responded inadequately, then today this should be done through taxes and New borrowing is financed so that the current generation foregoes consumption in accordance with their overuse of resources and future generations pay for the compensation of damage caused by climate policy. Basically, this line of argument corresponds to the “golden rule of financial policy”.

(4) This savings principle should also be used to measure budgetary commitments by avoiding asymmetry of effects because debts, tax burdens, welfare state equalization and investment opportunities are not considered as a whole. In any case, the Swabian housewife does not offer the right orientation for the financing of public budgets. However, this figure has developed into an icon of German financial policy, the culmination of which ends in the "black zero" and thus demands the annual budget balance ("The zero is, from an economic point of view, a number without particular weight. Its actual meaning is political in nature" " Haffert 2016). The legitimation of this communicatively narrowed objective of financial policy compared to the constitutional situation also includes the narrative that without the debt brake everything threatens to get out of hand as before; this is of course more narrative than reality (Hüther 2019a).

Nothing has changed in the dominant political-economic narrative of the justification of the debt brake when the budget balance of the state budget in 2012 and that of the federal budget in 2014 turned positive. The surpluses in the budget have become a matter of course. Taken in isolation, this is not to be criticized, but it does obscure the sober classification of public credit as an instrument of financial policy (Thöne 2005), especially as a growth-oriented strategy. It ignores the economic costs that can be associated with largely tabooing this method of financing. And it prevents the necessary analysis of what state loan financing means in times of low interest rates (“low for longer” or “low for ever” is now the question of future interest rate developments) and an interest rate below the growth rate of GDP, both in political and in political terms public discourse.

(5) The art of good politics consists in flexibly pursuing the long-term goal under the prevailing macroeconomic and budgetary conditions. In terms of Rawls' savings principle, it is about one fair balance between services received and financial burdens to be borne between the generationsto enable freedom and independence of citizens, an acceptable distribution of social characteristics and wealth, as well as effective political influence and the perception of available opportunities in every period. Restricting this context of action through a restriction - such as the debt brake or narrowing the "black zero" - can only be rationally justified with the expectation that negative excesses (endangering debt sustainability) can then be prevented and (new) other negative effects will not materialize.

This assumes that the restriction of a principally incomplete contract - as which one can understand the state budget (due to planning and approval reservations as well as implementation requirements and commitment authorizations, only general financing requirements (non-affectation)) - leads to a rationally defined complete contract that is clearly consistent Produces results (Richter and Furubotn 2010). But this contract remains incomplete. This is expressed in the fact that, in order to avoid negative collateral effects, further restrictions are often proposed, for example a cap for social contributions or the corporate tax burden or an investment quota. This expresses the fact that a restriction changes the incomplete contract and creates a vulnerability to strategy elsewhere or requires new restrictions. Or put another way: the debt rule, which itself arises from concern about party competition, does not fundamentally prevent it by shifting the political-economic pressure to other expenditure-side budget items or preventing relief in taxes and duties. These effects, which manifest themselves in changes in the budget structure, are easily overlooked in the consolidation phase. Basically, however, the question arises as to why parliament voluntarily binds itself in this way in a democratic order.

  • Rationally, this can be used structurally as a safeguard for the MPs against the budgetary leeway, i. H. permanently overwhelming claims of the electorate are classified (Buchanan 1984)

  • Likewise, in the political competition between the agents (parties) for the principal (the electorate), it can be a question of effectively installing a brake against an overwhelming competition in spending (Nordhaus 1975).

  • Ultimately, excessive demands on the state budget can begin on the revenue side if competition for tax cuts leads to a tendency to reduce state activity (state quota) with the aim of a lean state (Persson and Svensson 1989; Haffert 2016).

Despite the theoretical arguments in favor of such rules and the justification for this policy both conservatively and progressively (Krebs 2019; Haffert 2016), the question remains why the Germans - similar only to the Swiss - have a special preference for such restrictive forms of debt regulation. This seems to be due to a lack of imagination for growth and a high preference for security. Both are two sides of the same coin. The security preference leads to a focus on what has been achieved, a stabilization of the present and an extension into the future. A self-evident expectation of growth is not so easily compatible with this, because economic growth always goes hand in hand as structural change with incremental and disruptive changes and is therefore difficult to predict in terms of quality. Such an attitude refers to historical influences, for the "black zero" reference is made to the experience of state bankruptcies after the two world wars (Haffert 2016). In fact, over two thirds of Germans prefer a reduction in public debt - even in times of crisis - and a good 60% support the debt brake (Hayo and Neumeier 2016, p. 69 f.). This also applies in principle to the corona pandemic, which led to considerable borrowing and increased the debt ratio by 15 percentage points to 75% in 2020 alone. According to this, at most the federal government can cope with the debt brake, and by no means the federal states or municipalities, and the state investment crisis cannot be solved in it (vbw study 2020). The robust acceptance of the budgetary constraint coincides with the strong preference in Germany for stable prices.

The responsibility of monetary policy and the charm of saving

(1) In Germany, like only a few societies in the world, hyperinflation lives on in the collective memory, because it was the only industrialized country in the world to undergo two major inflations and currency reforms in the 20th century (Feldman 1984). The galloping surprise inflation after the First World War (paper currency) and the worthlessness of the currency (cigarette currency) after the Second World War have normatively and habitually reflected in being German.

If monetary devaluation is gaining momentum every day, then it means that life takes place in the here and now, only daily survival counts, that any planning is pointless and any saving is irrational. There is a double devaluation: “The individual feels devalued ... The mass feels devalued. ... Inflation cancels out differences between people who seemed to be made to last, and throws people who would otherwise hardly have greeted each other ... together ”(Canetti 1983, p. 206). In such a life situation, the speed of everyday life turns with the same number of tours as inflation, stability and stability are not found, the living conditions are completely shattered (Haffner 2000). People and social groups are rearranged and arranged in a chaotic manner (Feldman 1984, p. 32). So it was during the hyperinflation after the First World War, which resulted from a forced economy and reparation fulfillment with currency decline. It was basically no different after the Second World War when the macroeconomic capital stock - public as well as private, in the form of real capital and social capital - was largely destroyed or its functionality was restricted. Twice in the 20th century, the Germans experienced how the stabilization of the economy and the appeasement of society only succeeded with a currency reform and that the political ability to act reliably returned.

(2) In the absence of a politically convincing founding history, the currency reform of 1948 even operates as an economic founding myth for the provisional Federal Republic, later reinforced by the “supplementary myth of the 'miracle of Bern'” (Münkler 2009, p. 455 ff.): “The The founding-mythical core of the old Federal Republic was not the political constitution, but the economic order. This is still the case today, at least if you consider that the economic miracle went hand in hand with the development of the welfare state ”(Münkler 2009, p. 458). After a difficult start, the German economy swung onto a spectacular growth path from 1950, which led to the currency reform “marking the beginning of economic growth in the collective memory” and thus becoming a mythical tale “which led to identification with the new state contributed ”and made political self-recognition seem dispensable; "The victim society of the war and the deprivation society of the post-war period became a consumer society" (Münkler 2009, pp. 460 and 464). This myth was stabilized and strengthened by the ubiquitous personal experience and memory; the economic miracle was nothing abstract or theoretical. All of this was further developed in the “Model Germany” with which Willy Brandt and Helmut Schmidt ran for the federal elections and combined the promise of prosperity more intensively with social equality.

The social correlate to the Federal Republic's experience of sustained increase in prosperity was overcoming threatening marginal positions, suppressing political extremes in everyday life and strengthening the center (Münkler 2010, p. 205 ff.). The “leveled medium-sized society” so dubbed by Helmut Schelsky stood for this balance and the power of the middle - politically, economically and socially. In contrast to the first half of the 20th century, people now experienced for the first time on a broad basis that industry did not lead to a split in living conditions, but rather credibly promised opportunities for advancement through vocational training, which promoted a reduction in income spread. The broad rise from the working class, the bourgeoisisation of the way of life in the broader society undermined the thesis of the class conflict; individual performance could now reliably be profitable for everyone who only wanted it (Münkler 2010, p. 217).

It was the expression of an unbelievable stabilization and stability of all macro systems compared to the experiences of the Weimar Republic. And so it was true for decades after the war: "Since the Germans have come to terms with mediocrity, they have come to rest themselves and with them the whole continent" (Münkler 2010, p. 219). The center as a measure of orientation - keeping the measure and maintaining the center - offered the opportunity to face the inevitable changes. Because “a society can afford all the more modernization, practical differentiation and individualization, the heavier and more self-confident its center is” (Münkler 2010, p. 223).

(3) The gain in stability in its mentality-shaping power can only be understood and classified as a social experience against the background of the - as indicated - disruptive power of sustained, galloping hyperinflation. In such phases the possibilities of daily routine and reliability are crushed by the compulsion to take into account hourly changes in value through new dispositions. Supply chains no longer work, the benefits of economic integration are lost, and the search for real assets hinders rational investment. Sebastian Haffner (2000, pp. 53, 57) described these everyday consequences of hyperinflation particularly impressively: “The year 1923 came. This fantastic year is probably what has left behind those traits in today's Germans ..., that unrestrained cynical fantasy , that nihilistic joy in the 'impossible' for its own sake, that 'dynamic' that has become an end in itself. ... It was a situation in which indolence and reliance on previous experience were punished with hunger and death, but impulsive action and a quick grasp of a new situation were rewarded with suddenly enormous wealth. ... Under so much suffering, despair and beggar poverty, a feverish, hot-blooded youthfulness, lust and a general carnival spirit flourished ”.

This experience was so overwhelming for contemporaries that it retained its meaning in the tradition and dominated or even overrun later crises in the perception. Current surveys show that in Germany, on the one hand, hyperinflation and the global economic crisis merge in retrospect on the economic history of the Weimar Republic and, on the other hand, this misunderstanding is "particularly pronounced among well-educated and politically interested Germans" (Redeker et al. 2019, p. 3). The findings show that inflation is of paramount importance in the collective memory and not the later deflation with mass unemployment during the global economic crisis. In retrospect, everything fits together, the “great disorder” of 1919–1924 (Feldman 1997) is the heuristic anchor for Germans when it comes to assessing macroeconomic risks and responding to them in terms of economic policy. Even the disinflation since the early 1980s and long periods of very low inflation rates have not changed the fact that fighting inflation is a top priority; This extreme fixation in Germany on price level stability can also be seen in a comparison of European countries (Hayo and Neumeier 2016, p. 65 ff.).

(4) The individually based findings - cited here as the life report of the young Sebastian Haffner on the wild, disruptive years of hyperinflation - found expression in a different way in the contemporary sociologist Helmuth Plessner. In the analysis of the “boundaries of the community”, inflation is reflected in the sociological inventory. Because after overcoming the worst upheavals in 1923, Plessner diagnosed the compatibility of idea and reality as a German problem. Instead of carelessly taking action and taking life playfully, the German is now "difficult and everything becomes difficult above him," says Goethe (...) The German is proud to be the conscience of the world in his best men, but doesn't that mean playing spoilsport for the others too? ”(Plessner 1924, p. 20). Germans look for stability based on principles in the community, a seemingly natural order of relationships between people that is based on values, whereas society appears as something artificial, in which interaction is violent and anonymous.

The experience of hyperinflation has made the fleeting, unpredictable nature of abstract society clear. Plessner argues independently of a specific social and economic order of life, he basically addresses the uprooting of people under the conditions of an anonymous society and the desperate search for stability. The factual community turns out to be weak insofar as it is based on abstract ideas, values ​​and norms that are easy to doubt. And so the belief based on reason that there is an equally good way of life for all people quickly becomes weak, especially after experiencing hyperinflation. As a result, all the laws of normal life have been suspended and the promise of efficiency made by modern science has been permanently shaken.Then it can easily happen that with the next rejection - like the world economic crisis from 1929 - the belief in the rational organization of public tasks disappears completely. To put it another way: The great disorder of hyperinflation - this is how contemporaries experienced it in view of the short phase of the "golden twenties" and this is how it continues to this day - in unity with the global economic crisis, weakened social stability lastingly.

(5) Just as the financial upheavals and consequences caused the hyperinflation after the First World War, so it was only twenty years later the Second World War, together with the previous armament with a wage and price freeze, that had led to a similar disruption of livelihoods. The redemption of the currency reforms - Rentenmark on November 15, 1923, Deutsche Mark on June 20, 1948 - was obvious, but it was not until the economic miracle after 1950 that the chance to create myths arose. The decisive factor was a combination of regulatory decisions that ensured that the currency reform and the Guiding Principles Act, the Marshall Plan and the London Debt Agreement could develop their stabilizing effects. As much as hope was justified here as a realistic social category, the period from 1914–1924 (“the great disorder”, Feldman 1997) stood on the other hand as a warning sign, which also put all later efforts to stabilize the economy in a bland light and as an essential one The cause of the subsequent crises of the 20th century appeared.

It follows that the Germans value stability more than unpredictable change, especially the stability of the value of money is valued highly, without it everything is nothing; the pioneers of the social market economy made this a fundamental principle. The propensity to save, which is high in international comparison, symbolically condenses this. This microeconomically relevant attitude is reflected macroeconomically in the constitution of the central bank; The experience with hyperinflation almost naturally led to its independence, as it was enshrined in the Bundesbank law in 1957 and integrated into a stable economic system with a high corporatist character (Ritschl 2005). One area of ​​macroeconomic governance has been removed from parliamentary responsibility and control; the Bundesbank is only committed to its legally defined mandate. This delegation by creating an area of ​​autonomy is based on the historically founded mistrust of government and parliament in questions of money - both in financial and monetary policy. Incidentally, this assessment has not yet been the subject of the dispute between the parties in the German Bundestag.

(6) The special attitude of the Germans has a lasting effect, which is particularly evident in the commentary on European monetary policy (Redeker et al. 2019). This sometimes irritates other European actors in monetary policy. In December 2013, Mario Draghi complained about criticism from Germany and spoke of “perverse fear that things will turn out to be bad”; but the opposite happened. "Inflation is low and uncertainty has decreased." (Deutsche Welle 2013). The misunderstandings can only be explained by the deep anchoring of different attitudes towards monetary value and the monetary policy that is considered appropriate for it. With the euro, the Germans have found that a certain institutional solution does not yet guarantee that monetary policy will relentlessly take into account the German cultural imprint. Sensitivity to consumer price inflation is not equally pronounced everywhere; concerns about the depletion of wealth are then directed to other asset classes. If, however, the home ownership rate in Germany is only 43% for various reasons, then there is plenty of room for saving, which is not exploited in a particularly risk-prone manner.

Rather, it shows that the general fear of unpredictability in Germany strengthens the preference for “fixed income”. The individual wealth position of Germans is also geared more towards reliable development and stability than towards dynamic and volatile value development. The rule for the Riester pension, which provides for capital to be maintained at all times, can be seen as typical for this, which severely restricts riskier forms of investment with fluctuating market prices. The willingness to take risks when investing and to bet on a growth gain as a return is, on the other hand, less pronounced. This figure of thought is only sustainable in defined structures, i.e. in the traditions of medium-sized companies and especially family businesses, when it comes to stabilizing the market position and asset development over the long term. However, this figure of thought has come under pressure for four decades without any changes in attitude among the population. There is no other explanation for the particularly sharp criticism of the ECB, its unconventional monetary policy since 2015 and the low interest rates.

In the late 1970s, with the phenomenon of stagflation - as a result of the collapse of Bretton Woods and the first oil shortages - the mechanism of increasing prosperity over the business cycle had lost its reliability; For the first time, (limited) inflation was temporarily no longer acceptable as the price of higher growth dynamics or lower unemployment. The stable 1980s were then shaped globally by efforts to disinflation and gave the impression that, despite the increasing internationalization of the division of labor, the old relationships were working again, and the increase in employment at a stable price level was considerable. In the 1990s, the focus was on the transformation of the East German economy and its integration into the West German regulatory framework and the global economic context. But even in this extraordinary situation, it was perfectly acceptable for the Germans that the Bundesbank reacted early on to the inflationary surges associated with it and raised the discount rate to 8.75% in 1992.

Financing the company: What is different in Germany

(1) The pronounced German culture of stability in the context of national debt and inflation is reflected, according to the thesis presented here, in the culture of financing for companies. The fixed star in German corporate history is the family business with a long tradition, which has achieved a special position on the world market in the field of industrial production and is thus at the core of the German economic business model - medium-sized, industry-based, service-supplemented, export-oriented (James 2006). In Germany, 90% of companies are family-controlled, and these are responsible for 58% of employment (Stiftung Familienunternehmen). Family businesses stand in a special way for stable networks, traditions and longevity and thus offer security. This special structure of German companies is linked to the fact that financing through shares is much less the case than in the USA. There are historical reasons for this.

In the past two decades or more, companies have increased their equity base noticeably, from a good 7% to around 25%; financing through bonds does not play a major role; In the case of long-term financing, the banks are still the most important lenders (Bendel et al. 2016). The financing structure is particularly robust in the SME sector: the equity ratio averaged 50% over the last decade, while bank loans accounted for 30% and subsidies reached 13%; An average of 7% was left for other financing channelsFootnote 2. The increase in the equity ratio - from retained earnings - continues across all (non-financial) companies up to the current level (Deutsche Bundesbank 2018): "The picture of a clear equity gap between small and large companies, which was reflected in many of the economic problems of medium-sized companies in the past were regularly returned, is therefore largely obsolete. [...] All in all, the adjustments in the financing structures as well as in the maintenance of liquidity bring considerable advantages for the financial sustainability of non-financial companies in the face of exogenous shocks and should contribute to greater crisis resistance in the German corporate sector "(Deutsche Bundesbank 2018, p. 72 f .).

Equity financing remains subordinate if one considers the number of listed companies (Fig. 2). The number of listed companies is also falling in the Anglo-Saxon economies, but this is likely to be related to higher private equity availability, a lower capital requirement driven by digitization and a lower need for diversification, while in Germany in particular, lower start-up activity is the cause (Demary and Röhl 2017). The difference between the Anglo-Saxon economies and Germany is striking; the proportion of shareholders there is at least twice as high as in this country. The number of owners of shares and equity funds is a good 10 million, the persistent low interest rates only have a very small push effect towards equity investments (Deutsches Aktieninstitut 2019).

The preference of German private investors is directed towards the dividend: “Private shareholders weight positive success trends more [...] than negative ones. Overall, changes in dividends have the greatest relevance for investment decisions - in line with the study from 2013 - followed by changes in earnings and cash flow ”(Pellens et al. 2019). And: “The high relevance of dividend changes also coincides with the development of the dividend preference of private investors. Even if the majority of respondents (45%) still prefer a balanced relationship between dividends and price increases, there have been significant shifts in the direction of higher dividends and lower price increases since 2008. In addition, the response behavior of private shareholders with regard to the newly included question as to whether they prefer distributions in the form of dividend payments or share buybacks shows that the majority (56%) prefer higher dividends than share buybacks ”(Pellens et al. 2019). The private investors in this country prefer the dividend payment, the secure return of the share in the here and now, while price hopes are only of much less importanceFootnote 3. This also speaks in favor of security as the dominant preference.

(2) It is not the case that German companies do not know any growth - otherwise the success of the past decade could not be explained, but this growth is above all one that runs through differentiation and specialization, less through scaling; the innovations are more incremental and less disruptive. In structural change, this has so far shown itself in a considerable flexibility of adaptation, which the industry-based model has been able to distinguish - especially in a country comparison. The macroeconomic consequence is an integration into employment, which with 80% of the 15- to 64-year-olds has reached an all-time high and a remarkable level compared to other locations.

"Among large, advanced economies, only Germany has managed to reverse the decline. German manufacturing value added has increased by 38% since 1999, and it resumed strong growth after the Great Recession. Labor reforms in the early 2000s to freeze wages, promote job sharing, and expand worker training helped restrain costs while preserving talent. High-quality products and a competitive currency helped German firms of all sizes gain global market share, creating a large and growing trade surplus "(McKinsey Global Institute 2017, p. 29). Compared to the United States, there are also cultural influences that contribute to the structurally and quantitatively different developments on both sides: “An 'everyone for themselves' ethos can cause strains in a sector that combines inputs from multiple firms. In contrast to the institutional support enjoyed by Germany’s Mittelstand (medium-size firms), small and midsize US manufacturers typically lack financial, technical, and business development help. The German approach may not translate into the US context, but there are ideas to extract from it about the value of greater coordination. ... The prime example of this model is the institutional support enjoyed by Germany’s medium-sized firms. While the German approach to cooperation and collaboration may not translate to the US context, it does offer some lessons about how coordination and scale can produce economic sustainability "(McKinsey Global Institute 2017, pp. 14, 58). This also includes differences in the educational systems: "Apprenticeships that pay trainees while they learn on the job are widely available in countries such as Germany and Switzerland, and the model is finally gaining attraction in the United States" (McKinsey Global Institute 2017, p. 16).

(3) These notes are important because they show that economies can move in different historical paths (Hüther 2018) without being more unsuccessful or more successful than others overall. Rather, the historically defined structural conditions prove to be a power of differentiation. Of course, such paths can lead to different results in different periods. At the moment, discussion is primarily about how and with what opportunities and risks the digital structural change can be managed and shaped. The German economy is said to have a particular disadvantage: the financing system, more precisely: the provision of venture capital (Fig. 3). Here the “venture capital divide” is traditionally identified between the USA and Germany, whereby “a complex of political, social, and economic factors — many dating back to institutions put into place in the 19th century — explains the evolution of venture capital over the post-war era "(Fohlin 2016; so Albach 1983, p. 90 ff.).