Two Cheers for the Rhineland Model

Not so long ago, Germans and other Continental Europeans pointed to America's "working poor," as well as to the sorry state of public services in Britain, as defects that supposedly reflected the inevitable price Anglo-Saxon countries must pay for their ruthless form of capitalism. Europeans (Germans in particular), on the other hand, enjoyed the "Rhineland model": a market economy that harnesses economic success to the cause of social justice.

So when Chancellor Gerhard Schröder, early in his first term, signed the so-called Blair-Schröder paper, which pledged agreement with British Prime Minister Tony Blair on liberalizing reforms, he made certain that it was published in London and played down in Berlin. Similarly, the European Union's Lisbon agenda of economic liberalization was never really taken seriously in Germany, France, or most other countries on the Continent.

How things have changed in the last five years! Today, few people - if any - refer to the Rhineland model with such satisfaction.

As things stand now, the German economy lags behind most others in Europe, and almost all European economies trail Britain and the United States. Unemployment is high and growing, as German companies move production to low-wage countries in Eastern Europe or Asia. In Germany, "capitalism unmodified" has begun its reign. Profitable companies are closed if their returns fall below international standards. Managers' salaries - including bonuses for failed or departing directors - have reached new highs.