Globalization, Eastern Germany and the “Mittelstand”

The pressures of globalization in general and the specific fact of declining inward investment represent together a formidable challenge not only to the German political economy itself, but also possibly to the relevance and viability of the “Rhineland” model of capitalism. In particular, growth and changes in financial markets and the role of banks transform these various challenges into potential threats. They exacerbate the problems and difficulties Germany is experiencing in modernising not just industrial structures, procedures and practices, but also indeed its distinctive industrial culture. Two exemplars of the current crisis are examined here in detail: eastern Germany, and the Mittelstand (Germany’s SMEs). The present balance of evidence appears to indicate that successful adaptation is not occurring, with clear indications that it is primarily socio‐cultural factors which are hindering the transformation process.