Over the past five years the German economy has outperformed the economies of several other major Western countries. As a result, the country has grown to become the motor of growth within the European Union. Even over the past years, when most economies faced harsh times as a result of the economic crisis, the German economy remained a strong performer. So what explains their top class performance? According to a recent study from German consulting firm Management Engineers the key lies in innovation: Germany has turned its economy into a leading innovation machine.
In terms of production the German economy has outperformed for instance the UK and US with respectively more than 20 and 10 percentage points.
The study from the consultants assigns the higher productivity to a number of reasons, yet innovation comes out as the predominant factor. A comparison of expenditure on R&D versus GDP growth shows that countries that spend more on R&D attain a higher growth rate. In the case of Germany, it spent on average 2.8% of its GDP on R&D between 2006 and 2011, significantly more than the US, France or UK, and as a result it has achieved higher GDP growth.
The consultants highlight that the German innovation edge can not only be a result of measures taken over the past five years. Looking back at the past two decades reveals that Germany has consistently pursued a more ambitious innovation strategy in comparison with other large Western economies. An overview of the number of patents registered per capita clearly demonstrates this point:
Green Production Machine
According to an earlier study from Roland Berger, another large reason for Germany’s renaissance lies in the fact that it has successfully transformed its economy into a green production machine. Germany earns about €300 billion on sustainable products and services – that is 15% of the total global sales in “clean” technology, making Germany a world leader in the sustainable industry. The “clean” technology sector now provides jobs to more than 1.4 million people in Germany (Germany has about 44 million jobs).