Reasons for optimism
There are reasons for cautious economic optimism in 2021 and beyond – for example, the progress Germany made between the first and the second shutdown. In the third quarter of 2020, before the second lockdown, growth increased by 8.5 percent, leaving the economy operating at 96 percent of its pre-pandemic level.
“In general, the German economy is still going well, even though several individual sectors are suffering a lot,” concluded Christian Rusche from the Cologne-based German Economic Institute (IW Köln) in the fall. “Automobile construction, for instance, is slowly picking up again.”
Further reasons for confidence in Germany’s resilience include its structural advantages and its ability to draw on solutions that worked during the last period of economic turmoil, namely the financial crisis of 2007–2008. Compared to other European countries, Germany is less reliant upon service sectors with lots of face-to-face human interaction. When the pandemic began, Germany had far lower infection rates than, for example, Italy or Spain, and its decentralized healthcare system gave local hospitals the flexibility they needed to quickly adapt.
Meanwhile, tools that proved successful back in 2008 were redeployed. In addition to the furlough program, they included suspensions of mandatory bankruptcy declarations and the rollout of fast, unbureaucratic loans from public banks.
Last but not least, in reaction to the financial crisis, German national and regional governments and the business community had the foresight to create insurance funds for more difficult times. The experience of the global financial crisis encouraged many German companies, especially small to medium-sized enterprises (SMEs), to exercise financial prudence. According to the German Savings Banks Association (DSGV), the country’s mid-sized firms enjoy an equity ratio of 39 percent, which has kept bankruptcies to a minimum. In other words, many of Germany’s SMEs, often called the engine room of the economy, were in a position to compensate for temporary losses in income.
Stories abound throughout Germany of SMEs getting through the pandemic by taking advantage of the tools the state has put at their disposal and also by thinking outside of the box.
Take SchuF, a 100-year-old precision engineering firm that specializes in making valves. SchuF had to tell some employees to stay home for the first time in over ten years. Twenty percent of its workforce was furloughed, but “only in the office,” as CEO Martin Frank stressed in the fall. Despite a moderate decline in orders, the workshop stayed open and production carried on. By keeping his workforce together, Frank expects that his company will be able to pick up where it left off when the economy recovers.
Other entrepreneurs are changing their approach and product range to match new social realities. The British-German backpack manufacturer RiutBags, for instance, found demand plummeting amidst all manner of travel restrictions. So founder Sarah Giblin adapted and created an easy-to-disinfect rucksack especially for the Covid-19 world.
“There are some businesses out there who are going to start rebuilding the world around us to respond to how we’re feeling at the moment,” she predicts. “The world has changed, I accept that it has changed – so is there something I should be doing as a designer to help humans adapt to the new world through the objects that I make?”