Page 201 - Global Political Economy_Understanding The International Economic Order

CHA PTER S EVEN
case, no rescue took place, this provided evidence that a fundamental
feature of German economic culture was changing.
Another and even more important example of the profound change
taking place in the German economy early in the year 2000 was the
proposed merger of Deutsche and Dresdner banks engineered by the
powerful insurance conglomerate Allianz A.G. Although the merger
effort eventually failed, it did signal an important change in German
economic culture. Such an initiative would have dismantled a key
component of the bank-industrial system and led to the loss of many
thousands of jobs, an event unheard of in Germany. This develop-
ment in turn would have led to a major restructuring of a key segment
of the German economy. Efforts to restructure German industry have
been greatly facilitated by a new tax law that allows corporations to
sell off their holdings and investments without paying capital gains
taxes. The purpose of these sell-offs is to enable German banks and
corporations to eliminate burdensome holdings and pave the way for
the same type of corporate mergers, acquisitions, and takeovers as in
the United States and elsewhere. As a result, Germany will be able
to accelerate development of a more entrepreneurial and high-tech
economy appropriate for the world of the Internet and information
economy.
These developments will undoubtedly transform Germany and
make it more of a “competing state.” As German investors are de-
manding greater transparency in the management of German business
and a much higher rate of return on their investments, the shift from
stakeholder to shareholder capitalism will accelerate. Equity culture
is spreading fast in Germany and the rest of Europe, and the number
of shareholders is rapidly increasing. Yet, it is highly unlikely that the
German “social market” economy will be wholly abandoned in favor
of the American-style free-market economy. Although welfare pro-
grams will be trimmed in the interest of greater efficiency and flexi-
bility, the welfare state is too ingrained in German mentality to be
abandoned. In addition, the practice of codetermination has given
German labor a powerful voice in German firms, and German unions
have become so important in the overall economy that a Thatcher-
Reagan type of conservative ideology is unlikely ever to sweep that
country.
In Japan, the issue of institutional change has also become urgent.
Throughout the 1990s, the Japanese system of political economy suf-
fered one serious setback after another. In the early 1990s, major
problems arose with the collapse of the inflated “bubble” economy
and resulted in a severe banking crisis; Japan’s banks found them-
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