The having a Liberal Market Economy (LME),

The United States and Germany are two developed countries
that do not share many similarities; in fact, the two countries are quite
different from one other. There are small outward differences such as language,
location, and customs, amongst others. Additionally, there are larger, more
significant differences: the system of government, along with their respective
market economies being two of the major variances. The stark differences
between the two economic markets present two entirely contrasting perspectives
for each country and their main goals. This paper will explain how the
differences between liberal and coordinated market economies make the education
and workplace training of the United States differ from that of Germany.


The United States follows a strictly presidential system
where the executive branch is headed by the president, elected by the people by
popular election, which is completely independent and separate from the other
two arms of government: the legislature and the judiciary. In Germany, the
system of government is drastically different. They operate under a parliamentary
system that is headed by the Bundestag; responsible for choosing a federal
chancellor that will head the executive power and ultimately be controlled by
the Bundestag majority. The United States and Germany are also vastly separate in
the way they control their corresponding market economies: i.e. having two
distinctly different capitalist economies. By having a Liberal Market Economy
(LME), the United States focuses more on short terms goals and profitability
which ultimately does not leave much space to create collective bargaining and
leads to a competitive free market that directly affects people with scarce
skills. Additionally, LMEs are characterized by a relatively decentralized
system of industrial relations, with collective trade often occurring at a
basic enterprise level. Germany on the other hand operates a Coordinated Market
Economy (CME), specifically more focused on the long-term goals and the eventual
creation of collective bargaining that is intended to promote a more
specialized educational scheme and a better workplace environment from the lack
of a competitive market. Succinctly, CMEs are characterized similarly to the
patient economics model, and relies on formal institutions to regulate and
coordinate the market.

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A Liberal Market Economy or LME is an economy focused on
short term goals and profitability. The United States, the UK, Ireland, and New
Zealand are some of the countries that adopted this type of economy. Companies
gain financing privileges by issuing shares which can bring some instability to
the company as they will not be able to raise too much money if the prices fall
and can be threatened by a buyout or purchase. These companies negotiate at an
individual level avoiding the figure of wide collective bargaining. This brings
a more competitive environment and markets as companies do not rely or at least
collectively negotiate with each other. In liberal market economies generally rely heavily on
the, market relationship between individual worker and employer to organize
relations with their labor force’ (Hall and Soskice, 2001, p.29). A significantly
important aspect of this type of economic scheme is the ability that they are
free to hire, and fire people based on need. Specifically, in the united
states, they do not have to give any reasons or explanations. This economy leads
to competitive markets that will attract those people with plenty of skills or high-quality
skills making the companies to offer even higher wages in order to hire them,
and this do not leave enough resource for those with less or limited skills
that seem to get really low wages as all resources where focused on those with
great skills. In general, there are very limited labor rights in the Liberal Market
Economic frame: employees usually do not get paid on holidays and vacations
days are short; new employees are often denied extensions for vacation days as
extended privileges are usually assigned based on the years of service.


Coordinated market economies or CME are more focused on the
long run perspective, with many countries adopting this economic system such as
Sweden, Germany, and Austria, amongst other mainly Scandinavian economies. This
economy differs greatly from the LME as the financing is not primarily gained through
the issuing of shares but from long term bank loans. The bank in this case will
bring somebody of their own to the company to assure the loan is paid in the
long run, and this creates a lasting relationship with the bank. Negotiations
in this economy come along with the principles of collective bargaining and
corporatism. In northern
and central Europe, virtually all large and medium-sized firms belong to an
employer association that bargains with unions on their behalf (Pontusson,
2005, p. 20) Companies build good relations with other firms within
industries and prefer to act collectively in order to keep organization and
prevent competition, which is generally low in the CME system. By having highly
organized workers, the companies are able to stop that race to the top that ultimately
causes more damage to the company. Wages are decided by the industry consistently
upholding the principle of collective bargaining which do not allow individuals
to decide wages within the workplace. Usually wages are standardized by
industry and sector, assuring that each employee is completely aware that he or
she is getting paid as much as he or she can in that specific industry, which stops
a developing inequality or disparity of wages based on skills as of that found
in the LME. Additionally, by being aware they are receiving the appropriate
payment from working in that industry, companies are able to successfully
invest their time, money, and other resources on the specialized training they
give to their employees as they will rarely consider the possibility of moving
to another company where they simply get paid the exact same wage, i.e. will be
unlikely to benefit.


The educational model of the Coordinated Market Economies is
significantly different from that of the Liberal Market Economy. Education in
Germany is vocational, which allows students to focus on that  which they know best and they are most
interested in. More than 50% of students in Germany choose vocational
schooling. Having the option of a vocational education is not the only
difference in Germany’s educational system: the students in this country are
offered the opportunity to actually work in a specific field while they are studying,
called apprenticeship. In
fact, students in Germany spend two thirds of their time already training in an
industry.  From here, it can be deduced
that education in Germany is closely linked to workplace training as students
are getting this instruction from their initial years of basic education,
already making a bond with the companies and networking within the industry.

There is a high probability these companies will hire people that had have a
previous labor relationship with the company as they have invested time and
money training and developing his or her skills. In addition to this, many
firms pool their own resources to develop this educational system, generally at
a more sectoral level. In juxtaposition, liberal market economies usually have
educational systems developed and provided by the state; vocational paths are
unstable as large, sizeable firms would much rather develop their own system
and processes rather than contribute to sectoral and occupational systems, at
least in regards to the upcoming workforce generation. In German language areas
in particular, this aspect of edification and learning is considered to be
extremely vital. For instance, the Berufsausbildungsgesetz,
a German law that passed in 1969, was passed; this particular edict unified and
regulated the occupational training structure, as well as systemized the shared
accountability to the state, the various unions (i.e. the different industries
that tend to benefit from such a system), associations and Industrie – und Handelskammer, or the parliamentary chambers of
trade and industry. Understandably, this system of educational erudition is
massively popular in modern Germany, as well as a variety of other CME
countries (Austria, Belgium, Switzerland and Liechtenstein in particular) with
over 66% of millennials below the age of twenty-two beginning an apprenticeship
within the program, and 78% of these completing it (2001), indicating an
average of just over 51% of those within the age range successfully completing
a specialized apprenticeship. One in three companies involved with the vocational
studies program offered apprenticeships in 2003, and by the following year, the
government signed a pledge with industrial unions that all companies bar minor
ones were required to take on apprentices. Multiple German-speaking countries
and states recognize the Germanic vocational qualification, and vice versa.


Comparatively, the liberal economic market system in the
United States affects the education system just as it does the workplace, that
is, significantly contrasting the system employed by German. Whereas
coordinated market economies are in far greater demand for industry specific
and company specific skills, liberal market economies are focused on much more
general skills when it comes to training and development initiatives at a
variety of levels. While this can be perceived as being quite counterintuitive,
American companies are well-reasoned: the mobile nature of the workforce means
larger expenditure provided for more targeted development and instruction does
not always pay off. Well-trained employees and professionals are often poached
by rival enterprises, largely at the expense of the initial company; the
intensity of direct competition within industries means the invested financial
resources are simply not worth the risk. This ultimately leads to a generally
accepted educational system that offers instruction of more universal skills,
accordingly applicable at a wide range of industries, trades, business, and


On a less superficial analysis, the extremely different
market economies of Germany and the United States largely affect a much more
than just the economic structure of these nations. A largely affected sector of
society is the educational system and by extension, the workplace and
environment. By promoting a highly competitive free market, the United States
develops a culture of rivalry and a focus on short-term development,
essentially a cultural pressure for short term profits. In contrast, Germany’s
coordinated market economy, being highly credit based, is more inclined towards
a longer term view of corporate development and success, with firms working
together to benefit the primarily sectoral workforce.