The Hartz myth

Germany’s labour market and welfare reforms of the early 2000s have gained an outsized importance over time. For some, these reforms put an end to Germany’s social market economy and pushed millions into unsecure, low wage jobs. For others, notably many international observers, these ‘Hartz reforms’ are one if not the main reason why Germany – formerly known as the ‘sick man of Europe’ – is now Europe’s export powerhouse and strongest economy.

The importance of this debate can hardly be overstated. In Germany, the forthcoming election will in part be fought on the issue of ‘social justice’. Martin Schulz is putting corrections to the Hartz reforms at the centre of his campaign.

In Europe, no other narrative has so persistently shaped the response to the on-going euro crisis as the idea that some countries struggle because they have lost their ‘competitiveness’, and they should therefore reform like Germany in order to grow and reduce unemployment. The election of Emmanuel Macron will test the validity of this narrative, as he is vowing to reform France along German lines. If that narrative turns out to be false, however, he may well fail to deliver growth and employment.

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