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What Britain can learn from Germany’s economic reforms

How political economy can change. For the past 15 years Britain has enjoyed an evident edge over Germany in labour flexibility, productivity and control of the public finances. On a whole raft of measures – employment, labour costs, deregulation and fiscal ratios – Britain could claim a healthier, more adaptive model and significantly better outcomes in macroeconomic performance.

How political economy can change. For the past 15 years Britain has enjoyed an evident edge over Germany in labour flexibility, productivity and control of the public finances. On a whole raft of measures – employment, labour costs, deregulation and fiscal ratios – Britain could claim a healthier, more adaptive model and significantly better outcomes in macroeconomic performance.

But this is no longer true today, even though many in Britain are still resting on their laurels. Labour market and tax reform in Germany have brought, if not a dramatic transformation in performance, at least a discernible improvement. Meanwhile, a decade of Gordon Brown budgets have brought about a cumulative erosion of labour market flexibility and a notable increase in regulatory and employment costs.

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