There have been complaints by many other members of the Euro-zone about the German policy of saving even in times of crisis and especially about forcing other countries, not least Greece, to do the same. Especially during the last financial crisis, the policy of Anglophone countries, mainly the US, the financial policy was opposing Germany’s policy of austerity.

“Why are Germans sceptical of attempts by the ECB to pep up Europe’s economies? Why do they insist on fiscal austerity in countries where demand is collapsing? And why are they obsessed with rules for their own sake, as opposed to their practical effects?” asks the Economist in its recent article “Of rules and order- German ordoliberalism has had a big influence on policy during the euro crisis“. The Economist finds answers in Germany’s intellectual history of ordoliberalism, which is in the end again related to culture. Germany’s behavior is reflected nicely in Hofstede’s Model on National Dimensions, the 6D Model (definitions taken from The Hofstede Centre’s website):

Long Term Orientation 

This dimension describes how every society has to maintain some links with its own past while dealing with the challenges of the present and future, and societies prioritise these two existential goals differently. Normative societies who score low on this dimension, for example, prefer to maintain time-honoured traditions and norms while viewing societal change with suspicion. Those with a culture which scores high, on the other hand, take a more pragmatic approach: they encourage thrift and efforts in modern education as a way to prepare for the future.

Germany’s high score of 83 indicates that it is a pragmatic country. In societies with a pragmatic orientation, people believe that truth depends very much on situation, context and time. They show an ability to adapt traditions easily to changed conditions, a strong propensity to save and invest, thriftiness, and perseverance in achieving results.

Uncertainty avoidance   

The dimension Uncertainty Avoidance has to do with the way that a society deals with the fact that the future can never be known: should we try to control the future or just let it happen? This ambiguity brings with it anxiety and different cultures have learned to deal with this anxiety in different ways. The extent to which the members of a culture feel threatened by ambiguous or unknown situations and have created beliefs and institutions that try to avoid these is reflected in the UAI score.

Germany is among the uncertainty avoidant countries (65); the score is on the high end, so there is a slight preference for uncertainty avoidance. In line with the philosophical heritage of Kant, Hegel and Fichte there is a strong preference for deductive rather than inductive approaches, be it in thinking, presenting or planning: the systematic overview has to be given in order to proceed. This is also reflected by the law system. Details are equally important to create certainty that a certain topic or project is well-thought-out. In combination with their low Power Distance, where the certainty for own decisions is not covered by the larger responsibility of the boss, Germans prefer to compensate for their higher uncertainty by strongly relying on expertise.

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One way how uncertainty avoidance shows is through rules. This is the case in Germany – to avoid uncertainty, Germans like to make rules (it doesn’t necessarily mean that they follow them themselves, but given their position in the EU they are able to enforce them on others). So being obsessed with rules for their own sake is reflected by the relatively high Uncertainty Avoidance of the German culture, while the tendency to save, connected with austerity measures, is a reflection of Long Term Orientation.

Author: Michael Schachner

Key insights

In this article, Michael Schachner explains Germany’s fiscal austerity by using the Hofstede Model on National Dimensions, focusing on the two dimensions “Long Term Orientation” and “Uncertainty Avoidance”.