Germany is the Silicon Valley of political innovation

One of the more significant quotations of last week came from President Donald Trump, when he reportedly described the Germans as “bad, very bad”, referring to their automobile exports. He returned to the theme on Tuesday.

Another take on Germany, articulated by many economists and technology observers, is that the country has quality manufacturing but hasn’t been very innovative in other sectors, and is thus a disappointment.

I’d like to suggest a third view: When it comes to politics and political institutions, Germany’s record since the end of World War II as an innovator is virtually without parallel, akin to the role of Silicon Valley in tech.

After the war, Germany undertook an extensive and largely successful campaign of denazification. Other defeated nations, such as Austria or Japan, didn’t attempt anything comparable, much less succeed. In a relatively short period of time, Germany really did turn into a largely tolerant, peace-loving nation, acutely aware of the extreme nature of its previous wrongdoing. For all the imperfections in this process along the way, it is difficult in world history to find a comparable switch in attitudes.

Or take German unification. It was hardly obvious this project to bring together East Germany and West after the fall of communism would succeed or even come to fruition, as there was plenty of talk at the time of a binational federation or perhaps a slowly phased evolution toward unity. Yet Chancellor Helmut Kohl and other German leaders, supposedly staid figures, had the vision to see unification could be achieved rapidly and relatively smoothly. They just went ahead and did it, even though many of the world’s leaders, such as UK Prime Minister Margaret Thatcher, were squeamish about the idea.

Today it is completely taken for granted that a unified Germany will continue successfully, even though the Berlin Wall fell less than 28 years ago. East versus West is hardly a dominant split in German politics, as evidenced by the widespread support for East German Angela Merkel, and her more than 11-year term as chancellor, with possibly more to come.

Or look at German unification in this light: Since the end of World War II, many larger political units have fallen apart, such as the colonial empires, “historic India”, the Soviet Union and Yugoslavia. Large-scale political mergers seem to belong to the era of the 17th to early 20th centuries, but Germany pulled this one off.

The European Union, of course, has had Germany as a major founder, player and innovator, even if the Germans sometimes prefer to disguise their leading role. And Germany has also been a major pioneer of the social welfare state, both under Otto von Bismarck’s reign in the late 19th century and after World War II. It has managed to make those institutions work in a country larger than, say, Sweden or Denmark.

Increasingly, the handling of the euro crisis of 2008-2012 appears to be another example of German political wisdom. Ms Merkel’s decisions to limit bailouts, push for relatively tight monetary policy and eschew a banking union have been pilloried by many of my fellow economists. Yet in this age of post-Brexit, post-Trump backlash voting, her decisions look pretty savvy. The EU remains popular in Germany, the rightpopulist AfD party is dwindling, and the worst of the euro crisis seems to be over. In retrospect, given rising nationalism, it doesn’t seem that a form of fiscal union was ever an option.

Germany’s decision to take in almost one million Syrian refugees was another political innovation, though we don’t yet know how successful this one will turn out.

It is difficult to write about the broader history of Germany without considering the Nazi period, and I would put it this way: That was a terrible political innovation, but for a long time now Germany has been producing positive, peaceful and democratic innovations.

Might another German political innovation be in the works, in response to the deterioration of transatlantic relations? Ms Merkel, after various meetings with President Trump, said last weekend: “The times when we could fully rely on others are to some extent over — I experienced that in the last few days. We Europeans must really take our destiny into our own hands.”

Let’s hope this is more than just rhetoric aimed at domestic audiences. One problem with Nato has been that the US tends to assume a leading role, and the European nations respond passively. If Germany will now be more proactive in Nato, and ponder what kind of innovation might be required to save the day, that sounds to me like Silicon Valley working on a new tech product. There’s no guarantee of success, but if you look at recent track records, is there anyone you would rather rely on? Tyler Cowen is a Bloomberg View columnist. He is a professor of economics at George Mason University and writes for the blog Marginal Revolution. His books include ‘The Complacent Class: The Self-Defeating Quest for the American Dream’.