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People can collaborate in free markets too

The author of this Reuters article on the German jobs market plainly hasn’t heard of Linkedin, or jobs advertising, or even old-style labour exchanges where people can go to find out where vacancies are and retrain. Time for a good old fisking:

Germany’s industrial heavyweights are teaming up to retrain workers in areas such as software and logistics to fill a growing skills gap and avoid layoffs among workers of all ages as the economy shifts to clean energy and online shopping.

There is nothing wrong with firms exchanging ideas with one another to fix an issue. (Although ironically, government “anti-trust” laws might work against that.) It is worth noting, of course, that losses of jobs in areas such as petrol-driven cars are partly caused by government policy itself, such as the Net Zero decarbonization efforts that, depending on your point of view, are necessary or barking insane.

More than 36 major companies, ranging from auto suppliers such as Continental (CONG.DE) and Bosch (ROBG.UL) to industrial firms BASF (BASFn.DE) and Siemens (SIEGn.DE), have agreed to coordinate on redundancies at one firm and vacancies at another, training workers to move directly from job to job.


The scheme underscores Germany’s long-term social market economy model, which gives more influence to labour unions as opposed to free-market capitalism focused on maximizing profits.

Does it? I mean, I assume German firms want to pursue a profit. They’re not charities.

The costs of the initiative will be shared by the companies involved on a case-by-case basis. So if a factory closes, a dialogue will begin on what to do with its workers and then involve another company which may be seeking new skills.

Again, this seems like rational self-interest to me. There’s no objection I see to firms liaising with one another, and forming pacts about dealing with the need for skilled people. The key is that the State keeps its nose out of it. Also, if firms try and steer staff who might lose a job to another firm, that needs to be weighed against whether and how the employee might want their lives to go. The tone of the article seems to be that what is needed is a sort of hand-holding paternalism, but that creates a vicious circle where employees lose the desire to manage their working careers in a proactive way.

A study by think-tank Ifo Institute warned that 100,000 jobs linked to the internal combustion engine could be lost by 2025 if carmakers failed to transition fast enough to electric vehicles and retrain workers.

Forcing an entire industry to abandon a reliable, effective technology used for a century and switch to an arguably less reliable, and more costly one. Yep, there are going to be consequences. It also doesn’t help that German government policy in the past 20 years on energy has been almost calculated to harm its manufacturing base in the long run.

Engineering, metalwork and logistics are among the sectors seeking high numbers of people in Germany, alongside care work, catering and sales.The demand for skilled workers is coming from overseas companies too, highlighted by Tesla’s (TSLA.O) decision to build its European electric vehicle and battery plant in the state of Brandenburg, where it will create 12,000 new jobs.

Good news, so long as the jobs are financially viable.

Ariane Reinhart, board member responsible for human resources (HR) at Continental and chief spokesperson of the [jobs] business-led initiative, was quoted as saying: “Leaving it to the free market is not enough – it would not be what’s best for workers, or the economy.”

Wrong. For a start, none of the ideas about firms collaborating to move workers with desired skills around could not happen in a free market without state interference. Employers (I am one) know that finding talented staff is one of the most important issues there is, and in an open economy, there are all kinds of ways people with skills in demand can find jobs. Further, it is hardly a mystery to employees that they should keep on top of new skills to make themselves more desirable and increase what they earn. That’s the “free market”. The author of this article might want to reflect that it was the free market economy, and not some sort of top-down socialism, that helped propel West Germany after 1945 into being one of the richest economies on earth. By 1960 or thereabouts, that country had matched the UK in terms output per head.

To repeat an important point: there is no reason why firms could not and would not collaborate, if their self-interest coincided, in figuring out how people with desirable skills could be moved from place to place. What the author of this article cannot or will not address is whether firms in the article are not just doing what they might do anyway? Why did this question not get asked? Why just accept, at face value, that this sort of collaboration is some wonderful example of a less market-based system? After all, I can log on to the internet and find jobs, homes, flights, hotels, courses for training in new skills, etc, without anyone from government or some official entity holding my hand. Amazing, isn’t it, this “free market” of ours.

8 comments to People can collaborate in free markets too

  • rhoda klapp

    Forgive me if my knowledge is out of date, but Germany didn’t have a real free market of labour. You can’t do a job without being qualified by means of an apprenticeship (for trades, at least). The system much envied by UK polis anxious to deal with the kids who don’t want to or can’t go to uni acts as a trap for the unwary. A former colleague of mine trained as a TV repairman in the 70s. When it became impossible to repair a TV, he was out of luck. Couldn’t do anything else. He joined the navy, trained for a couple of years and joined IBM as a computer repairer. He had bypassed the credentialist mess which is German employment practice. And that is (I speculate) why the Germans need to do this, the old system has let them down. Lucky we never did it here where many trades are not protected so well by what is effectively the guild system.

  • Johnathan Pearce (London)

    Forgive me if my knowledge is out of date, but Germany didn’t have a real free market of labour.

    The unions in Germany are strong, but the system they agreed to post-1945 was one of constructive engagement, which was a heck of a lot better than the willfull obstructionism of the UK’s trade unions. W. Germany did not have price controls, or heavy tax rates on incomes and capital – unlike the UK – and so yes, it was far from ideal but a lot better. And throw in a generally rigorous education system and a commitment to excellence in areas such as technical training, and you get a kick-ass manufacturing base.

    It is certainly true, rhoda, that the German system needs to change, and to some degree, the “solutions” being proferred in the article are workarounds.

    But my broader point, I think, is that the author of this piece praises a system for fixing a problem that is not, contrary to what is written, intrinsic to free markets, but a result of a clunky system the unions have largely wrought.

    Thanks for your comments.

  • TDK


    Suppose we have two workers, Fred and Charlie both in danger of redundancy. Fred out of his own volition investigates and starts studying into learning a new skill. Let’s pick programming. Charlie is given a choice: either learn this new skill or else take less redundancy. All other things being equal, Fred is likely to be the better hire. It’s not 100% certain but a good rule of thumb is the self motivated person will generally prove a better bet.

    That’s not to say that we shouldn’t try to retrain Charlie. The fact of redundancy may give him a wake up call and he may prosper but we should be both charitable and realistic.

    From a more specific perspective, in my experience in the UK, government funded training in IT skills is woefully poor. Teaching how to use Word and Excel is basic. Teaching in other skills like programming is generally 5 years out of date. More importantly they don’t teach how to “fill the gaps” in the book knowledge. So whilst one person will happily google the information they want the next person will struggle in silence.

  • bobby b

    That’s basically how American Major League Baseball runs its hiring, but they needed an exemption from antitrust laws in order to do so. Does Germany have antitrust law?

  • bobby b

    Aw, heck. Read more closely, bb.

  • Lee Moore

    there is no reason why firms could not and would not collaborate….

    Confusion of the ideas “free market” and “perfect competition” is ubiquitous on the left (and far from uncommon elsewhere.)

    “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices”

    This is the free market at work. If you choose to try to stop it by having competition laws, that is an interference in the free market. “Free” includes free to collude*.

    Whether competition laws are “a good thing” (and if so what sort of laws are gooder or badder) is a different question. That depends on how good you think free markets are at breaking up monopolies, oligopolies and other collusions, with new technolgies, new business practices, substitute goods etc, and on what sort of timescale. And on how impatient you are.

    * just for the avoidance of doubt, to the extent that the State is called upon to enforce contracts, it is not an “interference” for the State to decline to enforce certain kinds of contracts (eg anti-competitive ones.) You ae still free to collude, you just won’t get your collusion enforced by the State.

  • Dmm

    Sorry if I missed something, but neither the quoted text nor this article makes it clear that this is not in fact a free market initiative. So…what did I miss?

  • Lee Moore

    Dmm : what did I miss ?

    Ariane Reinhart, board member responsible for human resources (HR) at Continental and chief spokesperson of the [jobs] business-led initiative, was quoted as saying: “Leaving it to the free market is not enough – it would not be what’s best for workers, or the economy.”

    Is this not an assertion by the said Reinhart that this is not a free market initative ?