Be Cautious With “Shock” Therapies In Economic And Social Transition

5.3.1. Be cautious with "shock" therapies in economic and social transformation

Immediately after the unification of the two German states on October 3, 1990, the leaders of the Federal Republic of Germany had high expectations for the rapid recovery and development of the Eastern states. Therefore, a series of urgent measures were implemented such as: implementing a 1:1 currency conversion despite the previous differences; carrying out massive construction; bringing huge capital flows into the Eastern states from many different sources; expanding the social security system... As a result, these measures only brought positive results in a very short time, after which the economy and society of the East German states quickly fell into crisis when the construction bubble burst, unemployment increased, and a series of companies went bankrupt. The economic and social picture of the Eastern states of Germany in the 1990s reflected the consequences of the "impatient" process for the complete unification of Germany that the government wanted to create.

Economic and social unification is much more difficult than political unification. The separation process has created many differences in models, development methods and even in social psychology. The German Federal Government wants to impose the economic and social model of the old states on the new states, so it must first create the foundations, facilities, infrastructure and society for that reception. There are policies that have been introduced that bring great benefits to the people but are not suitable for reality and therefore are not effective. Therefore, long-term measures and time are needed. That way, it will not cause serious breakdown and crisis. Germany has also made timely adjustments after the shock measures were introduced but did not bring the expected results. On the other hand, thanks to its very humane social policies and high social solidarity, the Federal Republic of Germany has maintained political security conditions for economic and social development.

From the experience of Germany, it can be seen that any country in the process of reforming and transforming its economy and society needs to base on the practical circumstances and conditions to come up with appropriate measures. Only by starting from practice, recognizing the relationship between the development path and the circumstances and conditions of the country can success be achieved. Shock therapy only brings immediate results, but real effectiveness requires appropriate and long-term solutions.

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5.3.2. Correctly resolving the relationship between economic development and social security implementation

The social market state was shaped and developed in West Germany right after World War II. Through the development process, this model was increasingly perfected and applied to the whole of Germany after the reunification. However, at each stage, the relationship between economic development and social security implementation needs to be resolved in accordance with economic and social goals and specific conditions. During the years 1990 - 1998, Chancellor Helmut Kohl implemented the following

drastic measures to rapidly transform the economy and society in East Germany. Therefore, in the first years after unification, the economies of the Eastern states grew very rapidly, with the main contribution coming from the construction industry. The social security system of the former West Germany was implemented intact in the new Eastern states. By the end of the 1990s, when the construction bubble burst, the German economy also fell into recession, with the unemployment rate reaching nearly 10%. In the context of economic decline, social welfare regimes were still maintained at a high level, leading to the risk of the collapse of the social market state. This practice has shown that although a high social security regime will satisfy the people, bringing stability to society. However, social welfare also needs to correspond to economic development to avoid the risk of too large a budget deficit and economic crisis.

Following Chancellor Helmut Kohl was the period of Chancellor Gerhard Schröder from 1998 to 2005. In order to overcome the economic and social consequences of the previous period, Gerhard Schröder implemented reforms to modernize the labor market, reform unemployment insurance, reform pensions... to reduce the burden on the state budget. The policies and measures of the Gerhard Schröder Government were introduced but did not have enough time to take effect. Therefore, from 1998 to 2003, the economic and social picture of Germany did not improve. Germany was still a declining economy, an aging society and lack of jobs.

In the context of the welfare state being at risk of collapse in Germany, Chancellor Angela Merkel should have taken power. She continued to implement the reforms of the Gerhard Schröder Government to maintain the social welfare state and bring the economy back to growth. Even during the economic crisis, while most capitalist countries laid off employees to avoid bankruptcy of enterprises, the Federal Republic of Germany advocated short working hours so that the fewest people lost their jobs. Thanks to that, the employment rate in Germany was always high, avoiding putting too much pressure on social costs during the economic crisis. Chancellor Merkel built her own development model, with German characteristics and values. The relationship between economic development and social welfare was appropriately resolved by the Merkel Government according to the specific situation of Germany. So, once again, instead of a social market state at risk of collapse, there is a booming economy that copes effectively with a series of shocks and maintains a high standard of living for its people.

The above practice of Germany has shown that the economy is the condition for development and the condition for implementing welfare regimes for the people; and a high welfare regime is a solid social foundation for stable economic growth. However, depending on each historical period, there needs to be appropriate adjustments and implementation of the relationship between these two factors.

5.3.3. Creating economic and social flexibility through small and medium-sized enterprises

As a leading developed economy in the world, Germany has no shortage of famous companies and brands such as Volkswagen, Deutsche Post, Robert Bosch, Schwarz- Gruppe, Siemens. However, small and medium-sized enterprises form the heart of the German economy. In other words, companies with annual revenues of less than 50 million Euros and less than 500 employees account for 99.6% of German companies. More than 1,000 of these companies are called secret champions [294]. The Federal Republic of Germany considers small and medium-sized enterprises to be the pillars of economic and social development. The government invests in and encourages the development of these types of economies, encouraging family businesses. It is the small and medium-sized enterprises distributed throughout Germany that are flexible, mobile businesses, pioneers in technological innovation, and are also centers for job creation, vocational training and employment. The success of small and medium-sized companies in Germany has brought economic success and social stability to Germany.

In Vietnam, during the period of centrally planned economy, a small part of the private economy also existed. However, it was not until 1986, when our country implemented the Doi Moi process, that the private economy was considered a component part of the socialist-oriented market economy with many economic sectors. However, private enterprises were only allowed to register for business licenses after 1990 when the Enterprise Law and the Company Law were issued. Due to the complexity of legal procedures, by 1999, only 14,500 private companies were established in Vietnam. “The Enterprise Law passed in 2000 created a breakthrough growth in the number and scale of private enterprises. Restrictions and conditions on market entry were loosened and reduced. Since then, the number of registered enterprises has continuously increased at an astonishing rate. By the end of 2017, there were more than 1 million registered enterprises in the private economic sector. In 2016 alone, 110,000 enterprises were registered, and this number increased to 126,800 in 2017. The ratio of enterprises per 1,000 people increased to 10 enterprises per 1,000 people in 2017. The Enterprise Law has truly liberated and strongly promoted the entrepreneurial spirit of the Vietnamese people" [3; p.23]. In the context of Vietnam's private economic sector being increasingly focused on and developed, the experiences from the process of developing this economic sector in Germany are even more meaningful to Vietnam. Although different in the models of capitalist market economy and socialist market economy, Vietnam can learn from Germany from determining the position of the private economic sector; Financial investment policies, legal support for the startup process; measures to support technological innovation for private enterprises.

The success of small and medium-sized companies is one of its very own characteristics.

of Germany's economic development. These are the economic nuclei that are dynamic, positive, and easily overcome crisis storms. This experience is worth Vietnam's reference, proposing appropriate and feasible policies to promote small and medium enterprises to develop more strongly in the process of international integration.

5.3.4. Focus on developing human resources to meet the needs of society

Like any country in the world, the most important factor in the success of economic and social development is the human factor. Germany has made good use of its human resources.

German people are famous in the world for their diligence, discipline and high work efficiency. This is thanks to Germany's unique education and vocational training system. German education differentiates students from a very early age. Right after finishing primary school, students are divided into different types of schools according to their abilities. Then, students who have finished high school or are 16 years old and above, if they do not continue their studies, will participate in Germany's dual vocational training system. Students will study at school and at companies and businesses. Most students will work at those companies and businesses after graduation. With such a vocational training system, the Federal Republic of Germany always provides the economy with a skilled, high-quality workforce. Companies and businesses in Germany must also fulfill their commitments to the government in vocational training. This is also the reason and the basis for Germany to always be at the forefront of the world in manufacturing industries. Industrial products are also the main export products of the Federal Republic of Germany.

Germany's success in developing human resources and skilled labor is not only the result of education and training but also due to the social concept in Germany. A country with a highly developed economy but almost no business administration schools; a company executive must have a thorough understanding of the company's new technical processes... That comes from Germany's social concept. For a long time, industry with high-tech manufacturing sectors has formed the backbone of the German economy. Society always appreciates and respects people who are professionally trained and good at practice. Therefore, Germany is the country with the most developed economy in the world today.

Experience and lessons from the development of labor resources and human resources have profound significance for many developing countries in the world today in general and Vietnam in particular. Only when human resources are fully developed can a country achieve sustainable growth and high quality of life.

5.3.5. Ensuring political stability and security

After the Cold War, many countries had to undergo economic and social transformation. However, not all countries could achieve development goals in peaceful and stable conditions. For Germany, the process of economic and social development took place in a context of political stability and tight security.

Germany is a country with a parliamentary-federal system. In which, the Federal Government will manage the country's general issues such as sovereignty, security, foreign affairs, finance, etc., in which issues directly related to the people such as culture, education, social security, etc. are the responsibility of the state governments. In Germany, there are also main political parties such as the Christian Democratic Union (CDU), the Christian Social Union (CSU), the Social Democratic Party of Germany (SPD), the Free Democratic Party (FDP) and the Green Party. Each state and each party has different points in economic and social development policies. The special point is that in Germany, almost no party can dominate the political system but must negotiate and form alliances with other parties. This tightly designed and somewhat complex political model helps the country's development policies to be more consistent with the interests of many social groups.

In general, for 25 years, Germany has always maintained political and social stability and tight security. During this time, Germany has only had 3 Prime Ministers taking turns in power. Compared to other developed capitalist countries, this number is larger: in the UK there are 5 Prime Ministers, in France there are 5 Presidents, in the US there are 4 Presidents and in Japan there are 16 Prime Ministers. The unique regulation of unlimited tenure of the head of government is also a favorable condition for good coalition governments in Germany to promote their role, bringing high economic and social efficiency.

Economic growth and social stability are always closely linked to political stability and security. Therefore, each country needs to resolve this relationship well, in order to create solid foundations and conditions for economic and social development.

Chapter 5 Summary

From the reunification of the country until 2015, the Federal Republic of Germany has experienced a quarter of a century of economic and social development. The economic and social picture of the Federal Republic of Germany has the following highlights:

After 1990, the Federal Republic of Germany entered a difficult and unprecedented development period: the Federal Republic of Germany had to unify two societies that had developed completely differently for more than 40 years. Meanwhile, economic and social integration and unification were much more difficult than political and state unification. However, Germany at that time also had the advantage of only having to convert a part of the country, the states in the East. At the same time, the Western states had already experienced a period of miraculous economic development, perfecting the market economy and social model, so they had a large material foundation to support the new lands. In particular, Germany had always maintained social solidarity and high security, which was a favorable environment to promote economic growth. However, the unification did not come as quickly as expected. Germany had to go through the shock of unification.

The first. Immediately after reunification, Germany witnessed economic decline, increased unemployment, social disparity and increased poverty rates. Only in the 21st century have Germany's economic and social difficulties been truly overcome. Germany returned to its growth trajectory, recovering quickly after each crisis. Along with these achievements, the manifestations of division are becoming less and less. Germany has become a living proof of the reconciliation of divided regions after the end of the Cold War. Germany will need more time to unify, but a German nation has found itself, asserting itself as a unified entity.

After 25 years of development, Germany has further affirmed its position as an export power and industrial power in the world. A high trade balance is a characteristic of the German economy. The German economy is always closely linked to the global trade market. At the same time, Germany also has a great impact on the economies of many countries, creating mutual dependence of these markets. Economic and social characteristics have shaped the identity of the Federal Republic of Germany, continuing to affirm and develop the social market economic model with a typical high social welfare state. The Federal Republic of Germany always creates a balance between economic development and social stability, between economic growth and improving the quality of life for the people. Even in times of crisis, Germany still emphasizes the interests of workers. It is this uniqueness that has made the success of the German economy and society and become a model for many countries.

Over the past quarter century, Germany has faced common changes of highly developed economies: declining birth rate, aging population, changing demographic structure with greater pressure on the social security system. This is also a big challenge for a high welfare state like Germany.

The economic and social development of the Federal Republic of Germany from 1990 to 2015 has created the foundation and driving force for the development of the Federal Republic of Germany in the following stages. At the same time, Germany also left behind experiences and lessons in development, that is: each country needs to find its own development path, create flexibility in the labor market and economic development always goes hand in hand with social development to create a sustainable foundation.

CONCLUDE

1. The Federal Republic of Germany is a country located in the center of Europe, playing the role of connecting East and West Europe. However, throughout history, Germany has often faced division. Therefore, the German nation was formed later than many other nations in Europe. Germany was first unified at the end of the 19th century. Not long after, Germany continued to fall into a state of division during the Cold War. A capitalist state and a socialist state were born on German territory. The state of tension and confrontation lasted for more than 40 years. On October 3, 1990, the existence of two separate states, East Germany and West Germany, ended, the unified Federal Republic of Germany located in the center of Europe was re-established. Germany entered a new period with the process of economic and social development to affirm complete unity.

The year 1990 brought Germany into a new historical period. The newly-born unified state had to embark on the task of carrying out two parallel tasks: economic and social transformation and development. The transition period of the Federal Republic of Germany took place in the context of many changes in European and world history. When the Yalta bipolar order collapsed, a new world order of international relations was gradually being built, which was a favorable opportunity for Germany to rise up and seek a worthy position in the international arena. A peaceful, interconnected, and closely cooperating world was also the time for countries, including the Federal Republic of Germany, to promote soft power from successful economic and social results. The period after 1990 was also the time when the connections within the EU became increasingly closer and more extensive. With its transitional position and historical ties, Germany has always demonstrated its role of closely connecting with EU members. German relations

– The EU is increasingly tightening, creating conditions to promote mutual development. In particular, Germany has taken advantage of a large duty-free market, a market for high-quality goods, a place to supply skilled labor… to serve its export-oriented economy. Since unification, Germany has taken advantage of favorable conditions of the new historical situation from the outside, combined with inherent internal factors such as human resources, scientific and technical foundation, a tightly designed political apparatus… to carry out economic and social tasks and goals.

Every objective or subjective factor from the context of Germany, Europe and the post-Cold War world has an impact on the economic and social development of the Federal Republic of Germany. That has created opportunities and challenges for Germany because each factor can both promote and hinder development. However, subjective factors have played a decisive role in bringing about changes in the economic and social picture in Germany. In which, the identity values of the German people and the German labor force are the most important factors. The Federal Republic of Germany has fully exploited its internal factors.

2. From 1990 to 2015, the Federal Republic of Germany experienced 25 years of peaceful economic and social development. There were many difficulties, but thanks to the specially designed political system, the Federal Republic of Germany always achieved political stability, close social solidarity and high security. Such a favorable political context is the condition for the German Government to focus on economic goals. Therefore, the German economy has undergone profound changes.

During the quarter century (1990 - 2015), the Federal Republic of Germany overcame challenges and crisis storms to become an economic giant. In the early period after reunification, there were no "blossoming lands", no economic boom. On the contrary, the economy of the Federal Republic of Germany had to pay the price for the shock of unification. The construction bubble in East Germany only created temporary growth indicators. Therefore, from the mid-1990s, when the construction bubble burst, it caused the German economy to fall into the most severe recession since World War II. The number of unemployed people increased every year, causing great pressure on the economy. Faced with the risk of collapse of the German economy, Germany carried out a transfer of power. Chancellor Gerhard Schröder of the SPD replaced the "father" of unification, Helmut Kohl, to head the German Federal Government. During the 7 years under Chancellor Gerhard Schröder, the German economy failed to overcome its weaknesses, continued to be in crisis, and unemployment continued to rise. From a leading economy, Germany became like the "sick man of Europe".

It can be said that for the first 10 years after reunification, the German economic situation was very gloomy. The process of economic transformation and development was not easy for the Federal Republic of Germany. However, there were also positive economic results and successes in many fields. That is, within about 5 years after signing the Unification Treaty, the centrally planned socialist economy in the Eastern states was completely privatized. Changes in infrastructure, transportation, and economic transformation in the new states were bright spots in the gloomy economic picture of the Federal Republic of Germany. During this time, the Federal Republic of Germany unified the model of the social market economy state, which began to be linked to the strategic goal of sustainable development. Another highlight is that the Hartz and Agenda 2010 reform programs introduced by the Gerhard Schröder Government, although they did not have many results, laid the foundation for economic and social reform. These reforms also represent a uniquely German path of development.

Germany truly returned to its economic superpower status when the German Federal Government was run by Chancellor Angela Merkel. In 2005, Chancellor Angela Merkel took office in the context of the German economy still in a recession but reforms were also introduced. With the right policies and measures, the German economy gradually recovered and rose to number 1 in Europe within a short period.

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