Misreading Germany: Its strength is in its boring stability and political reason.

• Author: Schmieding, Holger

As the pivotal country at the heart of Europe, Germany continues to fascinate and confound its observers. The discussion occasionally oscillates between excessive gloom and equally excessive admiration. Just months after some doomsayers had taken problems in the car industry as a sign that Germany's luck had run out, the world marvels at how Germany has seemed to handle the corona pandemic better than most other advanced countries.

The truth is more profane. Germany is the opposite of such extreme positive or negative views: instead, it remains a stable, slow moving, and reasonably successful country. Its stability rests on two specific traits: the large number of highly specialized and flexible medium-sized Mittelstand companies and a federal system that enforces a need to seek consensus. Because of its very checkered history, Germany is also not unlearning some key lessons of history as fast as some other countries. By and large, that is a good thing. Observers who alternatively see Germany's export prowess and current reliance on specific manufacturing sectors such as the car industry as either the key strengths or weaknesses of its economic model miss the bigger picture. These are not the crucial factors that shape the German economy. Instead, the real drivers are the large number of often owner-led medium-sized companies. Taken together, they are arguably one of the best search engines ever invented. A limited number of big companies may throw big money at some big projects, which may or may not be the right ones. In Germany's highly diverse Mittelstand, a huge number of companies directed by the survival instincts of their owners are constantly looking for new opportunities in almost every conceivable direction. The more they do so, the more such opportunities they will find. It's no wonder that they often dominate tiny niches of the global market.

As long as this search engine for thousands of new opportunities works, Germany can cope with even major structural shifts such as those away from textiles and steel in the past, or now away from carbon-powered cars. Other companies and countries may sometimes be much better at the great ideas. But even then, the German ecosystem of qualfied workers, engineers, and Mittelstand suppliers makes it an attractive place for companies such as Tesla, which needs reliable quality on top of the initial idea.

Being home to the Mittelstand search engine is not a guarantee for a strong economy. When...