Why Germany has no gilet jaunes protesters

If Vechta is not typical, it is far from unique. Pöppelmann (local workforce 2,100) and Big Dutchman (900) are two of Germany’s “hidden champions”, a term coined in the 1990s by Hermann Simon, an academic-turned-consultant, for Germany’s innumerable obscure, smallish and world-beating firms. Unlike high-end services companies, which benefit from the network effects and talent pools in big cities, specialist manufacturers are often found in places you’ve never heard of: at least two-thirds of the hidden champions are in settlements below 50,000 people, and they are dotted throughout Germany (see map). Their success helps explain the relatively high share of manufacturing in Germany’s workforce and the slow pace of its decline (see chart). Germany is also politically decentralised, which Philip McCann at Sheffield University says keeps regional inequality in check. And while creative sorts flock to cities, scientists and engineers keep small towns in rich areas alive. “I can stay here all my life,” chirrups Michael Fabich, a young production worker for a local grocery firm.

Decentralisation blunts a source of discontent that has plagued some of Germany’s neighbours. In France the revolt by gilets jaunes at first seemed to be about small-town grievances against the big cities in which economic opportunity has become concentrated. According to Andrés Rodriguez-Pose, a professor of economic geography at the LSE, Ile-de-France (which contains Paris) was the only French region with above-average growth between 1990 and 2014. Not only were the gilets jaunes left behind, they felt scorned by the winners of globalisation, embodied by the haughty and remote figure of Emmanuel Macron.

Germany should not consider itself immune to such problems, argues Marcel Fratzscher of the German Institute for Economic Research. Beneath its glowing jobs numbers lurk growing inequality and a vast low-pay sector, nurtured by a long period of wage suppression. Germany has gained more from globalisation than it has lost; you can see that in Big Dutchman’s logistics yard, full of packages destined for Senegal and Chile. But regions that specialised in low-end products like ceramics or textiles, such as upper Franconia or parts of the Palatinate, were walloped by cheap imports in the 1990s. Policy can hurt places, too: the government may have to spend €40bn to compensate regions affected by its recent decision to scrap lignite mining.

Yet there is no obvious parallel in Germany to the insecure, “peripheral” France of the gilets jaunes. Hidden champions create jobs and opportunities far from cities, limiting the brain drain. Local politicians are more responsive to voters’ demands than Jupiterian presidents in distant capitals. In troubled areas, Germany’s constitutionally mandated system of fiscal transfers across states can smooth globalisation’s rougher edges. Jens Südekum, an economist at Düsseldorf’s Heinrich Heine University, calculates that in 2010 such payments amounted to fully 12.4% of Germany’s aggregate tax revenue. Cities like Duisburg and Essen, in the post-industrial Ruhr valley, have been spared the ravages that deindustrialisation brought to parts of America’s Midwest or the Pas-de-Calais region in northern France, now a stronghold of Marine Le Pen’s National Rally. Comparable parts of Germany have not made a comparable populist turn. Indeed, researchers find no clear correlation between AfD support and economic hardship.

The big caveat is the former East Germany. Despite success in isolated areas like optics, only a fraction of Mr Simon’s hidden champions are found in the east. After reunification the mass sell-off of industry, largely to western investors, left easterners with what Mr Südekum calls a “deep perception that they were ripped off”, which lingers today. Extremist parties do best in the five eastern states. Dresden and Chemnitz have spawned thuggish protests.