“Without a strong ‘Mittelstand’* there is no democracy and no market economy”

Eberhard Hamer and Olaf Jörgens answer the question: Who is Mittelstand?

Book review by Ewald Wetekamp

Current Concerns readers are well acquainted with Professor Eberhard Hamer through his analyses of national and global economic and financial policy spaces. As the founder of the Mittelstandsinstitut Niedersachsen in Hanover in 1975, he sees his task as highlighting the importance of the “Mittelstand” for the functioning of a truly free market economy and a truly existing competition in the market. He is convinced that without a strong “Mittelstand” there can be neither democratic conditions nor free market competition.

“Mittelstand” as a motor of social developments

Readers who pick up the new book, “Wer ist Mittelstand?”1, written together with Olaf Jörgens – who, incidentally, was also a co-author of Eberhard Hamer’s earlier books – should know in advance that they can use this book as a reference work, but also as a reader. In this way, the reader is guided through history with a view to the entrepreneurial personality. The entrepreneurial personality is always characterised as innovative, proactive, responsible, full of ideas and, in relation to society, always as supporting society in a positive sense. From antiquity to the Middle Ages, from modern times to the Weimar Republic and the founding of the Federal Republic of Germany, the book shows the supporting function of the emerging “Mittelstand” in Europe and Germany. From Charlemagne to the development of the market towns, the free imperial cities, the guilds and guildettes, the “freedom of a Christian man”, the birth of compulsory education and pedagogy, from Cromwell to the ideals of freedom of the French Revolution, from the spread of the same to Germany with its Revolution of 48, from the Weimar Republic to National Socialism to the writing of the Basic Law of the Federal Republic of Germany and the existence of two German states – Hamer sees in Germany’s development into a democracy with a clear basic decision in favour of personal freedom, self-responsibility and individual decision-making competence not only the basis of a free society according to law and order, but equally he sees in it the fundamental conditions of a free market economy with freely operating personal enterprises that can and must assert their place in a truly free competition in the market.

“Mittelstand”, democracy and personal market economy are interdependent

The following quote very clearly illustrates how Hamer understands the bourgeois middle class and the challenges and dangers it faces:
  “In the meantime, the bourgeois middle class of small and medium-sized merchants or factory owners, of farmers and various service providers (old, self-employed middle class), of technical intelligentsia, bearers of responsibility in state and private administrations as well as in culture, education, economy and science (new ‘Mittelstand’ of employed educated citizens) is of outstanding, supporting importance as the strongest functional group for the development and stability of society as a whole. Therefore, it is also considered indispensable as a guarantor for the basic decisions of personal freedom, self-responsibility and individual decision-making competence underlying the decentralised systems of order – democracy and market economy. Without a strong ‘Mittelstand’, there is no democracy and no market economy.” (p. 21, emphasis ew)
  With the last sentence, this book has addressed today's struggle for democracy and a free market economy. This argument runs through the entire work. And it soon becomes clear that democracy and the market economy, civil society with its individual basic freedoms, are not a fixed and immovable system of order whose existence would per se be guaranteed for eternity. It becomes clear that this is precisely what must be fought for.

The “Mittelstand” from a sociological perspective

Before the authors come to a more detailed presentation of the socio-political and economic significance of the middle class, Olaf Jörgens deals in the second chapter with the question of a generally accepted definition of the so-called “Mittelstand”. In doing so, he draws on sociological analyses since the 19th century. He presents the analyses of Karl Marx, Max Weber and Theodor Geiger. After the Second World War, he sees in Helmut Schelsky, Ralf Dahrendorf, Karl Martin Bolte and Rainer Geißler those representatives of the sociological stratification model whom he cites and presents as references. Similar to the first chapter, in which Hamer roams through history, from antiquity to the formulation of the Basic Law of the Federal Republic of Germany, the reader becomes acquainted with the different sociological model analyses, which, in defining the “Mittelstand”, are sometimes based on income, sometimes on the level of education, sometimes on the entrepreneurial activity of an initiative, self-responsible, risk-taking and imaginative personality. At the same time, the entrepreneur of a midzise company is always obliged to his employees, his suppliers and his customers in a special way as a personal entrepreneur.
  To summarise this part, one can say that the social “Mittelstand” is made up of the self-employed and the employed “Mittelstand”. Just as the self-employed “Mittelstand” appears on the market as a self-responsible producer of goods or services, the authors see the employed “Mittelstand” as those persons who carry out management and responsibility functions as well as their decision-making function on behalf of others.

The “Mittelstand” in figures

The authors go on to show that it is precisely the self-employed and dependent “Mittelstand”, which in Germany today comprises about 5 million people in the first group and about 8 million in the second, that prove to be the most effective performers in our society. Their efforts have so far led to ever greater general prosperity and still provide the greater part of our economic life today. For example, two thirds of our labour market is covered by them; they generate 63 % of all taxes and pay 56 % of all social security contributions. Thus they support both the lower class and the largest part of the subsidies to the corporations. The “Mittelstand” of both groups and its members make up almost 47 % of the total population in Germany. That is about 40 million inhabitants. Their personal views may not be identical; their concern to continue to exist in the market as human resources companies should bring them together and make them realise their strength.

“Power economy” versus “personal market economy”

Although they are the real bearers of the decentralised regulatory systems of democracy and market economy, their political weight remains underrepresented. They have hardly any time to organise and operate effective representative bodies. Those that have already been established are not infrequently determined by functionaries who do not really do justice to the concerns and legitimate needs of the “Mittelstand”. It is one thing that a sprawling national administrative technocracy devised by EU bureaucrats, with a jumble of application forms and documentation requirements, makes it more difficult for staffing companies to perform their work and live their lives. But it is quite another that globally active large corporations are being courted by the state with favours that make a mockery of a free-market economy and the constantly invoked free competition. In this way, the top performers of the free “Mittelstand” are being worn down. The following quotation succinctly summarises the concern of the authors, to which they insist:
  “The capital feudalism of the upper group strives for central dictatorship rather than the will of the people and power economy rather than market economy, as well as global monopoly rather than competition from equal competitors.
  On the other hand, parts of the lower class strive for an ever stronger welfare state (redistribution) with a guarantee of provision instead of personal achievement and performance.
  Bourgeois society is thus not a fixed but a latent system of order, which must be ‘defended’ again and again against the power claims of the two fringe groups if it is not to be pulverised.” (p. 21)
  Thus, it is by no means certain that the personal freedom and self-responsibility of citizens will generally remain politically secure. It is constantly threatened by the power claims of big capital (which wants to rule) or the redistribution claims of the lower class (which demands the determination of the benefit yields of the middle and upper classes), but also by the supranational concentration of power of the Eurocracy as well as by world monopolies and world financial powers (globalisation) (p. 22).

For the common good and general prosperity

Professor Dr. Eberhard Hamer is the best-known German researcher of the “Mittelstand”. He founded the Mittelstandsinstitut Niedersachsen 45 years ago. Since then, in more than 30 books and countless articles, he has tirelessly pointed out that the economic sciences focus too much on the 6 % corporations and their conditions and do not correctly assess the importance of the “Mittelstand”. That is why Professor Hamer has always focused his attention on the person of the entrepreneur and their personal enterprises. He thus founded the “personal market economy”. Hamer was awarded the Federal Cross of Merit for this scientific work. After the economics of the “Mittelstand”, he also recently founded the sociology of the “Mittelstand”.
  With his conviction that the midsize personal enterprise is an enterprise of people, with people, for people, he emphasises like no other the importance of the “Mittelstand” for the common good in all areas of society: for prosperity, for culture, for education and above all for the preservation and expansion of democratic conditions.

The pandemic – a caesura for the “Mittelstand”?

The fact that the Corona pandemic poses such an unprecedented threat to the “Mittelstand”, their staff companies and their employees, the extent of which cannot yet be estimated, does not need to be emphasised at this point. The attentive observer of economic policy events has seen this for a long time. It is precisely the globally active large corporations that have been able to increase their profits exorbitantly as a result of the pandemic. The “Mittelstand” is struggling to survive. The fact that a pandemic threatens large sections of the bearers of socio-political conditions worthy of protection is more than worrying, considering what its representatives stand for.  •

* The term “Mittelstand” mainly applies to mid-sized firms as opposed to larger listed companies and most importantly “Mittelstand” companies are characterised by a common set of values and management practices. “Mittelstand” commonly refers to a group of unique businesses in German-speaking countries (and Britain) which are very successful, and are usually capable of surviving economic turbulence. Generally small and medium-sized enterprises, they differ from regular SME’s. Ludwig Erhard, the Economics Minister who crafted post-war West Germany’s economic miracle (German: Wirtschaftswunder) warned against reducing the Mittelstand to a mere quantitative definition, but instead emphasised more qualitative characteristics which embody the German Mittelstand, as it is “much more of an ethos and a fundamental disposition of how one acts and behaves in society.” (Wikipedia)

1 Hamer, Eberhard; Jörgens, Olaf. Wer ist Mittelstand? (Who is Mittelstand?) Sociology of the Middle Class. Published by the Mittelstandsinstitut Niedersachsen, Büsingen 2021, ISBN 978-3-00-066875-3.

For readers from Germany to be obtained from: Bücherstube Rielasingen, https://www.rielabuch.de/;; for readers from other countries via: redaktionzeit-fragen.ch.

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