Europe's Giant at a Juncture

German vote Sept. 27 pits Kohl's 'too slow' business reforms vs. Schrder's promises.

By , Staff writer of The Christian Science Monitor

If you're going to have a good new-business idea, try not to have it in Germany.

That's the lesson Frank Rinn says he has learned from 10 years of struggling to bring his invention to market. And as he sizes up the main contenders in landmark parliamentary elections later this month, he holds out little hope that Germany's next government will make life easier for business.

Like many of his ilk he is skeptical of promises from both Chancellor Helmut Kohl, head of the conservative governing coalition, and from Gerhard Schrder, candidate for the center-left opposition. Both pledge reforms that will prime Germany's economy for global competition.

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"This government can't change the system," he says. "Helmut Kohl is unable to move after 16 years, that's too much even for a good chancellor. But I'm not sure the Social Democrats would do better."

Mr. Rinn developed a method of testing wood for rot, measuring resistance to a needle drill rather than extracting core samples, aiding utility companies checking poles and architects restoring houses, among other uses.

But the hurdles he had to overcome would have deterred a less-determined inventor. For a start, he could not raise a single pfennig in venture capital, not from the chambers of industry, not from the government, not from the banks.

"They weren't even willing to read my business plan," he complains. "My machine was too innovative, too strange."

So he lived off his parents' charity while he perfected his "Resistograph." Even then his battles were not over. The firm that makes telephone poles had a cozy deal with the state-owned phone company to test its poles. And Rinn found architects and engineers unwilling to use his tool because their fees were pegged to the cost of a restoration project.

Of the 1,000 or so sales Rinn has made, about two-thirds have been to buyers abroad.

It is the opposition Social Democratic Party (SPD) candidate for chancellor, Mr. Schrder, picked by many to win the Sept. 27 poll, who has talked most enthusiastically about invigorating the economy with innovation and deregulation.

"We cannot spend two years talking about the ergonomics of chairs when the issue is making new computers," says Ernst Schwanhold, SPD economic spokesman. He raves about high-tech startup firms spun off from research at the Massachusetts Institute of Technology in Cambridge, and insists that "what we need here is less of the civil servant 'security first' mentality and more of an entrepreneurial mentality."

Schrder has also promised lower taxes for small businesses, and pledged to cut labor costs. But the business community is not convinced.

"It's Gerhard Schrder making the speeches now," says Winfried Fuest of the German Economy Institute, a business-funded think tank. "But after the election the party will make the program and many people in the SPD have different ideas."

Not that many businessmen are enthusiastic either about the idea of another four years of Kohl, whom they blame for not moving fast enough toward economic reforms. "Emotionally, few of us are overwhelmed by the prospect of voting for Kohl, but rationally we feel we have to," says Hans Stein, an analyst with the Association of Independent Entrepreneurs.

In recent years Germany has taken a number of steps to liberalize its economy, privatizing almost all state-owned firms and moving tentatively toward reforms that would make workers cheaper to hire and easier to fire.

And while legislation has "done a lot around the edges," in the words of Grant Kirkpatrick, of the Organization for Economic Cooperation and Development (OECD) "reality has gone far beyond the institutions" as employers and unions negotiate.

This has boiled down to workers often accepting longer hours and lower pay to save their jobs.

The problem is that as manufacturing industries have shed jobs to stay internationally competitive, the service industries remain underdeveloped. The collective-bargaining system sets wages so high that low-wage service jobs cannot be done legally.

"This will be the No. 1 item on the social-policy agenda after the elections," predicts Wolfgang Streeck, head of the prestigious Max Planck Institute for the Study of Society in Cologne.

Even the SPD seems ready to let wages in some sectors tumble. "It is better that people be in jobs, even if they are badly paid, than that they be out of work," says Mr. Schwanhold.

But this is clearly not going to happen brutally. The country's history this century has left Germans obsessed by the need for consensus, and changes will only emerge from negotiation.

"Restructuring has asked more of workers, and you need the goodwill of your work force," says Dr. Streeck, who recently completed a study of "co-determination," the German system that gives trade unions half the seats on companies' outside boards of directors.

"The German way of making adjustments is slow, because people talk a lot," he acknowledges. "But once it is done, it sticks.

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