Medieval ways stifle in Web age

Germany wrestles with craft guilds that help hold down business formation.

When ServiceMaster, a US-based disaster restoration firm, pulled out of Germany last year, it wasn't for lack of work. Fixing up after fires or floods is as lucrative here as anywhere.

The company ran into trouble because "disaster restoration" isn't on the list of trades recognized by the crafts association, a powerful - and peculiarly German - vestige of the centuries-old guild system. ServiceMaster's former general manager in Germany, Peter van der Gugten, says, "You can't fight against the crafts associations."

Tension between the New Economy and a medieval business practice revived by the Nazis is growing here. For example, you won't find teens running dotcom start-ups from a garage, not without an apprenticeship and master's license first. As a result, levels of self-employment are among the lowest in the European Union, while unemployment hovers near 10 percent. Yet greater EU integration is necessitating greater German competitiveness.

Designations long out of use elsewhere - apprentice, journeyman, and master (meister, in German) - are still integral parts of the vocational training system here.

Legislation based on a Nazi-era law governs the 94 professions that require a "master's license" to set up shop, from the mundane - as in carpenter, tire mechanic, or janitor - to the arcane, such as wood toy maker, porcelain painter, harpsichord builder, and bell caster.

Exceptions to the rule are rare. If you want to start your own business as bricklayer, butcher, or hairdresser in Germany, you must take a "master's examination." Costs range anywhere from $10,000 to $50,000.

For businesses that disregard the master requirement, fines, court cases, and eventual submission are the usual result.

"The trade law made it impossible [to operate in Germany]," says Mr. Van der Gugten. Local crafts associations tried to force each of ServiceMaster's 60 German franchises - some of them family businesses - to hire a "master" janitor, even though much of the work they did involved specialized leather restoration, not cleanups. The alternative was a $25,000 fine per franchise, or quitting Germany.

Keeping potential competitors in check was the original purpose of guilds in medieval Europe, when bookbinders and glassblowers jealously guarded rare skills. Yet with the rise of industrialized mass production during the 19th century, craftsmen and artisans lost almost all their privileges. In 1935, the Nazis, heady with romanticized notions of superior German workmanship, restored the "master's license" - which exists in an amended form to this day.

Horst Mirbach, an expert on economic law, estimates that over the decades, the damage inflicted by the master requirement goes into the "trillions" by nipping new businesses in the bud and extinguishing competition.

"If there were a referendum tomorrow, I'm sure 80 to 90 percent of the population would vote against the craft associations," Mr. Mirbach says. But, he adds, politicians of all colors are reluctant to take on the Central Association of German Handicrafts, which, with some 850,000 firms and 6 million members, wields enormous power.

Jrg Tauss, a member of parliament, only half-jokingly compares the group's clout with the gun lobby in the US.

As European Union integration continues to chip away at borders, however, strictly regulated, expensive German labor is becoming less a seal of quality than a self-imposed barrier to growth. Only tiny Luxembourg has similarly tough rules. And with the boom in high-tech industry, there is a growing trend to ignore or circumvent the master requirement.

"In the European context, it is becoming increasingly illogical and will probably be decided in [European] courts," says parliamentarian Mr. Tauss. "But politically I don't see anybody who's taking steps against the system."

But there are those who try to chip away at it. Michael Wrle is author of a self-help book on how to circumvent the master requirement. The whole system, Mr. Wrle says, is filled with absurdities: a baker, but not a cook, needs a "master's license." Rembrandt, had he lived in contemporary Germany, would not have been considered an artist because of the size of his workshop. And master "two-wheel mechanics" must spend most of their time learning about motorcycles, even if they only want to open a bicycle shop.

Rather than face interminable hassles, many large- and medium-size firms prefer to hire a single meister to appease trade associations. For example, a janitorial company with 350 branches throughout the country employs one master custodian.

But especially in the brave new world of the Internet, tiny start-ups are often on the cutting edge of innovation - and liquidity. While trade associations are pressuring dotcom entrepreneurs to take on master "information technicians," the flexibility required in the modern economy is pushing the logic of the mercantile economy to its limits.

Some 25,000 information-technology businesses in Germany lack the official qualification. Frank Garrelts, a computer entrepreneur in northern Germany, estimates that there are no more than 3,000 qualified information-meisters nationwide. "Imagine if Germany were dependent on these people," he says. "Here you can see the whole paradox of the matter."

Overall, says Wrle, a half-million businesses are potentially threatened if one day a local trade association demanded a "master" qualification.

A powerful argument for the crafts associations is the enormous role they play in job training: 70 percent of vocational jobs and 40 percent of all training spots.

"The numbers speak for the system," says Holger Schwannecke, head of the handicrafts association's legal department. "They show that this system of qualification bears fruits."

(c) Copyright 2000. The Christian Science Publishing Society

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