ABSTRACT
The breakdown of the East German economy, increasing unemployment, and low foreign investment rates forced the German Government to take action against what has been called the “German disease” ( Newsweek 1996:18; The Economist 1996:19). Following the “concerted action” of the 1970s, the Labor Minister invited prominent employer and employee organizations to collaborate on the reform of German labor law ( BMA 1996:1). Despite the institutional and political challenges posed by German unification, the macrostability of the labor network among interest groups and public actors promised the success of the traditional German consensus instrument for interest mediation, the Alliance for Labor among governmental, employer, and employee peak organizations. From a societal perspective such arrangements among only a few peak organizations are advantageous if they reduce the decision-making costs to an amount which exceeds the losses incurred by non-participants (Buchanan and Tullock 1965: 76).
