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Germany – the new mini-superpower

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The top exports of the new German economy are cars, chemicals, and machine tools. The Volkswagen factory in Wolfsburg, for instance, is openly setting out to beat Toyota.

Yet at the heart of the country's resurgence is something called the Mittelstand, of which Roth & Rau is an archetype. These are the more than 1,500 small- and medium-sized firms spread across the countryside that produce high-end niche products – from tools to sonar to precision parts for race cars. The Mittelstand account for more than half of German exports and 70 percent of its workforce.

Mittelstand characteristics are unique. Many, like Roth & Rau, are or were family owned. They operate on "old-fashioned" values of worker loyalty and core competency. When successful, they usually don't sell off: They plow profits back into the firm. They keep their production and quality control local. Mont Blanc pens, for instance, are sent around the world but produced in German plants.

"The Germans took seriously the idea that global competition will come from the BRICs, and they set about engineering a response," says a Western diplomat. "They started to make things; that's what they do."

The Roth & Rau brain trust, for example, decided early on that it would not sell coated solar wafers as an end product. What the company sells are the machines that make the coating process, and, equally important, the know-how to make the machines work. "We built this out of our former lives," says Silvia Roth, vice president of operations. "It was the right product at the right time – but we have to keep the gap with the Chinese."

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