The Caring Hand that Cripples: The East German Labor Market after Reunification by Dennis J. Snower and Christian Merkl. Published in volume 96, issue 2, pages 375-382 of American Economic Review, May 2006

What are the challenges that globalization makes on welfare states and how should welfare states respond? How should welfare states be designed to enable countries to reap the benefits of globalization? These are the main themes of Hans-Werner Sinn's book, Can Germany Be Saved? We view Germany as a case study of how a welfare state can go wrong in reacting to the pressures of globalization. We present two views of globalization—the “specialization view” (of Sinn) and the “Great Reorganization view” (ours)—and examine the policy implications of each for the welfare state design.