Michael Fry: Time for German lesson - and we have lots to learn

This column is about to go on a German walkabout, and it would like to take its readers with it.

I am myself embarking on a comparative study of Edinburgh and Leipzig during the 18th century. The job is to pick out common elements in the history of two cities which in that period saw both an intellectual flowering and an architectural transformation. I hope the project will finish in a book. But even some of my best friends say they would rather wait for the movie.

There is, anyway, a good deal for me to get out of living for a year in Germany, first in Frankfurt, where a national institute for legal history is based, then in Leipzig itself. More to the point for this column, both places offer points of comparison with my home here. Frankfurt is, like Edinburgh, a big financial centre. Both claim a second place to London, though that depends which measures you choose. For a certainty, both are struggling to overcome the credit crunch. Leipzig was the major regional centre in the failed state of East Germany, with a history of antagonism to the capital in Berlin: one reason why the revolution of 1989 started in Leipzig. The citizens went on the streets in their thousands, chanting "Wir sind das Volk" ("We are the people"). Yet a new liberal democratic order has fallen short of fulfilling all their expectations. Parallels with Scotland need not be laboured.

I especially look forward to writing comparative columns on these lines because comparison with Germany is not something we in Scotland usually do. There is perhaps too much comparison with England, often in terms condemning Scotland to come off the worse. Alternative comparators among the other small nations of northern Europe seem a good deal less useful after their own economic disasters of the past couple of years.

But one valuable political example that Germany might set us is of a successful federal system. The sole episode of centralised government in its history came during the Third Reich, and nobody is likely to want a repeat of that. When the Allies oversaw the creation of a new constitution after the Second World War, they sought to make sure power could never again concentrated in any single German's or set of Germans' hands. Power was instead carefully distributed among different organs of central government, and between the centre and the 16 German states.

Of course, the constitution has not remained static, and central government has grabbed power in Germany just as it has grabbed power in every other western country over the past half-century. It still has to be used with more restraint than the power available under Britain's doctrine of absolute parliamentary sovereignty. That remains in place even after the efforts since 1997 to devolve from Westminster. Looking back, it is clear we have advanced far from the securities of the old British constitution, yet it is hard to see in the results to date anything other than a dog's breakfast. The Welsh come closest to contentment with it, but both Scotland and England grumble without ceasing, while Ulster is scarcely being governed at all in a normal sense (not that it seems to be the worse for that).

Looking forward, it is difficult to discern where the whole business might end. Is federalism the answer? I do not think so myself because the United Kingdom is so lopsided, with England having 80 per cent of the people and even more of the wealth. And I doubt if the English will tolerate their country, with its thousand years of unity, being divided up to please a lot of Celts. In fact, I believe the independence of Scotland would solve more of the problems than any other conceivable solution.

But at least going to live under the German federal system will allow my scepticism to be tested. The differences between the north and south, and now between the west and east, of Germany are as large as any within these islands. If I remain unimpressed by the formal conception that holds the lot together, the mentality and methods of defusing conflict within it may well prove instructive.

Especially in economics, the year ahead will offer interesting comparisons. The Germans' tremendous post-war recovery had made them rather scornful of the antiquated elements of our industrial system that persisted up to the Thatcherite era. Then the tables were turned. For a good while, the British economy grew faster than the German one, till, by the time of the credit crunch, incomes per head in each country were almost at par (with the Germans still just a whisker ahead).

Today, everything is in the melting pot again. Nearly all western nations were guilty of excess in the boom of the past decade, but the British much more than the Germans. Now the Germans are among those who praise the firmness of David Cameron's coalition in cutting its deficit. Yet even when the immediate financial crisis is over, there will remain the question of just how the UK is going to earn its living in future. The boom came in the service industries, while the decline of manufacturing accelerated. The even longer experience of decline inside Scotland in particular shows it will not be easily reversed. Given how spectacularly the services have gone bust, what exactly, once the smoke has cleared, are we all going to do next?

By contrast, Germany remains one of the world's leading manufacturing countries, kept that way by a degree of co-operation between management and trade unions that we have never come near achieving, or perhaps even wanting. And unlike British governments, German governments have successfully held the ring between the two sides of industry. All have been affected by the credit crunch, too, but that will make the Germans more intent than ever on sticking to their tried and trusted methods of working.

The present crisis as it looks from Frankfurt is much more one of the currency than of industry or government. A never wholly enthusiastic member of the eurozone, Germany has seen the guarantees it sought on entry nullified by the need for joint action to prevent the collapse of the Greek economy and the chain reaction that would have followed.

So dark clouds loom over Frankfurt just as they loom over Edinburgh, perhaps a little less gloomily now than last year but still threatening to release another deluge. I will try to provide regular updates on the weather.