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The change in the geopolitical order, disrupted by the invasion of Ukraine, has exposed the weaknesses of the German economic model. The German model, points out Wolfgang Münchau in one of his analyses for Eurointelligence, hinges on three ingredients: cost competitiveness, technological leadership in its industry and geopolitical stability, and ‘all of them are gone,’ he adds. On the one hand, the cut-off of Russian gas — which accounted for more than 50% of the gas consumed in Germany — has impacted the electro-intensive industry, forcing businesses like the chemical company Lanxess to restructure their business and close plants.
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Energy prices are higher than in many other countries here, but not super high - especially not for businesses.
The real problem is that Germany is an gerontocracy that got complacent. Literally every change, whatsoever, will find at least 50 people arguing against it, because it could slighty affect their bottom line or their view. The result is a country that ground to a halt.
This is true in the business world, politics, science, administration. There are just too many old people that are afraid to lose anything.
Our car manufacturers straight ignored anything electric until Tesla built a factory literally on their door steps, our politicians willfully sabotaged wind and solar power (where we were world leading, at the time!) in favor of coal, because coal workers are somehow 10x more important than anyone else, our administration is still using paper everywhere, everything takes tons of useless paperwork, just because fucking Annegret thinks computers are a fad, our immigration system is almost nonexistant, since “we’re not an immigration country” despite something like 25% of the people here migrated, we don’t let refugees work, despite having literally too few workers to stock shelves at Aldi for 15% above minimum wage.
As a young German, I have to say, I’m afraid this country is fucked. But not because of any grand economical failure, but because the Germans as a people are idiots - luckily we’re only killing ourselves this time.
but because the Germans as a people are idiots
Which is easily explained when pensioneers (and soon to be pensioneers) have the absolute majority and give a fuck about anything but their pensions and everything staying as it was.
(For reference the 50/50 split of voters by age is quickly approaching 60…)
Yes, but even the younger ones are often vile.
There’s a frightening large percentage of people who are just plain anti-social - and I don’t mean that as hyperbole. They care about themselves and that’s it, nothing else matters. You could see that during covid, they knew, their behavior killed, but didn’t care. Even the tiny inconvenience of wearing a mask was too much to ask.
luckily we’re only killing ourselves this time.
Oof.
EU is with you my friend. You’re not going down alone, we’re going with you. ;)
The narrative of this article is disgusting. There is a tradeoff between ethical energy sources and profit. This is good news.
All countries should be transitioning away from carbon energy. That means they can’t use as much energy. That means they can’t produce as much useless crap. That is good.
Please stop placing “the economy” over the pressing climate catastrophe. Making ethical decisions requires sacrifices.
I agree overall, but for Germany in particular, they have fewer opportunities for renewables than other countries. At the same time, their most plentiful source of home grown energy is coal which is worse in every way to the gas they were getting from Russia. The economy only matters in so far as it serves the people, but it unfortunately matters a lot for people’s well being, especially in the context of global capitalism.
Germany has an enormous amount of wind energy, and there is plenty of room for expansion in the North Sea
Our national security experts in the UK, Netherlands, Germany and France all knew back in the 1970s that we needed energy security.
The oil crises proved that.
We all developed nuclear energy, but only France actually went through and achieved energy security.
Sorry, this is not correct. France is importing massive amounts of electricity power from renewable sources from Germany, because the France nuclear power plants are out of order, without cooling water or have cracks in the containment.
France imports solar electricity from Germany during the day because Germany installed too much solar without the necessary storage capacity. This power is often sold at a negative price because it’s not needed but must go somewhere. Germany imports nuclear electricity from France and coal electricity from Czechia and Poland at night because it doesn’t have enough baseload capacity.
It must be said that while the French did do well to choose nuclear, their fuel comes in large part from colonial resource extraction arrangements in Africa. Hardly secure, although much more reliable and environmentally friendly than coal or gas.
Nuclear fuel is so energy dense that it doesn’t really matter where it comes from. You only use a teaspoon per person per year.
That said, Uranium is a commodity and the biggest producers are Kazachstan, Canada and Australia.
France subsidizing their colonies to maintain influence is a typical French thing. They also buy sugar from their old colonies at inflated prices.
Lol. Which media do you consume that you spit out such bullshit?
And I claim he is dead wrong. It’s hard to overstate just how much money is in and goes through Germany. Despite its size (in land and people), it’s one of the largest economic and scientific powers in the world. The crises left but scratches so far.
Power was already expensive before, Germany and the EU are maybe less, but not unstable and there are tons of research and patents originating in Germany.
With a few course corrections, some of which have taken place, some more being underway and some maybe still necessary, I don’t see why Germany or its economy should collapse any time soon. At least that’s what Münchau seems to imply might happen.
Please feel free to tell me that I’m an idiot, if a couple years from now he turns out to be right. I really doubt it tho. There are even experts who actually claim we’re in relatively good shape rn and I strongly agree with them. There is quite a bit of room to improve in some areas, but hey, just witnessed two major crises and all
You are wrong for many reasons. Germany has been prosperous because of its export driven economy. Your products have become uncompetitive for a number of reasons.
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Your demographics are in the toilet and the Eastern European countries Germany has been using for cheap labor are not far behind you. You need cheap labor and cheap capital which will be in ever shorter supply as your population ages.
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Your current source of cheap gas energy has vanished. With it a lot of your manufacturing is moving. BASF, Volkswagen, ArcelorMittal are all examples of German companies seeing the writing on the wall and moving production out of the country.
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The US is backing away from free trade and is becoming less willing to underwrite the global order that Germany depends upon. The only trade agreements the U.S. has made are for NAFTA.
The U.S. is decoupling from the global order it built after WW2 and reshoring its industrial plant in N.A. Germany doesn’t have the military to ensure freedom of navigation for its trade goods. -
Germanys trading partners are in just as bad of shape and/or becoming competitive. The Economy’s across the Eurozone look just as bad. China itself is going through a major downturn and in many areas are competing directly with Europeans in their own market (EVs).
To be clear I’m not saying this is the end of Germany. But there are some major structural challenges that cannot be simply papered over.
You have fair points, but I disagree with some conclusions. Demographic change for example hits everyone at some point. Concluding that it will lead to a competitive disadvantage specifically for Germany doesn’t seem plausible to me, at least not in the long run. In the near future it might be, the question is how well we’ll adapt. Japan for example is struggling with demographics as well and they still do OK, albeit not amazing.
Moreover capital doesn’t necessarily decline becaue of a demography shift. State funding and buying power in Germany might, but the state is trying to reduce its debt, which opens up opportunities for future investments. Fewer people also mean that (hopefully) fewer investments into certain things are necessary. And as you mentioned, businesses are exporting and expanding into other countries. This means they extract capital there which could be directed towards Germany. You “just” need to capture it by making investments atteactive. I think the R&D area is a possible lifeline here. That said, private capital is a completely different story to begin with anyway. It can be used for investments that drive dividends toward Germany. There is no need for that capital to decline at all. It could of course, but I don’t think demographic change will be at fault if it does. Capital tends to attract more capital.
Finally I highly question the need for military power in order to conduct global trade. The US aren’t an economic superpower because their ships are escorted by destroyers, because pirates are afraid of retaliation or because, in contrast to other countries, they aren’t robbed of their goods. It might have opened some doors and it makes it hard to blockade them, but that’s assuming people want to blockade you to begin with. And Germany doesn’t stand alone. With a strong EU and growing military spending, I’m actually hoping for more independence in every regard, including military, in the future. The cold war is over and the Soviet Union is no more. It’s time to take care of ourselves in Europe and make our own decisions.
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Germany has exported its production into other countries for profit. We are depending on others for our “german quality” Our capitalism is to unregulated
Every economist has a model.
And every economist who has implemented his model in a given country, will be able to explain - in great detail - why it didn’t work
Sucks to be a US vassal.
