Mathew D. Rose – The Decline of Postwar Germany

Germany’s industrial decline is indicative of a rot permeating the whole of German society

Mathew D. Rose is an Investigative Journalist specialised in Organised Political Crime in Germany and an editor of BRAVE NEW EUROPE

Wir schliessen = We are closing down

In a talk to students a number of years ago, the economist Mark Blyth asked his audience to raise their hands if they thought the United States could produce a car comparable to a BMW. None did. Blyth then went on to ask those to raise their hands who thought Germany was capable of developing a high-tech product comparable to the iPhone. Once again there was no show of hands.

The point Blyth was trying to make was that the Germans have the innate ability to take a product and refine it. They focus on single, often minute details, optimising them – sometimes over generations. What they do not have is the ability to go beyond the given. This explains why the Germans have never been relevant in the high-tech age. As the German government recently offered eye-watering subventions to chip-producers to build factories in Germany, the companies selected were almost exclusively from the USA and Asia. Be it electric cars, batteries, renewable energy (although once well ahead of the rest of the world), computers, mobile phones, internet, social media, Germany today has little to show as a technological leader.

Germany’s current problems are a result of this mentality. This applies not only to industry, but the whole society, including its political class. In many aspects Germany has not joined the current millennium. Angela Merkel and her Christian Democrats did not lead German into the 21^st century, but kept it in the 20^th century, where it still lingers, fighting Russia, oppressing untermenschen, supporting genocide, and building internal combustion cars. In comparison to the rest of the EU Germany’s industrial production is shrinking and has been for some while. With the loss of cheap Russian gas part of Germany’s heavy industry has closed down or moved to other nations.

Which brings us back to German cars – cars being what German industry has been all about. When Blyth held his talk the German vehicle branch was booming, not only at home but internationally, especially in China, where German cars were synonymous with quality and prestige. In the United States, German “Green” diesel cars, especially from Volkswagen, had stormed the market.

The car industry is responsible for round 5 percent of German GDP and 35 percent of research and development. It employs 800,000 people directly and it is estimated a further 2.5 million jobs are indirectly attributable to automotive branch. German vehicle companies ignored the trend to electrical vehicles, carrying on with ever bigger, ever more expensive internal combustion luxury cars. Thanks to the United States, although it was already common knowledge among car experts in Europe, and despite a direct intervention in the US by Merkel, Germany’s “Green diesel” scam was exposed in 2015.

Germany is not a major player for electric cars, which is having devastating effects. The sales of German cars have been mainly hit in China, which is quickly transitioning to electric vehicles. German sales in China purportedly dropped from round 24 percent of the Chinese market in 2019 to under 16 percent in 2024, trending downwards. These are the internal combustion models.

The waning of Germany’s automotive industry has been the result of its inability and refusal to adapt to the technical changes of the new millennium. This is the result of German hubris, believing it could dictate the automotive market. This certainly works in Germany and the EU (the export of German cars to South America is what really lies behind the MERCOSUR trade agreement), but not with regard to the world market.

But it is not only the car industry that is in a state of denial with regard to reality. It is systemic in Germany. On 20 October 2023 we began posting a series of links to reports by the Federal Statistical Office of Germany, DeStatis, on various elements of the German economy. Everything was in decline. It was obvious to us as non-economists that Germany was in recession and would remain there for some time as the DeStatis reports repeatedly confirmed. Meanwhile all of Germany’s prestigious economic think tanks, very liberally financed by the German government, were predicting growth, repeated in the headlines of mainstream media. Not massive growth, but not a recession. Despite the think tanks having predicted 0.3 percent growth, German GDP for 2024 is now expected to be at minus 0.2 percent.

Germany has a mercantile economy. This had been mainly possible thanks the weak euro. As economists keep pointing out, if Germany still had the strong Deutschmark, its economy would be massively reduced. The problem is that China is also a mercantilist economy and now it is accessing the cheap Russian gas that the German government has deprived their nation. China too offers modern industrial products including cars – cheaply. This has already hit German industry hard.

This is why the European Union, in other words Germany, is introducing major tariffs on Chinese industrial products. The downside is that EU citizens will be paying higher prices to protect Germany’s industry. A further downside of such tariffs is that they result in retaliatory tariffs and other punitive trade measures (such as blocking the exports of raw materials, especially rare earths to the EU). Due to its mercantile economy, the latter will initially hit Germany much harder than the rest of Europe. As Germany loses markets internationally, which could intensify if Trump really does introduce massive tariffs of his own (10% of German exports went to the USA in 2023, the highest figure for more than 20 years), Germany can only compensate by expanding its trade surplus within the EU, which will have a devastating effect on other EU nations. In the EU it will hold back other member states in their development. Germany’s decline is Europe’s decline.

Internally the German economy is also being dragged down by a three factors in the labour market. First, there has been a steady demographic decline. This could have been alleviated to some extent with the integration in the job market of the large number of refugees that have entered Germany in the recent past, but inherent German racism and Islamophobia inhibited and inhibits much of this. Second, the education system has not only been egregiously downgraded due to austerity and the Bologna Process, but German governments have placed a priority on university degrees, as worthless as many are. This has been a fillip for what David Graeber termed “bullshit jobs” and deprived the economy of the technicians and hand-workers it so sorely needs. Lastly, Germans have discovered work-life balance. This is especially true of young people entering the job market. With the dramatic shortage of labour in skilled professions, they have little problem obtaining their demands. This shortage of labour in turn increases the work load on those working. Wage rises are not offering adequate compensation. Many suffer from burnout or simply decide to quit the job market and live a more tranquil life of reduced consumption, aggravating the situation additionally.

Germany is equally suffering from a degraded political class. This authoritarian neo-liberal elite is, like their economy, in decline. As we are seeing throughout Europe this self-serving and narrow-minded elite is clinging onto power, although it has lost its popular mandate. In Germany barely a third of the citizens support its legacy political parties.

Germans have realised that their political parties are not leading them towards a better life. In fact, the question is, are they leading the nation at all. Its foreign policy and now parts of its economy, are dictated by the USA, leaving Germany and the other European nations left with nothing but ridiculous moral posturing. Much of its domestic and economics policies are now determined in Brussels, where the neo-liberal ideology, mainly dictated by corporate interests is executed by an unelected, uncontrolled technocracy, unchallenged by democratic institutions. What is left in Germany of democracy has become what Wolfgang Streeck describes as a “moral attitude”. This deflects from its true role as the provincial enforcer of the EU neo-liberal diktat and inexorable transfer of wealth from the less well off to the wealthy. The other main occupation of Germany’ political class is maintaining its endemic corruption, selling government policies and contracts to the highest bidding corporations and particular interests.

This was the case throughout the Merkel era, who for every problem she reputedly solved, created two new ones. The austerity policies of her various governments has left German infrastructure dilapidated. Purportedly there is a deficit of 700 billion euros in investment that were not made: educational, healthcare, and transport systems crumbling, as well as the nation’s armed forces ineffective. But taxes for coporations and the rich were slashed. To protect Germany’s doomed coal industry her governments destroyed the nation’s nascent solar and wind-energy industries, once leaders in their fields. Germany’s vision for its ageing industries however was based on cheap Russian gas. This economic model collapsed with the NATO proxy war in Ukraine and the destruction of the Nordstream pipeline by the US.

There was, and still is not, a plan B. Worse yet, the German political class is not capable of executing anything resembling economic policy. German industrial policy is still devoted solely to the preservation of the car industry. The current government’s showcase programme was the creation of domestic production of chips and batteries to secure the car industry’s supply chains. It has dedicated financial resources in double digit billions to this project. The results have been a debacle. Two of the largest projects, the Intel and Wolfspeed chip factories, have been “postponed” by the companies, most likely cancelled. The building of a battery giga-factory for electric cars by Northvolt in the home state of Germany’s business minister Robert Habeck, has collapsed as the company filed for bankruptcy. There were state guarantees for credits given to the company by Germany of round 600 million euros, not to mention investments in the billions in Northvolt by German vehicle companies, especially Volkswagen.

That Germany has serious economic problems cannot be overseen, except maybe by German economic think tanks. GDP fell 0.3 per cent in 2023 and 0.2 per cent this year. The reports of massive lay-offs at major industrial companies is long. Even Germany’s industrial standard bearer, Volkswagen, is threatening to close factories in Germany for the first time in its history. Exports are in slow decline, which could accelerate as the EU introduces its tariffs on Chinese imports and should Trump realise his threat to do the same with EU imports.

In a recent gloomy report the Bundesbank predicts either anaemic GDP growth for Germany in 2025 or even another year of recession. Worse yet, it foresees an increase in unemployment to levels not experienced since 2011.This week another report came out claiming that poverty in Germany is increasing rapidly due to rapidly increasing housing rents, which has not been included in official statistics. Food banks are in crisis due to overdemand.

Hanging over Germany are the consequences of its highly unpopular military adventure in Ukraine. With its infamous debt break every cent that Germany gives to Ukraine has to be withdrawn from other areas. This has mainly been from social security, education, and infrastructure. Much of these funds return to German weapons manufacturers via the sale of weapons and war related materials to Ukraine, being in other words once again a redistribution of public funds to the wealthy. With Ukraine’s defeat and a looming peace agreement, the costs of rebuilding what is left of the Ukrainian state will probably be passed over to Europe by Trump (although much of this too will return to German companies). The German government has no funding for this. Due to incessant warmongering, including preparations for a NATO war with China, the EU is now talking of raising defence contributions of member states from two percent of GDP to 2.5 or even 3 percent per year. That would be a further twenty or forty billion euros per year that the cash-strapped Berlin government would need to find. This is a financial burden that has become a ticking bomb for Germany’s political class.

One needs not look to Germany’s political parties for any solutions. The German authoritarian neo-liberal political class fits well in Glenn Diesen’s description of Europe’s self-destructive, scrupleless leaders responsible for “deindustrialisation, reckless militarism, diplomatic decline, and growing international irrelevance”. The fascist, Manichean narrative of Germany’s legacy political parties has in the meantime lost credibility among most Germans. All the political parties are offering them some form of fascism and racism in one form or another, seeking to blame the evil “other” for their neo-liberal slash and burn policies.

In February Germany will be holding an early general election after the traffic light coalition collapsed. The message coming from all the parties is “No We Can’t”. They are delivering promises that they will not keep, which most of the citizenry know, and no visions for positive change. As in the past, their lodestar is to prevent any change, except the prescribed expansion of neo-liberal policies and increasing the wealth of the well off at the expense of all others. Sarah Wagenknecht’s BSW party has already discredited itself after its phenomenal success in three Eastern German federal states by joining coalitions with exactly those parties she has blamed for the current malaise in Germany. Change there is none.

The German Keynsian economist Peter Bofinger explained in a recent interview: “German industry is currently caught in a mid-tech trap. This means that it is well positioned in traditional areas, but where it has nothing to offer so far are high-tech areas. These are the markets of tomorrow.” This however brings us back to Mark Blyth and the fact that Germans cannot innovate. Nor is the current return of German society to its fascist roots conducive to pluralism necessary for new thinking and creativity.

Germans can probably only hope that wars and genocides – which they wholeheartedly support – increase worldwide, raising demand for German tanks. Building tanks is something the Germans are good at.

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