Germany, Once a Powerhouse, Is at an Economic ‘Standstill’
Germany, Once a Powerhouse, Is at an Economic ‘Standstill’
The economy shrank last year and is not predicted to grow much in 2024. Farmers are angry, industrial output is falling and the government is bickering.
The economy shrank last year and is not predicted to grow much in 2024. Farmers are angry, industrial output is falling and the government is bickering.
Germany started the year with Berlin’s streets choked with tractors and farmers blaring horns in furious protest of proposed budget cuts. Then train engineers walked off the job to demand better pay, stranding commuters and carloads of freight and leaving the country angry and gridlocked.
The same could be said for the state of the German economy. Last year it contracted 0.3 percent, official figures showed this week, making it not only the largest economy but also the slowest growing among the 20 countries using the euro. Industrial production has fallen five months in a row.
“The economy is at a standstill in Germany,” said Siegfried Russwurm, the president of the Federation of German Industries. “We don’t see any chance of a rapid recovery in 2024.”
Since it was rebuilt after World War II, Germany has been Europe’s main driver of economic growth, becoming an industrial powerhouse known for vast factories and fine-tuned engineering.
But now its automakers must compete with relatively cheap electric cars from China, and it vies with the United States to attract tech giants. There is a growing realization that Germany has not been successful updating its industry with sufficient flexibility and digital know-how to remain competitive.
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People were telling Germany for a decade that their over-reliance on Russian gas was a massive problem. Instead they publicly laughed at idea and doubled down. When the cheap gas faucet was abruptly turned off in 2022, suddenly Germans were paying piles of money for every loose scrap of gas available. Many factories ground to a halt or became uncompetitive.
A lot of other European countries depended on Russian gas. Some even more than Germany. That's not the main reason for the slow recovery from COVID and the energy crisis. Germany let a lot of it's infrastructure rot and is now facing the consequences. Additionally there are ideological debt restrictions in place, hindering the government to start a stimulus program, while a lot of other countries are doing exactly that.
You're also dealing with a Germany that made most of its economic value in manufactured goods that either don't transition well to a post-carbon world or can't compete against the Chinese market.
Transitioning Germany's auto industry to EV is like turning around an aircraft carrier. It's takes some time, but once it does, I wouldn't want to be in its path.
The same could have once been said of the British steel industry...
Difference is that steel is a nonevolving raw material, and cars are a dynamic high-tech industry. Two different worlds.
Steel is a complex manufactured intermediate good, not just a raw material that you dig out of the ground. Steel products and production methods evolved rapidly over the course of the 20th century, and the downfall of British steel was because they couldn't/wouldn't upgrade their tech and how their industry was organized.
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The point is that if you cannot make money in Germany, you're dumb. It's not about gas or energy. It's cheap as it was earlier but they're much more taxes.
The problem is the laziness of the industry and service sector. They haven't been making progress but stagnated for decades hoping to just make money from status quo. Now they blame everyone but themselves just to distract from their mismanagement.
But the reality is, when you don't make money, someone else will do.
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