Germany in Decline

We tend to think of the current clash of civilizations as a struggle between America and China. And yet, there is more to the West than America, and China is hardly alone in the East.

It’s a good reason to consider the current condition of Germany. Apparently, the engine of European economic growth has been floundering. The great Angela Merkel shut down its nuclear power plants; energy has subsequently been hard to find and expensive to consume. 

Germany embraced an equivalent of the Green New Deal and the country is facing economic decline and political irrelevance. 

Politico has the story:

Chemical giant BASF has been a pillar of German business for more than 150 years, underpinning the country’s industrial rise with a steady stream of innovation that helped make “Made in Germany” the envy of the world.

But its latest moonshot — a $10 billion investment in a state-of-the-art complex the company claims will be the gold standard for sustainable production — isn’t going up in Germany. Instead, it’s being erected 9,000 kilometers away in China….

In February, the company announced the shutdown of a fertilizer plant in its hometown of Ludwigshafen and other facilities, which led to about 2,600 job cuts.

Politics and bureaucracy, not to mention a flood of migrants, is killing industry and stifling business:

Confronted by a toxic cocktail of high energy costs, worker shortages and reams of red tape, many of Germany’s biggest companies — from giants like Volkswagen and Siemens to a host of lesser-known, smaller ones — are experiencing a rude awakening and scrambling for greener pastures in North America and Asia.

Politico explains:

New orders at the country’s engineering companies, long a bellwether for the health of Germany Inc., have been dropping like a stone, falling 10 percent in May alone, the eighth consecutive decline. Similar weakness is apparent across the German economy, from construction to chemicals.

Foreign interest in Germany as a place to invest is also receding. The number of new foreign investments in Germany fell in 2022 for the fifth year in a row, hitting the lowest point since 2013.

While that nation does as we are doing and admits too many migrants, it has discovered that those it has admitted are incapable of doing what needs to be done. And that does not even consider the crime wave that they have unleashed.

As for high tech innovation, Germany lags the world leaders:

With the exception of software maker SAP, Germany’s tech sector is essentially non-existent. In the financial world, its biggest players are best known for making bad bets (Deutsche Bank) and scandal (Wirecard). Manufacturing accounts for about 27 percent of its economy, compared with 18 percent in the U.S.

A related problem is that Germany’s most important industrial segments — from chemicals to autos to machinery — are rooted in 19th-century technologies. While the country has thrived for decades by optimizing those wares, many of them are either becoming obsolete (the internal combustion engine) or simply too expensive to produce in Germany.

Some of Germany’s problems sound familiar. Like the state of infrastructure:

A top priority for German industry — the modernization of Germany’s creaking infrastructure — will be more difficult to finance. Germany’s roads, bridges, shipping lanes and other critical infrastructure are in sore need of repair. Four out of five German companies said poor infrastructure hampered their business, according to a study published in November by the Institute for the German Economy (IW). The regulatory hurdles revitalization efforts need to overcome before breaking ground mean there’s no quick fix.

I’m fact, “the problems are likely to get worse,” the study’s authors concluded.

We all want to outcompete China in the clash of civilizations. But clearly, the path to success lies in building up our own industries. In America, we are doing it, perhaps haltingly. In Western Europe, the story is far less encouraging. 

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