German companies – large, small and medium-sized without exception – They reduced the investment rate in 2023taking it from 14.7% in March to 2.2% in December, predicting an even greater decline (1.2%) in 2024. The manufacturing sector was the one that suffered the biggest cuts to the point of collapsing from 21.4% in March to 6.8% in the last quarter of 2023.
The production is historically the decisive sector of the German economyThat It is the main one in Europe and the 4th in the world (4.3 trillion US dollars / 5% of global GDP).
What is truly critical in the German situation is presented in its medium- and long-term prospects, which reveal the proof Their production costs are double and even triple those of the United States and China.; and this difference originates from the fact that Energy prices have tripled, and even quadrupled, in the last two yearsas a direct consequence of the war in Ukraine and the sanctions imposed on Russia by Washington and NATO.
That’s why more than a third of German companies, led by energy-intensive ones, have decided to move all or part of their production chains abroadin particular China and the USA. In historical/productive terms, the manufacturing capitalism of the Federal Republic, which was the 1st in the world together with the USA during the 2nd Industrial Revolution (1866/1930), through the automotive industry and electrical production .
Now you’re experimenting right now an acute process of deindustrialization this weakens the German system and pushes it towards growing irrelevance, which necessarily drags down the European economy as a whole. This disturbing trend tends to accentuate in the next 5/10 years; and according to the German Chamber of Commerce and Industry (DIHK), 32% of its members have decided to invest abroad and not domestically, while only 16% had decided to do something similar a year ago.
Both the IMF and the Paris-based OECD point out that Germany is the worst among the world’s large economies, with a contraction of 0.5% in 2023, which results from complete stagnation in the 2nd quarter, and then from a process recessive in the 3rd. and 4th.
International organizations that The fundamental cause of the recession is to be found in the manufacturing sector, which represents 25% of GDP, double that of the United States, France and the United Kingdom. To this we must add that the competitiveness/productivity levels of the FRG are increasingly lower due to the high cost of labor, high taxes and the deep and paralyzing bureaucratization of the system.
The German stagnation, now transformed into a real recessionit is structural in nature: It has been more than 50 years since the Federal Republic of Germany has seen a world-class high-tech company., and this is accompanied by a notorious inability to innovate, especially in the field of high technology. Chancellor Olaf Scholz claims that the prevailing culture in productive Germany is deeply bureaucratic and based on a general attitude of “…risk aversion, passivity and loss of initiative”.
Scholz warns that this profoundly conformist culture has become increasingly paralyzing “…in recent years and decades”, in direct reference without euphemisms or mediation to the 14 years of Angela Merkel’s government, which was an authentic reign of incremental gradualism, with a systematic rejection of the entirely disruptive and innovative.
“The only thing that can defeat bureaucracy is charisma,” said Max Weber, the greatest German thinker and strategist of the 20th century; and charisma is synonymous with political leadership, that is, vigor in decision-making and color in personality. The realm of common sense is highly risky from an innovation and growth perspective.
Joseph Schumpeter, the great German-speaking economist together with Karl Marx, argued that the core of capitalism is the constant search for the different and the innovative; and that therefore the “permanent revolution” that is capitalism is the opposite of the passion for repetitive, incremental and bureaucratic predictability. This is what is at stake in Germany today, as Chancellor Scholz underlined.
Here because, the structural character of acute deindustrialization what he experiences is also and at the same time a cultural phenomenon. It could be pointed out that gray and mediocre is bureaucratic, while green is the tree of innovation and creativity. If this is not drastically changed – and this in an un-German way – in the coming years the great German civilization, the land of Goethe, Marx, Freud, will run the risk of dying of irrelevance, which is the fate of large bureaucratized societies. 21st century economies.
Source: Clarin
