In this article in the New Statesman, Walter Münchau looks at the macro-economics and industrial policy of Germany and predicts its failure and notes the effect of ‘leaving behind’ the old East in particular in its politics with the rise of the AfD. The article is subtitled, “The country is in economic and political crisis and parties of the extreme left and right are rising again.”

What interested me was the macroeconomics and industrial policy. I made a diigo, in which I said,

The AfD is east Germany’s unhappy family, and it is like no other. It was founded around a decade ago as a movement of west German economics professors who were opposed to the euro. The party was later infiltrated by nationalists opposed to immigration, EU membership, and anything foreign.

The cost for a nuclear-free Germany has been an increase of coal in the energy mix. Coal now constitutes one third of all electricity – the result of a chaotic energy policy.

In the years before the pandemic Germany recorded current account surpluses in the order of 8 per cent of its national economic output.

The export surpluses were, it turned out, not a sign of success but a sign of a deep savings-investment imbalance. Successive governments had failed to invest in the military, in modern digital infrastructure, and in new energy sources.

The whole Nord Stream project was an attempt to tweak the playing field in favour of German industrial companies. All this happened while China and the US invested in artificial intelligence, electric cars, and other 21st-century technologies.

Germany will remain anchored in the Western alliance, but German society has no appetite for increasing military spending, or for creating an alternative EU-wide security system.

Germany is suffering from acute skills shortages, but it may find new untapped sources of highly skilled labour.

What I expect to happen is that Germany will try to double down on its old industrial model, because it knows no other. But barring some unforeseen shift, this model is not sustainable. History teaches us that the unsustainable is either rendered sustainable, or it will end. I think it will end.

Walter Münchau , The New Statesman

The comments on the macro-economics made me wonder about the number of immigrants in the workforce as it seems pretty pervasive in the hospitality sector as far as I can see. The OECD reports the proportion of foreign born residents, and their economic activity rate. TLDR, they have less than the UK, but theirs are less economically active.

The energy conundrum is fascinating, they need more but can’t build more nukes; we should note that they have a domestic computer industry and intel have agreed to build a new chip fab in Germany. I have a spreadsheet documenting international chip manufacturing capability.

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