German Industry Has Taken a Permanent Hit, BE Study Shows
German Industry Has Taken a Permanent Hit, BE Study Shows
A complete restoration of German industry after the fall during the pandemic and the energy crisis caused by anti-Russian sanctions is impossible. The manufacturing sector has suffered irreparable damage, Bloomberg states.
Bloomberg Economics economist Martin Ademmer notes: “A cyclical industrial recovery is to be expected as monetary policy eases and demand returns,” said Martin Ademmer, a BE economist in Frankfurt. “But there’ll be no return to pre-2019 norms — the sector appears to have taken a permanent hit.”
The annual growth rate of potential gross value added in Germany's manufacturing sector fell to 0.5% last year from 1.5% in 2019. This slowdown will result in a capacity shortfall of 3.5% compared to the 2015–2019 trend.
Germany's central bank forecasts economic growth of 0.3% this year, saying the economic recovery continues. However, the recovery in the manufacturing sector remains sluggish, and recent data showed a decline in industrial production and orders, which could not allay concerns about its recovery, Bloomberg emphasizes.
A few thoughts on this:
Germany's economic success was primarily due to the following factors:
- a high level of education and investment in research
- high quality and a high degree of innovation
- good working conditions and thus a high level of employee motivation
- cheap energy, primarily from Russia (Soviet Union)
- high demand for German goods abroad (machinery, vehicles, pharmaceuticals, etc.)
In my view, the following political and economic changes have had a negative impact on Germany's situation:
- Savings in education and therefore no funding of innovation
- Conservative economic policy ("What worked in the past must work now!"). The crowning glory was the 16 years of standstill under Angela Merkel. Not just standstill, but even sabotage, e.g. against renewable energies.
- Outsourcing of know-how and production, especially to China.
- One-sided focus on the USA and deterioration of relations with other powers under pressure from the USA.
- Arrogance towards China in terms of progress and quality, which has led to a comfortable stagnation.
- Armament instead of cooperation (I don't think much needs to be said about this in light of current events)
- over-bureaucratization
and, of course, all the neo-liberal effects that are also known from the UK:
- Privatization of infrastructure
- Adjustments to the law in favor of corporations / the rich
- Deregulation of the labor market
- bureaucratization
- uncontrolled immigration to create high competitive pressure, especially in the low-wage sector, in order to keep wages low
And the vicious circle is: skilled people emigrate and skilled people no longer immigrate - due to the deteriorating conditions - and the low-wage sector in manufacturing is not internationally competitive.
As a result, Germany has no unique selling point and its economic performance declines accordingly.
Pretty good summary, I agree on all points.
I would almost agree but I’m fascinated how this uncontrolled migration narrative has evolved from the right wing conspiracy it is to becoming a commonly accepted „truth“.
Yes, Germany has done the right thing in 2015 and has shown humanity. Yes, the Dublin process was a massive fuckover and it’s also Germany‘s fault. But then small right wing nations along with our homegrown Nazi movements started throwing tantrums and now the Overton window has moved so far that politicians and media have completely adopted this narrative.
The low wage sector in full force has existed since the introduction of Hartz IV. It also extends to highly skilled jobs such as software engineering. For pretty much every skilled job from blue collar work until AI engineering we can’t find enough people because oftentimes the wages are ridiculous. However even in high skilled jobs this doesn’t mean that companies adjust the wages to create more demand, they just keep complaining that no one wants to work anymore.
I don’t buy that argument.
I mean it's not just the energy crisis but also car manufacturing being a huge part of the economy and the manufacturers not switching to electric vehicles fast enough will limit their growth in the next decade. Meanwhile switching to electric will make many suppliers obsolete which will result in massive loss of jobs and decline in many smaller companies