De-Industrializing Germany

It is hard to believe, but Germany is on its way to becoming a post-industrial country. What its economy will look like at that point is anyone’s guess, but it won’t be pretty.

The Telegraph interviews Monika Schnitzer, who heads Germany’s Council of Economic Experts. She leads off by talking about the need to distance Germany from China:

Berlin outlined a plan to “de-risk” the relationship with China last month. While the government stressed it was not seeking a “decoupling”, Germany announced it would pare back its dependence on China in a number of “critical sectors,” including medicine and chipmaking.

A 64-page report published by the government warned that Germany had built “dependencies in numerous areas” including veterinary drugs, solar panels and lithium batteries.

No mention of reversing Germany’s dependence on China for solar panels and lithium batteries. It is ironic that, having just learned the peril of depending on Russia for its energy needs following the invasion of Ukraine, Germany’s leading economists don’t seem to have a problem with the same dependence on China.

But the really alarming points have to do with Germany’s ability to engage in manufacturing:

The country’s large car making industry is dependent on China for rare earth minerals necessary for electric car battery manufacture.

And politicians insist on producing electric vehicles, whether drivers want to buy them or not.

China currently accounts for 85pc of all rare earth processing worldwide, and supplies about 98pc of the EU’s demand for the rare earth magnets used in electric vehicles.

Yes, that is a problem:

But it is all right. Who needs to make products, anyway?

More broadly, the 61-year-old academic said Germany was “too reliant on car manufacturing.”

Around 800,000 people work for car makers in Germany, many in highly-paid jobs.

The country is home to Volkswagen, Mercedes-Benz, Audi, BMW and Porsche, and produces around 25pc of all passenger cars manufactured in Europe.

However, the industry has been slow to realise the significance of the shift to electric and been left flat-footed as a result.

“Flat-footed” means they are manufacturing vehicles the public wants to buy.

Ms Schnitzer said: “Germany as a whole is very much dependent on car manufacturing, and many executives were not happy to change what they saw as a winning business model.”

Right. The “change” is being driven by politicians and ignorant (and minority) political factions, i.e. the Greens. More:

More broadly, she argued that Germany’s economy must fundamentally reorganise to reflect the political tensions between the East and West, and the fact that the era of cheap energy appears to be over.

The era of cheap energy isn’t over, the problem is that the era of government-mandated expensive energy has arrived. In Germany, anyway.

Ms Schnitzer said: “We need to get our act together and restructure the economy. That is the big discussion we’re having right now.

“Should we do everything in our power to keep the old structures [by subsidising] energy prices for the energy intensive industry to keep them in the country? Or should we let them go? If you ask my personal opinion, I would say we should let them go.”

So it’s goodbye, manufacturing. No more German automobiles, among other products. Of course, the issue isn’t whether the government should subsidize energy prices on behalf of the manufacturing sector. The issue is whether the government should continue to intentionally and catastrophically drive energy prices higher.

But Ms. Schnitzer says we should resist pessimism about her country:

However, she rejected the idea that Germany is again the sick man of Europe.

She says Germany needs to “embrace change.” Unfortunately, the change she proposes is de-industrialization and a resultant sharp decline in Germans’ standard of living. I’m not sure that is a good idea. The world still remembers what happened the last time Germany suffered an economic collapse.

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