April 14, 2024 - 2:00pm
One of the greatest myths about capitalism is that companies like competition — or, for that matter, their customers. The truth is that in an ideal world, from the corporate perspective, one would hold a monopoly in supply and serve one customer with deep pockets.
Keep this in mind when trying to understand the seemingly never-ending story of German deindustrialisation. A few years ago, the “Federation of German Industries (BDI)” that represents more than 100,000 companies was celebrating the much vaunted “Energy Transition,” putting up almost no resistance against the phasing out of Germany’s world class nuclear power plants. This is even more remarkable, since the latter was finalised under the conservative and supposedly economically liberal chancellor Angela Merkel.
It is therefore not without irony that the head of the BDI, Siegfried Russwurm, is now criticising the “toxic” and “dogmatic” climate and energy policy of the current government. One can be critical about minister of the economy Robert Habeck, but his plans were never a secret and were well-known by German industry. Take, for example, the fact that most German automakers have been fine with the proposed 2035 EU combustion engine ban. Now all of a sudden they have had a change of heart.
One wonders why, but the answer could be the sudden and unexpected end of government subsidies for buying EVs. Not surprisingly, sales are now plummeting (in the case of Volkswagen, by 24%) and consumers are returning to cars with an internal combustion engine. Having suffered under policies they never resisted in the first place, German industries are now pursuing the tactic of burdening the taxpayer with the bill for their oversight: they claim the Government should subsidise companies so they remain competitive and avoid moving production abroad.
Mr. Habeck, it seems, is happy to oblige: in 2023 alone, Germany paid €4.2 billion in subsidies, and there is no end in sight for 2024. The German newspaper Die Welt has called Habeck “the minister drunk on subsidies”, and even the European commission is getting worried that Germany is moving from a free market to a government-run economic scheme.
What is truly happening, however, is that German companies are blackmailing the Government and taxpayers into providing massive assistance while threatening to leave the country and produce elsewhere. This amounts to a gigantic Ponzi scheme where significant parts of the German industry participated in policies that were always suicidal — banning ICEs, ending nuclear power, or the energy transition — in the hopes of making quick and easy cash from government subsidies.
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SubscribeWhen East and West Germany reunited in 1990, it was always assumed that Western liberalism would be the basis on which the new and powerful state would proceed, and for a while that’s how things played out.
It would now seem as if the Eastern sense of state control has overtaken the German mindset. Much of that can of course be attributed to Angela Merkel, but not the ready adoption of economically illiberal principles throughout the industrial and management sectors. Perhaps they’ve always been statist and the post-war period when Germany, on the back of initial Western assistance, became a free market powerhouse was a blip.
IDK. It’s not like this is just happening in Germany. It’s happening across the west. Ford and GM have sunk billions into productions lines they are in the process of shutting down.
I don’t think that’s correct if you take into consideration that Germany was the second biggest exporter of industrial goods on the eve of World War I.
Interesting how people often support ideas until they have to live under the consequences. We see it in the US with people surprised to learn that being a sanctuary city or hating on cops does not work out very well. Similarly, the green proponents are learning the hard truth about their preferred policy. In a simpler world, that was called a learning moment and people tried to not repeat past mistakes.
I wonder what happened to the practice of “engage brain before opening mouth”.
So many of the downsides have always been highly predictable.
Interesting how people often support ideas until they have to live under the consequences
Indeed-which is why the current net zero collectivist ideology will ultimately fail,but only after inflicting huge & irreparable immiseration on previously successful countries. The big problem however is that the promoters of the policies do not “live under the consequences” but simply inflict them. Tale your pick-Covid NPI’s,GIDS,Nut Zero,DEI…the promoters generally get away scott free.
Here in California the average time between house moves perhaps less than seven years. So easy to vote for local “green” measures that only take effect in ten years!
Much easier to “farm the subsidies” than work on products, routes to market, competitive advantages etc.
I first came across this in 1979 working for an Agrochemical Company on trials and taking to farmers. The UK was learning how to work with the Common Agricultural Policy and farmers were learning that there could (sometimes) be more money and profit in farming the subsidy.
One example was Lupins (for oil), a fairly short lived craze as far as I know. One farmer laughingly told us he planted, allowed germination and then ploughed back the crop as he had got his subsidy and planted something else for profit. (this type of thing was clamped down on years ago as far as I am aware).
Sounds like the German industrialists are working hard to farm the subsidy rather than make things people want to buy.
I’m not sure how I feel about this. I guess we get what deserve – all of us. Voters across the west have repeatedly elected leaders committed to economic suicide. On the other the hand, it’s not like voters had a choice. Up until very recently, political parties on both sides of aisle supported net zero. I’m not sure it’s job of corporations to oppose these plans either. They adapt to the political and regulatory environment in each country. If it gets too oppressive, they close up shop and move.
“On the other the hand, it’s not like voters had a choice.”
Nah. We always have a choice. We’re just too distracted with Netflix, football, YouTube, Instagram, The Bachelor, and on and on and on. In the ’90s, when this started ramping up, it was no different. Distractions. Actually learning about an issue like global warming as it was called then takes some effort and a little time. As always, there were (and still are) people out there writing clearly about what is at stake, what the consequences of these policies will be. We’re just too lazy to take the time to listen to them and think things through.
Well said!
One has to LOVE Green policies, given that (1) we currently are living in an ice age (the Holocene); (2) current CO2, at 430 parts per million, is near 200-million year lows (the range is 180 to about 2000); and (3) we killed nuclear, easily the cleanest, safest non-intermittent energy source imaginable.
Take, for example, the fact that most German automakers have been fine with the proposed 2035 EU combustion engine ban. Now all of a sudden they have had a change of heart.
They’ve presumably had a change of heart because they have realised that, by and large, consumers don’t want electric cars.
Auto makers are in the business of making and selling cars. After more than a hundred years in business, one would think they would have a better understanding of their market than to make such a monumental mistake. As a consumer, I never had any doubt that ev’s were an exceptionally dumb idea and I would never purchase one.
EVs are great! It’s the infrastructure to support them that’s not so good ….
Think charging and servicing stations. Think insurance and resale value. Think pricing for equipment and trained mechanics, etc.
Think indeed. My comfy, 30-year-old Volvo gets from northern Germany to London on one tank (720km/440mls). Which is more than could be said about ANY(!) EV, I think.
There seems to be some sort of insanity that has taken over the minds of those in positions of power and influence in politics, the media and industry. If you have an economy based on people and good being able to move distances, and then you make the system of transport too expensive and difficult to use, workers won’t be able to go to work, earn and create added value. In the West for a while, they will claim unemployment benefits, without enough added value being created, the source of this will dry up and the economy will grind to a halt, causing severe hardship which will lead to riots and anarchy. When will those in power wake up to what they are doing?
Add to this the insane invitation of uneducated fortune seekers (by the Greens) from backward countries who are basically unemployable and unable to assimilate, probably for generations to come.
The free market serves consumers, not producers. A fact that hardly anyone believes.
Calling Angela Merkel or her government “conservative” is not understanding the term. People seek to make comparisons of parties of one country to another and it never works or matches. There is no conservative party in Germany and there hasn’t been since Kohl. Also it is entirely wrong to call Merkel a liberal. She is a strong believer in dirigisme and has with her insane policy decisions, be it nationally or internationally, not only destroyed conservatism in Germany but also helped creating the AfD, the devastating energy crisis and the literal flowering of Clan-criminality in German cities and towns. She is also responsible, along with Macron, for putting Ursula von der Leyen, who is equally demented and single-handedly ensured when she was Defence Secretary that the Bundeswehr is no longer able to defend the country, at the head of the European Commission when Manfred Weber actually won the election. The number of catastrophic decisions and miscalculations continues under the current government.
Actually, having one customer (a monopsony) would not be ideal for most companies, as that single customer would have too much price-setting ability. This is why single-payer health care systems can drive a better bargain with doctors than individual sick patients could.
Given the high political cost of relying on Russian fossil fuels, the high cost of importing oil and gas from elsewhere and the even higher cost of building sufficient nuclear power stations to run the country, Germany should continue to build out its solar and wind capacity as fast as possible, with enough storage and long distance transmission to even out local fluctuations.
They should have kept their existing nuclear power stations.