Since the first time we ever met was in Berlin, I take the liberty of making two comments on your nice post.
You write that Weimar’s inflation destroyed its credibility. Though the hyperinflation of 1923 was indeed a shocking and reckoning moment for the young Republic, its taming after 1923 produced years of relative stability leading, in fact, to the actual “golden years” of the Weimar Republic. It was not until the disastrous austerity policies of Chancellor Brüning in 1930 - which were disinflationary in nature and which, combined with the consequences of the 1929 crash, led to 6 million unemployed in one year- that the downfall of Weimar Republic started. Not coincidentally, it was after 1930 that the Nazis started gaining traction after years in the margins.
The notion that hyperinflation was the most significant trauma and “lesson” of Weimar is a retrospective view, promoted consistently by conservative critics of Weimar (many of whom supported Brüning's policies and who did not hesitate to support, even initially, Hitler as a solution against instability). Postwar popular accounts, influenced by such a perspective, even went as far as conflating hyperinflation with Hitler, thereby producing a remarkable inversion: that it was not those who had supported Hitler that were to blame for Nazi ascendance but those who had caused hyperinflation (i.e., the SPD/Zentrum government). In short, the victims of Nazis were more responsible than its supporters.
The hyperinflation trauma-myth was also used consistently by postwar monetary authorities (from the BdL to the Bundesbank) in order to support their goal of central bank independence (curiously ignoring the fact that in 1923 the Reichsbank was, in fact, already independent due to the Autonomy Law of 1922). [On this exact topic, I could not recommend enough Simon Mee’s 2019 Central Bank Independence and the Legacy of the German Past]
A similarly peculiar inversion is now visible in relation to the war in Gaza. While the official line of unconditional support for Israel is meant to emanate from Holocaust guilt, one would be amiss not to notice an instrumentalisation of sorts: while anti-semitic incidents are visible (I live in Neukölln where there have been such cases), the definition of anti-semitism seems to have departed from its usual meaning and to have been transformed into any criticism of the Israeli state and, inversely, any show of support for Palestinians. That such a re-interpretation has permeated the atmosphere here is visible in the various “slip of the tongue” (or maybe, Freudian slips?) of journalists, politicians and other official figures who use the terms Palestinian or Hamas interchangeably, with appalling consequences: recently a newspaper publicly asked for the removal of citizenship from a teenage girl for posting something in favour of Palestine (not Hamas!) on social media. While there is little doubt that there are expressions of support (or reluctance to condemn) Hamas, it is also clear that equating support for Palestine or the civilians of Gaza with support for Hamas consists of, among other things, an authoritarian reflex. The double standards were made clear in Habeck’s famous video where “Arabs” (in general) are asked to prove they are not anti-semitic, at the same time as official figures with clear anti-semitic biographies (let alone the far right itself) are given a free hand. The further fact that government officials were happy to reproduce and promote a video where a far-right English "journalist" compared Hamas to Nazis … only to find Nazis more “civilised”, indicates that there is much more going on here than Holocaust guilt. Using the Holocaust trauma to justify defending Israel is one thing but using it as a way to attack Arabs in Germany (many of whom are German citizens) or to whitewash Nazis is quite another.
Combining those things with the veritable rise of the AfD (I am not as convinced as you that they will not be part of a coalition in the next election) does indeed make the streets of Berlin quite dark but I am not sure it's because of energy saving.
"inflation and dearness of energy, economic stagnation (near zero growth), the rise of the extreme right, political paralysis, loss of exports to China, decline of German car technology, high wealth inequality, imperfect assimilation of foreign-born population, inefficiency of German railways, dark streets in Berlin (saving of energy), full political dependence on the US"
this doesn't even include climate change, biodiversity loss, the rise of AI, ... all of which, I believe, are considered to have no positive impact on the German economy
wrt the dependence on the US: this looks even darker if one thinks of the sabotage of the Nordstream Pipeline as a US attack on Germany and Europe
"acceptance acceptance of more than 1 million Syrian refugees" should definitely not be viewed as a positive entry in the ledger. The damage from loose immigration policies -- attributable in part to a dunderheaded acceptance of the "all are equal" mantra -- has been enormous, not only in terms of damage to public coffers - these immigrants are and will continue to be an enormous drain on the social system -- but also to social cohesion. The massive suppression of voices who point to such problems is the true danger to democracy, not the AfD.
G'day Robert, my suggestion is to look at the cause and location of the refugee problem aka the empire rather than from an insular subjective perspective. Yes granted German has been remarkably effected by the wars they recently participated in as was intended by the empire. Now think Nordstream and direct your concerns appropriately. My commiseration to you.
From an economic theory point of view, Germany may be fine according to certain parameters.
But, from a historical point of view, the European Union (therefore, Germany) is decisively declining. The key here is that capitalism -- Germany's mode of production -- needs eternal growth (profit rate) to be sustainable; just stagnant or barely positive growth rates won't cut it.
My prediction is that Europe will continue to decline until a decisive capitalist crisis a la 2008 or worse will finish it off.
Decline, finishing off ... Those aren't quite the things that happen to countries under most circumstances. Take Argentina after a century of stagnation (sometimes worse than others) and China after a generation of epic growth: their respective GDPs (corrected for purchasing power, per capita, from wikipedia): 26K and 23K.
The sentence should read: "According to SOEP survey, 39 percent of the German population has zero (or quasi zero) net financial wealth, and almost 90 percent of the population has rather negligible net financial wealth (reflected in receiving property income of less than 100 euro per month).
Home ownership in Germany is some 50% which is very low by international comparison and must contribute enormously to the wealth inequality.
The inability of the German car industry to design and sell electrical (or hybrid) cars at a significant scale is a drama and may be a reflection of the inability of the industry to face reality: last decade, there was dieselgate, the widespread fraudulent ways by VW, Audi, BMW, Mercedes, of measuring car exhausts to meet environmental standards. They seem to live in another universe..
This malaise is far from unique to Germany, but may be seen more generally as a failure of G7 democracies to adapt to the realities of a changing World. Depression and anger result from the underlying sense that policy makers no longer know how to fix things, and ultimately this is an intellectual failure to rethink the Global economic system. Compare for example the post war period in the 1940's when leaders re-shaped the World with unprecedented speed and clarity of vision :
1944 World Bank and International Monetary Fund
1945 United Nations
1947 Marshall plan to rebuild Europe
1949 Council of Europe ( future EU ) and NATO
By comparison we might ask our current leaders "What have you done for me lately?" Instead our politicians seem to be recycling the ideas and thinking of the past ( nationalism, protectionism, fascism, expanding fossil fuels) in the vain hope that we can somehow return to the 20th century colonial era when 1/6 of the world's population consumed 99% of the World's resources!
I would not claim to have all the answers, but I think the following at least are worth discussing:
1) Economic growth will not return quickly to the rich World. Way back in 2014 Piketty predicted developed nations would continue to grow at only 1-2% per annum, whilst emerging nations would grow at the catch-up rate of 4-5%, probably for several decades. This is right and proper as it will eventually lead to a Global economic convergence, but Western leaders should not pretend otherwise.
2) This does not mean life has to get worse for those in the West. However, the path to better quality of life in G7 countries will NOT come from economic growth, but rather from reducing waste. The concept of "lean thinking" has been applied for decades in manufacturing. ( Relentlessly eliminate ALL waste that does not add value ) must be applied to Western lifestyles. ie. build passive houses that require little or no space heating, stop wasting 20% of the food we produce, buy 3 or 4 nice items of clothing per year instead of 20 that just sit in a wardrobe, eliminate unnecessary travel and time wasted in traffic jams by building 15 minute cities. It is ONLY by eliminating ALL waste that we can achieve a rising standard of living in the West, in the absence of economic growth.
3) Become more self-sufficient and use resources according to "lean" principles. The Western economic model was built around waste in an era when resources from our colonies around the World were cheaper than the extra labour needed to recycle or use them efficiently. Global inflation will now continue to hound us, as these ex-colonies start to consume their own share of resources. By 2050 there will be 5 billion people in Asia, and 2.5 billion in Africa, whilst Europe and North America together will count for just 1.1 billion. The idea that the era of cheap resources that we enjoyed in the 20th century will continue is just delusional. Global competition for resources will continue to push up input prices, but if we rely just on future market forces to drive this change it will be far more painful than if we set out our policies to double down on efficient use of resources now.
4) Economic migration is the inevitable consequence of inequality between nations. As we know, this will be made far worse by global warming, and proxy wars paid for by rich nations, so we need to stop both. The biggest return on investment we can make right now is to eliminate extreme poverty, particularly in Sub-Saharan Africa. Providing education and healthcare to women in particular, will accelerate the decline in birth rate to help control population growth. The West must make a choice between receiving an ever increasing tide of economic migrants, or investing to create the peace, stability and economic opportunities that will encourage them to stay in their own countries.
5) Real progress on these issues requires co-operation on a Global scale that today seems impossible. Achieving the Global Goals requires an investment of around $4T per annum ( which is only around 5% of Global GDP ) yet we barely manage one quarter of that today, even though the return on this investment for the Global economy would be huge. Global thinking seems in short supply, but the arguments for it are clear. We could for example agree a Global tax on all payments between countries to get around the barrier of giving "our" money to "them" but such large scale thinking is out of fashion. If America and China, together with other G20 nations are to re-shape the World, as we once did in the 1940's, it must be with a vision to at last build a "Global Race" in which everyone can be winners.
When politicians ignore these new Global realities, it is depressing, but predictable, as they are elected by very poorly informed voters. However, when academics and economists remain locked in 20th century colonial thinking, that is inexcusable.
There is a certain kind of sober hysteria deeply embedded in the German mindset. Things are often seen in the worst possible light and we tend to expect the worst possible outcomes as near certainties (If they don't come to pass, it's seen as a lucky escape rather then prudent preparation). Ironically this thinking might be self-reinforcing in such a situation (to put a pessimistic spin on it): The antisemitism-scare leads to a curtailment of civil-rights, concerns about integration sour the mood and drive up the far right, economic anxiety exacerbates Germany's excessive love of fiscal austerity, which leads to further economic contraction and ever greater inequality and so on...
Dear Branko, congratulations on a fine article, giving us chance to start discussing causes of German malaise. Germany is a country, a state, society in a need of a goal. Enormous energy, intellectual, as well as technological transforming into power. Jewish nation possessing similar energy found a solution to 2000 years of wandering in creating a state, own state, a real proper state with borders, military, secret police, currency, borders, even more than a state, an embodiment of Jewish civilization. An ambitious project that consumed and is still consuming almost all surplus of energy individuals have to give to the universe in addition to what they use in their lives. Germany, compared to Israel, has twice banged the wall, when the national energy was canalized into attempts to fight for a position of a dominant world power. A pathway of European peaceful cooperation was always like vehicle with double commands, (like driver’s school automobile where the instructor can always take commands, brake, accelerator and steering wheel), and steering the EU was always shared with the Americans, the US.
Now, US approach to Russia, aggressive in enlarging NATO, provoking Russian response, really is like US taking responsibility for vital decisions on EU future, grabbing the steering wheel away from Germany. There has to be someone with a wider perspective on a European level and there is no one. No one visible, no one. European leadership is a group of politicians without democratic support. US diplomats, politicians are unable to lead US, and are of no use in Europe. This has to reverberate in German society,
Germany lost a cause, a role of the leader, like a ship that loses drive, power, and is just floating in the middle of the ocean.
The malaise is real, existential.
Germans do feel, that some possible avenues are dead streets, more instinctively than from much learning from history, but a giant ship moved by waves and currents and wind that is not really advancing in any direction, frightens it’s passengers by its aimlessness. Far right populism is a dead end street, waging war against Russia in East European steppes is a dead end street, but where are we going? What is the goal? What are the methods? What should Germany support? What is important?
Unfortunately forces of life cannot be stopped, accepting democracy means accepting the will of the people, and only democratic alternative that will give credible answers can stop right wing conservatives from gaining power. Media and public debate could be used to promote discussion, that would give answers, but if used to suppress different voices, will only strengthen opposing camp.
When US refuses to act as a responsible leader and offers no realistic solution to war US itself provoked, started in Europe, Germany is being positioned into leading force in continuing war in Ukraine, war Germany didn’t started, refused to start. Germany is together with Ukraine and Russia the biggest loser of the war. And now in position to pay the expenses, for ever, or as long as it takes, suffer damage, and has absolutely no influence on decisions on how and when is the war to end.
This is surreal. Malaise is real, because crisis is as deep as in the 1920 ies. On the positive side, there are some historical changes going on that are slowly giving Germany chance to decide on its future, to redecide in a way, wrong decisions that led into First World War.
Starting with refusing to being drawn into war with Russia. Meaning searching for a solution that will end the war, and end being used as proxy by honestly dumb generation of US diplomats/statesmen.
But in the end all will turn around relationship towards Israel, and EU and Germany will remain toothless, powerless as long as Israelis don’t make up their mind, what do they really want, one state or two,states, with or without Palestinians, with or without West Bank and Gaza, and are they ready to risk to get it. It looks like Israel has chosen one state, with West Bank, possibly Gaza, and without Palestinians. It is definitely not the two state solution, that Arab and Islamic world now look like they’re ready to accept. It is a big question if it should be done, but this question has already been answered by Israel and US. it can be done, it is happening, being done in front of us now, has to end in a month or two, otherwise situation will become a bit more difficult. Continuing with one state solution will give Israel a realistic chance to survive and grow, and after dust of Gaza’s destruction settles, further cooperation with neighboring Arab states. Egypt and Jordan will be destabilized, but with political, financial, military assistance could be kept inside US led world as allies of US and Israel. Syria will survive, but will continue to be destabilized. Palestinians will suffer terribly, a significant number will turn into, or support freedom fighters that will be judged as terrorists by US, EU and Germany. Germany will suffer from terrorism more than US or even Israel. Turkey and Egypt will be destroyed economically if they try to do more than rhetorics.
Germany and EU has no chance to change anything regarding Israel, and will follow US lead.
Russia will remain supporter of Syria, and by force of facts an ally of Iran, and opponent, not an enemy of Israel. But Israel will in real life judge all supporting two state solution as enemies, and enmity towards Russia, will be one of the reasons Germany will find it extremely difficult to change relation towards Russia into something less negative.
Germany has some unhealthy and unhappy years in front. Malaise is a natural answer to a situation that is oppressing, and there is no way out. Like a giant open air prison, without real freedom to chose your future, to make vital decisions.
A lot of patience and wisdom is needed, or just a stroke of luck, like Trump. But last time Trump was around Germany refused to engage.
Carl Icahn: “Net worth of median households is basically nothing. We have major problems in our economy.” Median US household net worth is $97,300 (adjusted for purchasing power, it's $363,500 in China).
China's price level is about half what it is in the US. So you seem to state that the median Chinese household's net worth is 180K, nominal - that is, say, 15 years of gross income for an average Chinese. That sounds implausible.
These high growth rates also mean that your income of half a generation ago, even if entirely saved, would contribute peanuts to your current balance sheet. What is the source of this 180K number anyway? Let's have a look.
Averages aren't medians and maybe there are quite some more or less than half a billion households but we're talking about 180K*500 million as the net household worth in China, with some huge margin. That's 90 000 billion USD. But China's total nominal GDP since 1950 is maybe 11 000 billion USD (most of it obviously fairly recent). These families all need the services of DJT's accountants to arrive at such life time savings.
I am inclined to confirm the impression of doom and gloom In Germany but I think that it makes more sense to relate it to the crisis of the German industrial model than to the issues of inequality and inflation, however suggestive the narrative could be.
Let me offer a couple of considerations.
I did not know the SOEP survey, but OECD data suggest that wealth inequality in Germany (as measured by the share of wealth owned by the richest 10 percent) is higher than in France, Japan and Italy but lower not only than in the US but also Sweden and the Netherlands. Income inequality as measured by the Gini coefficient (after taxes and transfers) seems to be rather comparable across all the above European countries). Why should inequality more of a problem in Germany than in (more unequal) Sweden?
The 1921-23 German hyperinflation is routinely cited as the source of German pathological aversion to inflation. It is however by now outside living memory (unlike all the other nine most severe inflations in history). Why should inflation be a problem in Germany more than in other countries that have closer memory of inflation?
It seems that the feeling of doom is quite strong in Sweden too, with a party with Nazi roots participating unofficially in government and with a austerity policy almost written into the constitution – the so called "överskottsmål" ("surplus target") or the proviso in the Financial Law that the State finances must give a surplus of at least 1%.
It looks weird, at least 1% of the state part of the GDP must be sucked out of the economy each year. And there is no opposition against it. Everybody are scared of inflation, apparently, and yet the inflation of the 70s was quite modest, about 8%/year - and since then there hasn't been any.
Why? A stab un the back? Six million Jews murdered? Twenty five million Soviets murdered? Soviet flag on Reichstag? Millions of German but also Italian, Hungarian, Estonian, Latvian, Letonian, Ukrainian...soldiers dying in Eastern steppes... All of this possible because a country a society that considered itself a competitor for Weltmeisterschaft was destroyed... And this destruction was equaled with inflation. Inflation is the first beginning, a first negative move, that leads to tragedy.
Perhaps because they have institutionalized some of those fears? The "Schwarz Null" still has an iron grip upon the Bundesbank and Bundeswehr alike, eh?
Dear Branko,
Since the first time we ever met was in Berlin, I take the liberty of making two comments on your nice post.
You write that Weimar’s inflation destroyed its credibility. Though the hyperinflation of 1923 was indeed a shocking and reckoning moment for the young Republic, its taming after 1923 produced years of relative stability leading, in fact, to the actual “golden years” of the Weimar Republic. It was not until the disastrous austerity policies of Chancellor Brüning in 1930 - which were disinflationary in nature and which, combined with the consequences of the 1929 crash, led to 6 million unemployed in one year- that the downfall of Weimar Republic started. Not coincidentally, it was after 1930 that the Nazis started gaining traction after years in the margins.
The notion that hyperinflation was the most significant trauma and “lesson” of Weimar is a retrospective view, promoted consistently by conservative critics of Weimar (many of whom supported Brüning's policies and who did not hesitate to support, even initially, Hitler as a solution against instability). Postwar popular accounts, influenced by such a perspective, even went as far as conflating hyperinflation with Hitler, thereby producing a remarkable inversion: that it was not those who had supported Hitler that were to blame for Nazi ascendance but those who had caused hyperinflation (i.e., the SPD/Zentrum government). In short, the victims of Nazis were more responsible than its supporters.
The hyperinflation trauma-myth was also used consistently by postwar monetary authorities (from the BdL to the Bundesbank) in order to support their goal of central bank independence (curiously ignoring the fact that in 1923 the Reichsbank was, in fact, already independent due to the Autonomy Law of 1922). [On this exact topic, I could not recommend enough Simon Mee’s 2019 Central Bank Independence and the Legacy of the German Past]
A similarly peculiar inversion is now visible in relation to the war in Gaza. While the official line of unconditional support for Israel is meant to emanate from Holocaust guilt, one would be amiss not to notice an instrumentalisation of sorts: while anti-semitic incidents are visible (I live in Neukölln where there have been such cases), the definition of anti-semitism seems to have departed from its usual meaning and to have been transformed into any criticism of the Israeli state and, inversely, any show of support for Palestinians. That such a re-interpretation has permeated the atmosphere here is visible in the various “slip of the tongue” (or maybe, Freudian slips?) of journalists, politicians and other official figures who use the terms Palestinian or Hamas interchangeably, with appalling consequences: recently a newspaper publicly asked for the removal of citizenship from a teenage girl for posting something in favour of Palestine (not Hamas!) on social media. While there is little doubt that there are expressions of support (or reluctance to condemn) Hamas, it is also clear that equating support for Palestine or the civilians of Gaza with support for Hamas consists of, among other things, an authoritarian reflex. The double standards were made clear in Habeck’s famous video where “Arabs” (in general) are asked to prove they are not anti-semitic, at the same time as official figures with clear anti-semitic biographies (let alone the far right itself) are given a free hand. The further fact that government officials were happy to reproduce and promote a video where a far-right English "journalist" compared Hamas to Nazis … only to find Nazis more “civilised”, indicates that there is much more going on here than Holocaust guilt. Using the Holocaust trauma to justify defending Israel is one thing but using it as a way to attack Arabs in Germany (many of whom are German citizens) or to whitewash Nazis is quite another.
Combining those things with the veritable rise of the AfD (I am not as convinced as you that they will not be part of a coalition in the next election) does indeed make the streets of Berlin quite dark but I am not sure it's because of energy saving.
It seems that Germany's official policy is full of anti-semitism. If this website is correct (and not a kind of troll site) they don't allow immigration of Jews if they can't speak fluent German: https://www.bamf.de/EN/Themen/MigrationAufenthalt/JuedischeZuwanderer/juedischezuwanderer-node.html. Apparently, other people are welcome.
"inflation and dearness of energy, economic stagnation (near zero growth), the rise of the extreme right, political paralysis, loss of exports to China, decline of German car technology, high wealth inequality, imperfect assimilation of foreign-born population, inefficiency of German railways, dark streets in Berlin (saving of energy), full political dependence on the US"
this doesn't even include climate change, biodiversity loss, the rise of AI, ... all of which, I believe, are considered to have no positive impact on the German economy
wrt the dependence on the US: this looks even darker if one thinks of the sabotage of the Nordstream Pipeline as a US attack on Germany and Europe
Germans see the last as a desirable outcome. "We are bad slaves who deserve to be beaten!"
"acceptance acceptance of more than 1 million Syrian refugees" should definitely not be viewed as a positive entry in the ledger. The damage from loose immigration policies -- attributable in part to a dunderheaded acceptance of the "all are equal" mantra -- has been enormous, not only in terms of damage to public coffers - these immigrants are and will continue to be an enormous drain on the social system -- but also to social cohesion. The massive suppression of voices who point to such problems is the true danger to democracy, not the AfD.
Not wrecking other states near your own doorstep (Libya, Syria) might be an idea which Europeans struggling with migration might want to consider?
G'day Robert, my suggestion is to look at the cause and location of the refugee problem aka the empire rather than from an insular subjective perspective. Yes granted German has been remarkably effected by the wars they recently participated in as was intended by the empire. Now think Nordstream and direct your concerns appropriately. My commiseration to you.
From an economic theory point of view, Germany may be fine according to certain parameters.
But, from a historical point of view, the European Union (therefore, Germany) is decisively declining. The key here is that capitalism -- Germany's mode of production -- needs eternal growth (profit rate) to be sustainable; just stagnant or barely positive growth rates won't cut it.
My prediction is that Europe will continue to decline until a decisive capitalist crisis a la 2008 or worse will finish it off.
Decline, finishing off ... Those aren't quite the things that happen to countries under most circumstances. Take Argentina after a century of stagnation (sometimes worse than others) and China after a generation of epic growth: their respective GDPs (corrected for purchasing power, per capita, from wikipedia): 26K and 23K.
The sentence should read: "According to SOEP survey, 39 percent of the German population has zero (or quasi zero) net financial wealth, and almost 90 percent of the population has rather negligible net financial wealth (reflected in receiving property income of less than 100 euro per month).
Home ownership in Germany is some 50% which is very low by international comparison and must contribute enormously to the wealth inequality.
The inability of the German car industry to design and sell electrical (or hybrid) cars at a significant scale is a drama and may be a reflection of the inability of the industry to face reality: last decade, there was dieselgate, the widespread fraudulent ways by VW, Audi, BMW, Mercedes, of measuring car exhausts to meet environmental standards. They seem to live in another universe..
This malaise is far from unique to Germany, but may be seen more generally as a failure of G7 democracies to adapt to the realities of a changing World. Depression and anger result from the underlying sense that policy makers no longer know how to fix things, and ultimately this is an intellectual failure to rethink the Global economic system. Compare for example the post war period in the 1940's when leaders re-shaped the World with unprecedented speed and clarity of vision :
1944 World Bank and International Monetary Fund
1945 United Nations
1947 Marshall plan to rebuild Europe
1949 Council of Europe ( future EU ) and NATO
By comparison we might ask our current leaders "What have you done for me lately?" Instead our politicians seem to be recycling the ideas and thinking of the past ( nationalism, protectionism, fascism, expanding fossil fuels) in the vain hope that we can somehow return to the 20th century colonial era when 1/6 of the world's population consumed 99% of the World's resources!
I would not claim to have all the answers, but I think the following at least are worth discussing:
1) Economic growth will not return quickly to the rich World. Way back in 2014 Piketty predicted developed nations would continue to grow at only 1-2% per annum, whilst emerging nations would grow at the catch-up rate of 4-5%, probably for several decades. This is right and proper as it will eventually lead to a Global economic convergence, but Western leaders should not pretend otherwise.
2) This does not mean life has to get worse for those in the West. However, the path to better quality of life in G7 countries will NOT come from economic growth, but rather from reducing waste. The concept of "lean thinking" has been applied for decades in manufacturing. ( Relentlessly eliminate ALL waste that does not add value ) must be applied to Western lifestyles. ie. build passive houses that require little or no space heating, stop wasting 20% of the food we produce, buy 3 or 4 nice items of clothing per year instead of 20 that just sit in a wardrobe, eliminate unnecessary travel and time wasted in traffic jams by building 15 minute cities. It is ONLY by eliminating ALL waste that we can achieve a rising standard of living in the West, in the absence of economic growth.
3) Become more self-sufficient and use resources according to "lean" principles. The Western economic model was built around waste in an era when resources from our colonies around the World were cheaper than the extra labour needed to recycle or use them efficiently. Global inflation will now continue to hound us, as these ex-colonies start to consume their own share of resources. By 2050 there will be 5 billion people in Asia, and 2.5 billion in Africa, whilst Europe and North America together will count for just 1.1 billion. The idea that the era of cheap resources that we enjoyed in the 20th century will continue is just delusional. Global competition for resources will continue to push up input prices, but if we rely just on future market forces to drive this change it will be far more painful than if we set out our policies to double down on efficient use of resources now.
4) Economic migration is the inevitable consequence of inequality between nations. As we know, this will be made far worse by global warming, and proxy wars paid for by rich nations, so we need to stop both. The biggest return on investment we can make right now is to eliminate extreme poverty, particularly in Sub-Saharan Africa. Providing education and healthcare to women in particular, will accelerate the decline in birth rate to help control population growth. The West must make a choice between receiving an ever increasing tide of economic migrants, or investing to create the peace, stability and economic opportunities that will encourage them to stay in their own countries.
5) Real progress on these issues requires co-operation on a Global scale that today seems impossible. Achieving the Global Goals requires an investment of around $4T per annum ( which is only around 5% of Global GDP ) yet we barely manage one quarter of that today, even though the return on this investment for the Global economy would be huge. Global thinking seems in short supply, but the arguments for it are clear. We could for example agree a Global tax on all payments between countries to get around the barrier of giving "our" money to "them" but such large scale thinking is out of fashion. If America and China, together with other G20 nations are to re-shape the World, as we once did in the 1940's, it must be with a vision to at last build a "Global Race" in which everyone can be winners.
When politicians ignore these new Global realities, it is depressing, but predictable, as they are elected by very poorly informed voters. However, when academics and economists remain locked in 20th century colonial thinking, that is inexcusable.
There is a certain kind of sober hysteria deeply embedded in the German mindset. Things are often seen in the worst possible light and we tend to expect the worst possible outcomes as near certainties (If they don't come to pass, it's seen as a lucky escape rather then prudent preparation). Ironically this thinking might be self-reinforcing in such a situation (to put a pessimistic spin on it): The antisemitism-scare leads to a curtailment of civil-rights, concerns about integration sour the mood and drive up the far right, economic anxiety exacerbates Germany's excessive love of fiscal austerity, which leads to further economic contraction and ever greater inequality and so on...
Dear Branko, congratulations on a fine article, giving us chance to start discussing causes of German malaise. Germany is a country, a state, society in a need of a goal. Enormous energy, intellectual, as well as technological transforming into power. Jewish nation possessing similar energy found a solution to 2000 years of wandering in creating a state, own state, a real proper state with borders, military, secret police, currency, borders, even more than a state, an embodiment of Jewish civilization. An ambitious project that consumed and is still consuming almost all surplus of energy individuals have to give to the universe in addition to what they use in their lives. Germany, compared to Israel, has twice banged the wall, when the national energy was canalized into attempts to fight for a position of a dominant world power. A pathway of European peaceful cooperation was always like vehicle with double commands, (like driver’s school automobile where the instructor can always take commands, brake, accelerator and steering wheel), and steering the EU was always shared with the Americans, the US.
Now, US approach to Russia, aggressive in enlarging NATO, provoking Russian response, really is like US taking responsibility for vital decisions on EU future, grabbing the steering wheel away from Germany. There has to be someone with a wider perspective on a European level and there is no one. No one visible, no one. European leadership is a group of politicians without democratic support. US diplomats, politicians are unable to lead US, and are of no use in Europe. This has to reverberate in German society,
Germany lost a cause, a role of the leader, like a ship that loses drive, power, and is just floating in the middle of the ocean.
The malaise is real, existential.
Germans do feel, that some possible avenues are dead streets, more instinctively than from much learning from history, but a giant ship moved by waves and currents and wind that is not really advancing in any direction, frightens it’s passengers by its aimlessness. Far right populism is a dead end street, waging war against Russia in East European steppes is a dead end street, but where are we going? What is the goal? What are the methods? What should Germany support? What is important?
Unfortunately forces of life cannot be stopped, accepting democracy means accepting the will of the people, and only democratic alternative that will give credible answers can stop right wing conservatives from gaining power. Media and public debate could be used to promote discussion, that would give answers, but if used to suppress different voices, will only strengthen opposing camp.
When US refuses to act as a responsible leader and offers no realistic solution to war US itself provoked, started in Europe, Germany is being positioned into leading force in continuing war in Ukraine, war Germany didn’t started, refused to start. Germany is together with Ukraine and Russia the biggest loser of the war. And now in position to pay the expenses, for ever, or as long as it takes, suffer damage, and has absolutely no influence on decisions on how and when is the war to end.
This is surreal. Malaise is real, because crisis is as deep as in the 1920 ies. On the positive side, there are some historical changes going on that are slowly giving Germany chance to decide on its future, to redecide in a way, wrong decisions that led into First World War.
Starting with refusing to being drawn into war with Russia. Meaning searching for a solution that will end the war, and end being used as proxy by honestly dumb generation of US diplomats/statesmen.
But in the end all will turn around relationship towards Israel, and EU and Germany will remain toothless, powerless as long as Israelis don’t make up their mind, what do they really want, one state or two,states, with or without Palestinians, with or without West Bank and Gaza, and are they ready to risk to get it. It looks like Israel has chosen one state, with West Bank, possibly Gaza, and without Palestinians. It is definitely not the two state solution, that Arab and Islamic world now look like they’re ready to accept. It is a big question if it should be done, but this question has already been answered by Israel and US. it can be done, it is happening, being done in front of us now, has to end in a month or two, otherwise situation will become a bit more difficult. Continuing with one state solution will give Israel a realistic chance to survive and grow, and after dust of Gaza’s destruction settles, further cooperation with neighboring Arab states. Egypt and Jordan will be destabilized, but with political, financial, military assistance could be kept inside US led world as allies of US and Israel. Syria will survive, but will continue to be destabilized. Palestinians will suffer terribly, a significant number will turn into, or support freedom fighters that will be judged as terrorists by US, EU and Germany. Germany will suffer from terrorism more than US or even Israel. Turkey and Egypt will be destroyed economically if they try to do more than rhetorics.
Germany and EU has no chance to change anything regarding Israel, and will follow US lead.
Russia will remain supporter of Syria, and by force of facts an ally of Iran, and opponent, not an enemy of Israel. But Israel will in real life judge all supporting two state solution as enemies, and enmity towards Russia, will be one of the reasons Germany will find it extremely difficult to change relation towards Russia into something less negative.
Germany has some unhealthy and unhappy years in front. Malaise is a natural answer to a situation that is oppressing, and there is no way out. Like a giant open air prison, without real freedom to chose your future, to make vital decisions.
A lot of patience and wisdom is needed, or just a stroke of luck, like Trump. But last time Trump was around Germany refused to engage.
Germans like being slaves. Nothing gives a euroclass politician greater delight than when he is permitted lovingly to fellate his American Master.
Carl Icahn: “Net worth of median households is basically nothing. We have major problems in our economy.” Median US household net worth is $97,300 (adjusted for purchasing power, it's $363,500 in China).
China's price level is about half what it is in the US. So you seem to state that the median Chinese household's net worth is 180K, nominal - that is, say, 15 years of gross income for an average Chinese. That sounds implausible.
Real incomes have increased 16-fold since 1980 and the savings rate is 35%, plus appreciation and inheritances. That's within range.
These high growth rates also mean that your income of half a generation ago, even if entirely saved, would contribute peanuts to your current balance sheet. What is the source of this 180K number anyway? Let's have a look.
Averages aren't medians and maybe there are quite some more or less than half a billion households but we're talking about 180K*500 million as the net household worth in China, with some huge margin. That's 90 000 billion USD. But China's total nominal GDP since 1950 is maybe 11 000 billion USD (most of it obviously fairly recent). These families all need the services of DJT's accountants to arrive at such life time savings.
I am inclined to confirm the impression of doom and gloom In Germany but I think that it makes more sense to relate it to the crisis of the German industrial model than to the issues of inequality and inflation, however suggestive the narrative could be.
Let me offer a couple of considerations.
I did not know the SOEP survey, but OECD data suggest that wealth inequality in Germany (as measured by the share of wealth owned by the richest 10 percent) is higher than in France, Japan and Italy but lower not only than in the US but also Sweden and the Netherlands. Income inequality as measured by the Gini coefficient (after taxes and transfers) seems to be rather comparable across all the above European countries). Why should inequality more of a problem in Germany than in (more unequal) Sweden?
The 1921-23 German hyperinflation is routinely cited as the source of German pathological aversion to inflation. It is however by now outside living memory (unlike all the other nine most severe inflations in history). Why should inflation be a problem in Germany more than in other countries that have closer memory of inflation?
It seems that the feeling of doom is quite strong in Sweden too, with a party with Nazi roots participating unofficially in government and with a austerity policy almost written into the constitution – the so called "överskottsmål" ("surplus target") or the proviso in the Financial Law that the State finances must give a surplus of at least 1%.
It looks weird, at least 1% of the state part of the GDP must be sucked out of the economy each year. And there is no opposition against it. Everybody are scared of inflation, apparently, and yet the inflation of the 70s was quite modest, about 8%/year - and since then there hasn't been any.
Why? A stab un the back? Six million Jews murdered? Twenty five million Soviets murdered? Soviet flag on Reichstag? Millions of German but also Italian, Hungarian, Estonian, Latvian, Letonian, Ukrainian...soldiers dying in Eastern steppes... All of this possible because a country a society that considered itself a competitor for Weltmeisterschaft was destroyed... And this destruction was equaled with inflation. Inflation is the first beginning, a first negative move, that leads to tragedy.
Perhaps because they have institutionalized some of those fears? The "Schwarz Null" still has an iron grip upon the Bundesbank and Bundeswehr alike, eh?