Germany’s Left Party dissolved its faction in the German Bundestag as of December 6. In October, prominent politician and former party parliamentary co-chair Sahra Wagenknecht announced that she was founding a new party focused on working class issues, which includes repairing ties with Russia and examining whether German interests are congruous with those of Washington.
The Alternative for Germany (AfD) party overlaps with Wagenknecht on those issues while also containing strong strains of ethnonationalism and euroscepticism. The AfD has had recent strong showings in local elections and maintains its second place in national polls, consistently coming in above 20 percent.
Both the breakdown of the Left Party, which is considered a direct descendant of the Socialist Unity Party that ruled East Germany until reunification, and the rise of the AfD are the political signs of an upheaval occurring in Germany caused by the willingness of the country’s elites to impose economic decline on the vast majority of its citizens.
Aside from Ukrainians, the German people are among the biggest losers from the ongoing war against Russia. While support for Project Ukraine slowly evaporates, the damage to the German economy will not end with the war effort. Inflation continues to be problematic, the energy outlook remains dire, the economy is stagnating, exports to China are declining and there is constant pressure from Atlanticists to self-impose a further reduction, living standards are declining, political paralysis reigns on most matters except social cuts and more military spending, and wealth inequality grows.
The German government is struggling to figure out a budget that deals with so many costly crises at the same time. A recent ruling by the country’s highest court said that the 2024 fiscal plan broke rules enshrined in the constitution by attempting to repurpose 60 billion euros left over from an emergency COVID-19 fund in order to fill budget holes. The ruling also limits the government’s ability to dip into special funds that were set up to get around the outlawing of deficit spending, and Germany simply doesn’t have the money to fund increased military spending, support for industry hammered by the loss of cheap Russian energy, and the country’s social programs. Despite Chancellor Olaf Scholz’s promise to the contrary, harsh austerity is likely coming for the German people.
The point of this piece is not to rehash all the ways the New Cold War is doing outsized harm to Germany. Instead, it is an attempt to nail down some of the why. There is a common assumption that Germany, as a vassal of the US, had to be strong-armed or tricked into supporting Project Ukraine against its own interests, but is that really the case? And if not, why did German decision makers pursue such a course of action? Why is Germany, which has already lost so much with Project Ukraine, continuing down this ruinous path? And why has it tethered itself to a US declining in relative power? Here are some possibilities (and please add any I’ve missed in comments).
One potential reasin is the US military and intelligence agencies factor. As NC reader divadab pointed out recently:
Start with an army of occupation, 50,000 US troops still there iirc, almost eighty years after Nazi Germany’s defeat. Add a comprador elite, beholden to the US and its media and secret service tentacles, and you get weaklings like Scholtz, utterly without agency, insulted in public by Emperor Joe, and acting directly against the interests of his countrymen. It’s hard to believe that this supine, defeated nation, was once the terror of the world, and only the forces of the USA and its imperial vassals, and the USSR could defeat them.
On the intelligence front, NC reader JohnnyJames adds:
…documents published by Wikileaks showed that the NSA had tapped Angela Merkel’s phone for many years. The BND [German Federal Intelligence Service] had knowledge of it, yet did not inform their own Chancellor. The BND was largely created by the CIA in the first place. The mass media even reported on it.
No doubt the US uses certain tactics to keep its “allies” in line, such as bribery and coercion. NC reader CatBurglar comments:
“Bags and bags of money” has been adduced as one reason the US can control German politicians. It wouldn’t be surprising if US surveillance has discovered things to blackmail the politicians with — it is their job!
As just one example, it would be irresponsible not to speculate about Scholz being compromised over his past entanglement with the Cum Ex affair that is constantly being dangled about, the threat of which could theoretically be used to influence his decisions on other matters.
Bribery and coercion are no doubt part of the US toolbox to maintain order much the same way organized crime networks expand their reach, but could the overarching alignment be the result of something much more insidious? While on its face it appears like subservience or blackmail, could it not instead be that the German elite simply identify more with their American counterparts than the working class in their own country?
If it’s the case that decades of training in the WEF-style transnational capitalism mindset has finally come to fruition, it’s likely that the German elite saw their potential monetary reward for helping to bring Russia under the US-run neoliberalized and financialized global economy.
If they acknowledged the risks at all of the plan not succeeding, they likely would have realized that the brunt of the economic pain would fall on Germany (and Europe’s) working class, and does anyone really believe that the likes of Scholz, Macron, and other European figureheads care at all about the working class in their country?
German Foreign Minister Annalena Baerbock who frequently blurts out the quiet part, said as much last year in the perfect summation of the “leaders’” mindsets:
We stand with #Ukraine “no matter what my German voters think”.
“People will go on the street and say we cannot pay energy prices, and I will say ‘yes, I know, so we’ll help you with social measures'”
— In Context (@incontextmedia) September 2, 2022
Politicians like Baerbock do not need to be persuaded to act against the interests of the majority of citizens in countries they purportedly represent.
Retired General H. Kujat and Professor Emeritus H. Funke’s report on how the chance was lost for Ukraine peace settlement showed that Germany was involved in efforts to torpedo early peace efforts in Operation Ukraine – not a wavering participant that needed to be cajoled along as Chancellor Olaf Scholz often pretended to be. It isn’t just Russia, either, but increasingly China, Iran, Azerbaijan, and elsewhere – basically anywhere the US is targeting, the Germans are now right there beside them. Scholz has said Germany will take a more active role throughout the world alongside Washington, as has foreign minister Baerbock who pushes a “feminist” foreign policy using human rights as a justification for more aggression.
Despite all the outsized risks it posed to the German nation as a whole, the German elite apparently wanted the war. It’s a strong possibility that for them the potential payoff outweighed the negligible risks for themselves.
A brief look at the class divide and polling along those lines in Germany and Europe as a whole shows that that repercussions of the war have not reached the elite – at least so far. First, a brief summary of the extreme wealth inequality in Germany:
Despite many years of social-democratic rule and an extensive welfare state, German wealth inequality is very high. 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 negligible net financial wealth (reflected in the fact that monthly income received from property is less than 100 euros per person). This makes German wealth inequality (depending on the metric one uses) equal or even greater than the very high US wealth inequality. A feeling that many large fortunes are hidden or enjoy tax shelters thanks to different European schemes and tax competition between the EU countries, adds to the feeling of unfairness.
The story is the same across the EU, with the 2010s’ austerity policies playing a major role in widening the gap. And the Ukraine war has only accelerated this process. Real minimum wages declined in nearly all of the 21 EU countries with a minimum wage since the start of the war, and real wages fell at record speed in Germany last year. There is no plan to fix this.
Let’s look at some of the most recent Europe-wide polling from the European Commission, which handily breaks down results along class lines, to see a complete divergence between the European elite and working class on economic issues and the fallout from the war against Russia.
European polls show major divergence on labor issues, such as 52 percent of the working class rating fair working conditions as the most important to the EU’s social and economic development. Only 30 percent of the upper class feels the same way. And 66 percent of the EU working class feel their quality of life is getting worse; only 38 percent of the upper class feel the same way.
On this issue of whether the war in Ukraine has serious financial consequences for you personally, 47 percent of Germans agree; 52 disagree while the remainder don’t know. 61 percent of Europeans as a whole agree.
The EU-wide division along class lines remains clear. 71 percent of the working class feel the war hurts them financially. Only 40 percent of the upper class feels the same way. 71 percent of those struggling financially say their situation has deteriorated in the past year. 26 percent of the well-off feel similarly.
More generally, the working class is more suspicious of the undemocratic institutions at the heart of the war efforts:
- Only 35 percent of the working class trusts the European Commission 68 percent of the upper class does.
- 33 percent of the working class trusts the European Central Bank; 67 percent of the upper class does.
- More people who often struggle to pay bills have a negative view of the EU than positive. It’s completely flipped for those who don’t have to worry about bills.
- A much higher percentage of the upper class wants more decisions made at the EU level.
- The working class is much more pessimistic about the future of the EU.
- 58 percent of those who struggle with finances distrust NATO. Only 15 percent of the “upper class” has the same misgivings.
- When it comes to the EU spending more money on defense, once again the further you climb up the class lines, the more support there is.
For now, the European Commission seems satisfied enough with the level of disenchantment coming from the lower rungs of society. The first paragraph of its conclusion to the polling results:
The results from the Standard Eurobarometer 99 conducted in May-June 2023 show that Europeans remain satisfied with the response of the EU and their national government to the Russian invasion of Ukraine. There has been little change since January-February 2023: satisfaction levels have remained relatively stable since June-July 2022.
If this is what “satisfied” looks like, it’s abundantly clear von Der Leyen’s commission could care less about the European working class. Yet, the commission does note that, “Respondents who have difficulties paying bills at least some of the time, and those who consider they belong to a lower social class are less satisfied with the EU and national responses to the war and are more likely to report serious personal financial consequences as a result of the invasion of Ukraine. They are also less supportive of proposed defence co-operation and spending measures, and less supportive of the energy policy directions presented in the survey.”
So what’s the commission to do? It could admit the war was and is a disaster. It could try to improve the living standards of more citizens so they’re more likely to support the EU, NATO, militarization, etc. Or it could try to assume more powers and become more authoritarian.
The questions the Commission is asking give a sense of which direction it prefers:
- Does the EU have sufficient power and tools to defend the economic interests of Europe?
- Does the EU need to reinforce its capacity to produce military equipment?
- Do you agree with banning state-owned media such as Sputnik and Russia Today from broadcasting in the EU?
So while the weight of the war falls most heavily on the working class, what of the motivations of the German and European elite? What is the ideology that drives the support for war? Colonel Smithers sums up:
I think the European PMC / leadership class has its own reasons to adopt this position / policy towards Russia (and others like China and Iran). Vide Uschi von der Leyen. This deracinated elite has its own agency and does not need Uncle Sam’s direction / instruction. From experience, the financialisation of the past five decades has helped to facilitate the Atlanticist positioning and, due to the prominence of US firms in managing the wealth of that elite, bridged the Atlantic and given the impression of the US doing the bidding.
This said, and this is where your and similar questions may arise, it’s very rewarding professionally, politically and financially to do (or be seen by the US, a short hand, to be seen to do its bidding. I have observed British and EU27 politicians and officials build their retirement nest eggs by favouring US firms in government and join them at the earliest opportunity. They were already corrupt, but Uncle Sam’s money has turbo charged that process. US firms and think tanks pay very well. In addition, working with US firms and think tanks is like going out with a glamed up Hollywood star, not plain Jane next door.
To add to that, in my experience anecdotal evidence shows that PMC Europeans view the US as more “dynamic” and want their workplaces to function more like those in the US. What do they mean by dynamism? When you get down to it, it means less worker protections in exchange for potentially higher salaries for highly educated workers like themselves. Many are well acquainted with the US having studied there for at least a semester and see the US as having many more high-paying job opportunities as it’s easier in the US to get rid of the old and bring in the new. There are also higher salaries in the US – not just for CEOs but “skilled” and high-paying jobs tend to be higher than those in Europe, where collective bargaining agreements between unions and employers are often used to set salaries.
The German and European PMC want to earn more money like their American counterparts, and they resent the modest brakes that unions put on corporate power in Europe even if it provides more stability for the whole but less upside for them individually.
In essence, it is a similar mindset that leads to higher support from European elites and the professional class in war against Russia; there were potential benefits for themselves while the majority of the risk falls most heavily on the working class.
According to NC reader MD in Berlin, a major reason behind German elites’s support for regime change efforts in Moscow was the potential payoff should Russia implode from the weight of sanctions and war spending:
Do “we” need to worry about loss of cheap gas? No, we are going to “ruin Russia” (Baerbock), and it will only take a matter of months. And then we get a big share of the plunder. And our client governments in the broken-up remnants of Russia will restore our cheap gas.
No need for anyone to yank a chain. The assessment of the prospects of success may have been faulty, but the decision made on its basis was rational.
Germany could have also felt pressure to make a move, so to speak, as their economic model was faltering after years of mismanagement. According to Yanis Varoufakis:
The tables have been turned on Germany because its economic model relied on repressed wages, cheap Russian gas, and excellence in mid-tech mechanical engineering – particularly manufacturing cars with internal combustion engines. Germans are now slowly coming to terms with the demise of their economic model and are beginning to see through the multifaceted Big Lie their elites were repeating for three decades: Fiscal surpluses were not prudence in action, but rather a monumental failure, during the long years of ultra-low interest rates, to invest in clean energy, critical infrastructure, and the two crucial technologies of the future: batteries and artificial intelligence. Germany’s dependence on Russian gas and Chinese demand was never sustainable in the long term; and they are not mere bugs that can be ironed out.
Essentially Germany’s elite relied for too long on wage suppression and fell behind in the innovation race. As Irrational points out:
…after reunification real wages stagnated and under the governments led by Gerhard Schröder in the late 90s-early 00s, they declined as this chart shows. But the extent is of course far greater now – loss of 4% in real terms last year. If they were trying to preemptively head off economic decline, well, grabbing Russian and Ukrainian resources makes more sense.
The House Always Wins?
We need only look back to the European polling quoted above to show that the well-off aren’t all that worried about inflation and other economic inconveniences for themselves from the war with Russia. So what if industry is relocated to “low-cost” regions of the Balkans or the US?. So what about paying higher energy bills? This is a positive for the bourgeoisie Greens steering the ship in Germany as they’re enacting many of their environmental policies despite the damage to the working class.
There is also evidence that the German elite are using the crisis to push right-wing neoliberal ideology and strengthen its chokehold over the German economy. Michael Hudson summarizes:
The economy is to be Thatcherized – all by riding the crest of the American anti-Russian sanctions and claiming that this creates a crisis requiring dismantling of public infrastructure and its privatization and financialization.
So it goes. This is on display in German budget plans currently in disarray for 2024, which impose deep austerity everywhere except the military. It’s evident in the growth of Germany’s private equity and venture capital industry, which tripled in size from 2012-2021, and that trend is picking up steam. According to Reuters, International and U.S. law firms continue to invest in Germany, with international mergers and acquisitions, finance and private equity hires driving legal market growth in the country:
Reed Smith is the latest to add to its Munich office, roping in two partners from U.S. rival McDermott Will and Emery, including its German private equity group leader, Nikolaus von Jacobs, the firm said last week.
Other U.S. law firms have also grown in Munich, most notably Morgan, Lewis & Bockius, which opened its second German office there in March with a 19-attorney group from rival Shearman & Sterling, including its country head and M&A leader Florian Harder.
Kirkland & Ellis, McDermott, Dechert, DLA Piper, Allen & Overy, Ashurst and Dentons all added transactional partners in the Bavarian capital this year. Goodwin Procter, which launched a Munich office last year, called the city “a private equity hub.”
And from Deutsche Welle:
A study published in May by the financial research collective Finanzwende found that private equity firms bought 174 German doctors’ practices in 2022, up from 140 in 2021 and just two in 2010. And, according to research by the public broadcaster NDR, such firms now own hundreds of practices across Germany, to the extent that single chains have a monopoly in certain regions and towns.
The financialization of Germany is also showing up in how the German people are getting squeezed and are increasingly angry. From Reuters:
Some 80% said they considered the economic situation in Germany as unjust, up 32 percentage points from 2021, and 60% of Germans said they saw society as divided – principally between rich and poor – up 20 percentage points compared with May 2022, according to the More in Common research organization. …
Low and middle income households have been generally hit harder by inflation, Florian Dorn, a researcher at Ifo told Reuters. Workers in Germany, Europe’s biggest economy, lost around 4.1% of their purchase power in 2022, research by the WSI institute published in July showed.
Although higher energy import prices initially drove inflation in Europe and Germany, companies were also putting up prices beyond their cost inflation, WSI analysis showed. Companies’ profit inflation rose by 7% in 2022 compared to an only 3.3% rise in labour costs.
Living standards are expected to continue to decline as due to social programs losing out to industry aid and/or military spending. Economics minister Habeck says he wants a subsidized electricity price for industry of 6 eurocents per kilowatt-hour. Germans are currently paying about 40 eurocents for their retail electricity supply. Industries in the US or France enjoy prices as low as 4 eurocents.
The problem is Habeck’s plan is opposed by members in his own Green party who don’t want to subsidize heavy industry that uses gas and oil, and deficit hawks don’t want to spend the money. The higher energy prices for now are falling most heavily on smaller firms that cannot absorb the cost. From Deutsche Welle:
The Deputy Chairman of the powerful metalworkers’ union IG Metall, Jürgen Kerner, added that medium-sized, family-owned companies currently have “no prospects of continuing their business.” There’s great uncertainty, he said, as “aluminum smelters cease production, and foundries and forges are losing orders.” IG Metall’s local branches were increasingly reporting insolvency administrators in the companies, planning “layoffs, insolvencies, and business closures.”
The fact is Germany just doesn’t have enough money to ramp up military spending and subsidize energy costs for industry. As a result, it is becoming more like the US – more financialization, more outsourcing, and more military spending.
Foreign policy-wise, the bumbling Scholz, the former trampoline athlete foreign minister, and the children’s book author economics minister running the show have volunteered all of Germany to lead the ongoing charge against Russia in Europe while Washington focuses on China. Simultaneously, Germany must scale back remaining economic ties with China and ramp up military spending against Russia. Like a gambler on a losing streak, the German elite is unwilling to walk away now. From German Foreign Policy:
The German government seeks to adapt and upgrade the German army for possible war with Russia, according to the New Defense Policy Guidelines presented by German Defense Minister Boris Pistorius last week. Berlin remains committed to increasing its military strength and declares “deterrence” of Moscow as the Bundeswehr’s core task. In the guidelines, there is no mention of possible negotiated solutions and de-escalation. Ignoring NATO’s war of aggression against Yugoslavia in 1999, the authors claim that Russia brought war back to Europe in early 2022. Germany must therefore become “combat-ready” as quickly as possible. The two focal points of the document – the expansion of national military capabilities and the orientation of the Bundeswehr towards war with Russia – do not represent a “Zeitenwende” in German military policy. They have been continuously promoted by German governments for years, throughout several legislative terms. On the basis of new military clout, Berlin is seeking a leading military role in Europe and a “creative power” within NATO.
In a certain light, you can see the rationale for keeping up the New Cold War with Russia. If not, people are going to start asking a lot more questions about just what Berlin gets out of the relationship with the US, how Scholz and company were so derelict in duty, what exactly happened with the Nord Streams, why their living standards have plummeted, what about the diverging fortunes of Germany and Russia (as Gilbert Doctorow writes, “Russia is transitioning to gas heating in the countryside – Europe is moving to log fireplaces in the city”).
If elections were held today in Germany it looks like they would be dominated by the center-right CDU and the AfD:
Würde Sonntag Europawahl sein, sähe es wie folgt aus:
Union: 31 %
AfD: 25 %
Grüne: 12 %
SPD: 10 %
FDP: 3 %
(BSW 7 %)
— Peter Jelinek (@Peter_Jelinek) December 8, 2023
Readers, please correct me if I’mm wrong, but wouldn’t a CDU government be largely a continuation of current policies.
It remains to be seen for how long the German elite can escape the effects of the widespread anger among the citizenry and rising nationalists who want to put Germany first, but their conception of Germany often excludes the country’s roughly 19 million people who either immigrated to the country since 1950 or are the children of immigrants. The AfD is especially wary of Muslims that now make up nearly seven percent of the German population.
Another factor that contributes to Germany’s worsening predicament is just plain inertia, as Aurelian described in a recent comment here:
…After WW2, Germany was understandably a little unpopular with its immediate neighbours. The Adenauer generation recognised that the only way back to international respectability was through membership of multilateral institutions and through, effectively, giving much of its sovereignty away to others, such that it was not seen as a threat. Germany was therefore a member of the European Coal and Steel Community from 1951, and of the EEC from the start in 1958. German remilitarisation, grudgingly accepted by other European states, actually turned out to be a better solution than the original idea of a Western Treaty Organisation as a permanent military alliance against Germany. All German troops were put under NATO control, and the Bundeswehr was not allowed to have its own operational HQ, and so could not conduct national missions. This, together with the subordinate relationship to France under the 1962 Elysée Treaty, was a kind of voluntary masochism, which helped to deflect very real fears of German revanchism. (Those fears, incidentally, are a large part of the explanation of why European states were keen to continue with NATO after the end of the Cold War). This subservience produced several generations of German diplomats and military officers (and I met many of them) whose greatest concern was to be seen as “good Europeans” and “good members of NATO.” Whilst they didn’t agree with the US on everything, a German government which followed the US lead could never be criticised.
It’s changed a lot since then, of course, with the change in the balance of the Franco-German relationship and the complete transformation of the European security scene. It’s been observed especially that, on the rebound after decades of good behaviour, the Germans don’t have the diplomatic reflexes they really need, and risk getting themselves into an incredible mess. The existential problem of what Germany even is, never solved in its history, means that for many in positions of authority, the best and easiest solution is to follow the US, because that worked well in the past.
But when that habit of following the US is eventually upset, it could come quickly and unleash unforeseen consequences. For how long will Germany (and Europe) continue to become more authoritarian in effort to preserve this inertia?
All it might take would be a German government that starts pursuing policies that are in the interest of the majority of Germans, and Europe’s role as the frontline in the New Cold War could collapse like a house of cards.