The War Racket in Germany 

Note: A previous version of this post mistakenly labeled Blackrock as a private equity company. It is an American multinational investment company. 

“We must be ready for war by 2029,” German Defense Minister Boris Pistorius declared last week before the Bundestag. “We must provide deterrence to prevent things coming to the worst.”

If the threat from Russia was truly so pressing, you would think preparations wouldn’t take another five years to complete. After all, it was more than two years ago that Chancellor Olaf Scholz delivered his Zeitenwende speech pledging to do just what Pistorius clamors for week after week.

In some ways, Berlin has made progress – just not in any way that actually helps to fight a war.

Germany is spending 51.8 billion euros on defense this year from its regular budget. Berlin is also drawing from a 100 billion euro emergency fund to push the total spending above the two percent of GDP target. That is the plan going forward in order to meet the two percent target and should mean that Berlin is able to hit the much-discussed target through 2028.

Despite all the endless warnings over the threat of Russian hordes rolling across Europe to the English channel, the fact is that this additional spending makes little difference in Germany’s overall military readiness to take on the Russians. What the additional money does do, however, is help further enrich a lot of (primarily American) financial companies.

The Rheinmetall Swindle

At the end of May, one of Germany’s top football clubs, Borussia Dortmund, announced a multiyear sponsorship deal with weapons manufacturer Rheinmetall – the first time a German defense company has sponsored a Bundesliga team. Europe’s largest ammunition manufacturer will now have its logo emblazoned on stadium advertising boards and in the background at press conferences.

“Security and defense are fundamental cornerstones of our democracy,” said club chair Hans-Joachim Watzke. It’s another small step in the effort to get Germans to embrace remilitarization – or at least spending money for the appearance of it. The news media constantly churns out fear pieces pushing for escalation in Ukraine and more money for defense. And as if the Greens needed more convincing, even the environment is apparently at stake.

The chief executive of tank parts maker Renk, Susanne Wiegand, said in March that German weapons companies were essential to society, “otherwise nobody will take care of windmills”.

No doubt. They’re also taking good care of their shareholders.

Rheinmetall’s share price is up more than 500 percent since the 2022 start of the war in Ukraine. That’s great news for the biggest owners of Rheinmetall, which include:

Many of these same financial outfits also benefit from Germany’s 380 contracts with US defense companies worth approximately $25 billion. Capital Group, for example, is the major owner (17 percent) of BAE Systems. But back to Rheinmetall where the future is bright.

The company’s 2024 forecast envisages an operating margin of around 14-15 percent and the topping of 10 billion euros in sales for the first time ever.

The Zeitenwende has surely been a turn, just not so much in the way it was marketed. It was supposed to mark the dawn of a new era in Europe and Germany in particular, which would undergo a massive overhaul of its armed forces in order to “deter” Russia. In reality, though, it signified Germany’s complete capitulation to US interests.

That promise is being kept.

On energy “diversification,” Berlin is now wholly reliant on buying expensive US gas as more than more than 80 percent of Germany’s LNG came from the US last year.

And while Rheinmetall specifically points to the Zeitenwende as a turning point for the company and its American owners, it has done next to nothing for Germany’s military, which largely remains a joke, especially compared to the Russians.

According to a recent report from the Bundestag’s parliamentary commissioner, German soldiers are often short of basic equipment like armored vests, winter jackets and helmets. The report reads: “Not a single field visit or conversation with servicewomen and men goes by without shortages or deficiencies being reported to me.”

Meanwhile the constant fear mongering over the Russian bear is profitable in areas where it really matters to monied interests. Reports are that Rheinmetall 155-mm shells go for anywhere from $4,000 to $8,000 a pop.

In contrast, Russia’s production costs for its 152mm shells are $600.

That gap (along with soldiers potentially freezing without winter coats) is going to be difficult to overcome – that is, of course, if deterrence and winning a war is the goal instead of simply redirecting more public money away from social programs and into weapons companies.

Blogger Ian Welsh recently had a brief post that succinctly summed up this conundrum. Titled You Can’t Run Industrial Policy OR A War Economy Under Neoliberalism it’s more focused on competition with China, but the point applies equally to Russia:

We can’t compete with this. It’s impossible. Not because it’s impossible in theory, but because we don’t believe in doing such things and to pursue such policies we would have to hurt rich people, a lot, and they own Congress and the Presidency and our politicians in other countries.

China has repeatedly shown that if a policy is good for the majority, but hurts the rich, they’ll do it anyway. We’ve repeatedly shown the opposite.

And you can’t run industrial policy or a war economy if you want fake profits based on not actually producing good new goods at cheap prices. It can’t be done. If an entire society is based around “give me money for the least possible effort”, you’re cooked.

For once neoliberalism might provide some good news, though. This reality that Welsh describes likely means that any talk of Germany becoming directly involved in the war against Russia is not serious. Hopefully.

‘To Be America’s Friend Is Fatal’

This is the deal you get as a US ally: let the Americans in to feast, and some of the wealthy in the home country get richer as a reward for selling out their countrymen, but for the vast majority quality of life deteriorates as the country gets strip-mined. This is coming to pass in Germany where wealth inequality is quickly widening:

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.

And without a major shift in government policy, the share of the richest ten percent of Germans in total wealth is expected to rise from just over 60 percent to around 67 percent by 2027.

As the country continues to deindustrialization, and living standards decline, the finance crowd is slowly increasing its presence across the German economy.

As the above shows, Blackrock, Vanguard, and Capital Group are now the three biggest players in the German economy. The three American financial services behemoths manage a combined $20 trillion worth of assets across the world.

The leader of Germany’s Christian Democrats (CDU) and as of now, the odds-on favorite to be the next chancellor of Germany, Friedrich Merz, is a former Blackrock executive.

Whether he ascends to the chancellorship or not is more a matter of optics since the embrace of economy’s financialization is widely accepted by all parties now, and as finance expert Werner Rügemer says with regards to the CDU:

“The power of capital in CDU governments was always more or less hidden, and it never aspired to direct representation in the top political positions,” said Rügemer. “But that’s different with Merz. The fact that the most highly paid lobbyist of BlackRock is not just going to the chancellery and saying, ‘Please don’t make such tough laws,’ but that he himself wants to be CDU leader and chancellor — that’s the difference.”

So whether it’s Merz or someone else, should the CDU maintain its top spot in the polls, it could be an ever bigger boon for finance.

Elsewhere private equity is increasingly coming for the Mittelstand. According to Private Equity International, medium-sized companies are increasingly being driven into the arms of private equity by a lack of funding from other sources (oddly enough, Commerzbank, which plays a key role in financing the nation’s small and medium-sized businesses, is increasingly steered by US private equity firm Cerberus, which forced out the previous CEO last year for cutting costs too slowly), as well as generational change with “a younger, more sophisticated and energetic group of management teams…hungry to work with private equity.”

Legislation coming out of Berlin and Brussels also helps, according to Jin-Hyuk Jang from Debevoise & Plimpton, a New York City law firm that specializes in private equity:

This perception shift has been supported by legislative change at both a national and EU level, according to Jang. “Politicians recognise the need for alternative financing. They understand that it can’t all come from the banks, particularly given the regulatory restrictions they face. Legislation does tend to focus on fostering the start-ups and growth markets. But there are positive knock-on effects for buyouts too, such as discussions around VAT exemption on management fees in Germany.”

According to a Reuters story last year, US 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.”

The finance-centric reorganization of Germany’s economy will likely have the same result it did in the US where the manufacturing was sold off to Asia – primarily China. Is it any wonder that the hollowing out of the US and its “allies” means that US “enemies” keep getting stronger?

Short Term Profits, Long Term Fallout.

Again the good news: Germany fulfilling its role as privileged political and military subcontractor of the US is not a sign that the West believes for a second all its warnings about Putin’s desires to conquer Europe.

On the other hand, the Western elites’ ineptitude is great, and there could, as always, be (unforeseen) consequences to their enrichment scheme. In order to capitalize off of the “Russian threat”, the fear mongering has been turned up to an 11 for years now, and these forces once unleashed could be difficult to control.

The defense minister, Pistorius who constantly pounds the fake war drums is the most popular member of the government. And despite it eating away at social spending, Germans want more defense spending. As Wolfgang Streeck, emeritus director of the Max Planck Institute for the Study of Societies in Cologne, writes: 

The spirits invoked to bring about Zeitenwende may not easily go away when commanded to do so…There may also be specifically German factors at work. Within the Green generation, nationalism as a source of social integration has effectively been replaced, more than anywhere else in Europe, by a pervasive Manicheanism that divides the world into two camps, good and evil. There is an urgent need to understand this shift in the German Zeitgeist, which seems to have evolved gradually and largely unnoticed. It implies that, unlike in a world of nations, there can be no peace based on a balance of power and interests, only a relentless struggle against the forces of evil, which are essentially the same internationally and domestically. Clearly this bears some resemblance to an American conception of politics, shared by neocons and Democratic idealists alike, and embodied by someone like Hillary Clinton. The syndrome seems to be particularly strong on the left side of the German political spectrum, which would in the past have been the natural base of an anti-war and pro-peace, or at least pro-ceasefire, movement. Now, however, not even Die Linke would endorse the peace demonstration organized on 25 February by Sahra Wagenknecht and Alice Schwarzer, Germany’s feminist icon, at the risk of breaking the party apart and ceasing to be a political force.

Even if the creeping militarism in Germany isn’t matched by actual military capabilities, there exists the possibility that some actually believe the hype. It can be difficult to separate between profitable fear mongering and dangerous overconfidence – both of which are not in short supply across the West these days. What to make of, for example, the recent piece in Foreign Affairs arguing again that the US and its vassals can fight and win simultaneous wars in Asia, Europe, and the Middle East? Does the author really believe this or are they simply providing a service for their benefactors?

At what point does the line begin to blur?

The comparisons to Hitler’s Germany can be overdone, but one obvious similarity is that some of the key Third Reich industrialists then weren’t necessarily big believers in Nazi ideology; they were believers in making money. Similarly today, the financial outfits cashing in on the fear of Russia might not believe in any of the Russian threat, but the forces unleashed by constant Russophobia might spin out of control – if they haven’t already. Is it possible that the financial calculations of the major Germany stakeholders show that a widening of the conflict would be more profitable even is there is a sizable risk that those calculations err in their prediction of the Russian response?

And if things go south, surely the German elites, flush with cash from their role in the racket, can just relocate to a beach in Florida or join a US-based private equity board in NYC.

Some in Germany certainly seem ready to play their part:

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57 comments

  1. Anti-Fake-Semite

    The last time I was in Germany, for a Gaza protest, I was shocked by a number of things: the pro-genocide propaganda, the censorship, the
    human faeces in the streets of major cities, the delipadation and poverty of the Ruhr area, trains cancelled and late, mail gone missing. Russia is the last thing Germans need to worry about.

    Reply
    1. MD in Berlin

      Yes, I can only confirm the clampdown on speech in the public sphere concerning both Ukraine and Gaza. Truly shocking. One shouldn’t conclude that all Germans are signed up for militarisation, though. But there is no proper pole/organisation/structure around which opposition could coalesce. That may be changing. The BSW (Wagenknecht) unequivocally opposes German involvement in Ukraine (watch for their result in the European election this evening). And there is talk about a national demonstration on 3 October (national holiday).
      I think there is also a process of alienation going on in the background, which is not very visible but significant nonetheless. On both Ukraine and Gaza a significant proportion of the population (I’d estimate 1/4 to 1/3 probably) has been told that their opinion is not just wrong but impermissible, unspeakable, beyond the pale. (The same would also apply to Covid). The groups overlap but are not identical. My hunch is that this is gnawing away at the bonds that tie citizens to the state (or the system).

      Reply
        1. MD in Berlin

          Don’t think so really, hard to tell as what opposition there is is fairly hidden. On Ukraine definitely an east/west division. Gaza gets tangled up with Germany history, so you have essentially the same establishment knee-jerk support for Israel as elsewhere in the West, but potentiated by the “German guilt” complex. I’d say unequivocal support for Israel is strongest in the PMC and is the orthodoxy throughout the political class. Radiates out from there. Put another way, highly educated, middle class, middle aged.
          The rare demonstrations against participation in the Ukraine war have been either very small (largely Trotskyist) or skewed older (ordinary eastern Germans plus the remnants of the old peace movement plus visible contingents of people who got together around opposition to Covid measures; the latter surprised me and I took a long hard look before coming to that conclusion).
          Gaza demonstrations have skewed younger. Many Arab and other migrants. EU immigrants unusually visible (esp. Irish). The old peace movement again. Jewish activists are prominent in leadership, along with Palestinian activists and a contingent of (other) Germans who came essentially through identity politics. The latter another surprising observation. Racism activists and a particular segment of the feminist milieu.

          Reply
      1. CA

        MD:

        I can only confirm the clampdown on speech…

        [ A series of fine and helpful comments. I am grateful. ]

        Reply
  2. John

    What does private equity do when there is no more low hanging fruit to be picked, squeezed, pressed and the husks cast aside? But, there will always be Soylent Green.

    Reply
    1. midtownwageslave

      PE is waiting in the wings to roll up all the döner shops in Munich. No more cheap delicious kebaps, only empty wallets and broken dreams.

      Reply
    2. ian

      Reminds me of the fictional Omni Consumer Products in the movie Robocop – “Good business is where you find it”.

      Reply
  3. Ignacio

    I have had, for once, the experience of working for a company that was basically owned by BlackRock. Everything was sub-contracted and I was one of those sub-contractors. In my experience their business was mostly about working on subsidized schemes (for building refurbishing and renewable energy) and when the business of working in subsidized programs ended subcontracting extended to everything. These companies do not create know-how that can be used to extend the activity beyond subsidies. They only focus on cash flows and change subcontractors according to fill these necessities. You cannot trust these companies to build anything durable. They do not think beyond weekly gains.

    Reply
  4. ciroc

    The military under neoliberalism is characterized by soldiers as low-wage service workers and expensive, low-quality weapons for the benefit of the MIC. It is the exact opposite of the Russian and Chinese armies.

    Reply
  5. K.M.

    What german politicians say can not be taken seriously.

    Let us not forget that The Treaty on the Final Settlement with Respect to Germany was signed in Moscow in 1990, and that as per today the NATO, while sending all kinds of weapons to Ukraine , can not deploy one bullet in East Germany without russian authorization.

    Germany as a unified nation needs a minimum of corodination between Russia and the USA to work properly. Otherwise, it is paralyzed as a nation and all what “”its politicians”” would say does not matter at all.

    I am even inclined to think that the real objective of the USA from its project Ukraine was to sacrifice Ukrainians to wage an attrition war against Russia that would help to force russians to renegotiate the The Treaty on the Final Settlement with Respect to Germany.

    Like the case with all the chaos the US has been instigating all over the world during the last twenty years, their objective would be materialized but once again that would not work out the way the US strategists were hoping.

    Reply
    1. Revenant

      This treaty merits detailed discussion. Its terms are news to me!

      One immediate argument against this being the real goal, playing Devil’s advocate, is that it seems to be a sledgehammer to crack a nut: NATO creates existential threat to Russia on Russian border in order to… force Russia to accept more distant existential threat? This only makes sense if the purpose of a reunified Germany free from Russian oversight is not more war on Russia. But then war on whom? The EU? Maybe – certainly the EU is being looted to keep the domestic US economic order aloft.

      Perhaps what you suggest is not the primary goal – the primary goal of war on Russia is war on Russia – but a consolation prize: if Ukraine has to negotiate peace, the concessions will all be Ukrainian and the benefits will all be American. A free hand in Europe, west of the cordon sanitaire; guarantees that Russia will not extend energy supplies or military security guarantees in the EU etc. (Bad Hungary! Bad Serbia!).

      I don’t know if Russia would accept such a thing – an Alice-through-the-Looking-Glass Iron Curtain, erected by the West – but letting the US feast on the immense riches of Europe looks easier for Russia to agree than, say, withdrawing from contesting the Global South in South America, the Middle East and Africa. If it came with arms control in Europe – which will be sold in the West as the US imposes missile limitations on Russia to secure peace in Ukraine etc, ignoring the benefit to Russia – then who knows, there may be back channel discussions of precisely this…? The posturing by both sides about their missile threat and nuclear arsenal may be intended to present a treaty to the public as a relief.

      China cannot want Russia to sign a non-aggression pact in Europe – ideally any war would have multiple fronts – but if the treaty secured the western flank of Eurasia and left Russia’s prodigious war economy free to supply China, perhaps it would suit China too….

      I would like to know what was in the Russian proposal for a new European security architecture. I suspect whatever is signed in the wreckage of the Ukraine will be billed differently but will amount to much the same.

      Reply
      1. K.M.

        With Russia somehow or other still present in East Germany and with Kaliningrad as a part of Russia the expansion of NATO to Eastern Europe does not make sense for me. The issue of the quarrel between Russia and the USA is not the expansion in itself, otherwise Russia would have acted against Nato expansion much earlier.

        The war in Ukraine is not waged with the objective to defeat Russia militarily from the US perspective or to oppose the NATO expansion from Russian perspective .

        Let us not forget that this war in the first place was just a ramification of the chaos the US created in the middle East.

        Hence my question about the real objective of this war. Of course it is not necessarily a war with one unique objective but what I mean is the hope to change the status quo in Europe in favor of either party, and renegotiate the arrangements that led to the end of the Cold War may be a reasonable objective of the war for both parties .

        Reply
        1. MD in Berlin

          Russia has had no military presence in Gernany since 1990.
          Russia was in no state to resist the 1999 and 2004 NATO expansions.
          The strength to resist militarily was build up between ca. 2008 and 2021 (via Donbas/Crimea 2014)

          Reply
        2. Tom Pfotzer

          K.M:

          Please elaborate on this point:

          Let us not forget that this war in the first place was just a ramification of the chaos the US created in the middle East.

          From my reading, the Ukraine war was a gradual and direct result of the 2014 color revolution in Ukraine, sponsored by the CIA and the State Dept of U.S., which resulted in the installation of virulently anti-Russian policies manifest by:

          a. repression of Russian language,
          b. active terrorism .vs. Russian-oriented portions of Ukraine (burn people alive) and
          c. the preparation by Ukrainian gov’t for active ethnic cleansing of the Russia-oriented portions of Ukraine, and then
          d. the statement by Zelensky that nuclear weapons were going to be installed by Ukrainian gov’t and pointed at Russia

          That’s when Russia invaded.

          I don’t see any linkage to mid-Eastern chaos at the moment. Please explain that.

          Your other points are very interesting – esp. the explanation of The Treaty on the Final Settlement with Respect to Germany.

          ==== To Conor: great piece of work … again!

          Reply
          1. K.M.

            The 2014 color revolution in Ukraine was a way to make pressure on Russia to obtain concession regarding the war in Syria.

            In April -May 2013 there was a turning point in the war in Syria with the battle of AlQusayr where Hizbollah defeated the US suppored armed groups in Syria. It was a stratrgic victory for Russia and it its allies in Syria because it helped to secure Damascus, the border between Syria and Lebanon and the access to the coast including the russian base in Tartus.

            It was the battle that decided the outcome of the whole so called Arab spring and its wars, and led to the political division that we are still witnessing in the US.

            It was in that context that the US used Ukraine to distract russians and make pressure on them. The russians were very well prepared and replied with annexing Crimea and everything started from there.

            Reply
            1. Joker

              The 2014 colour revolution in Ukraine was not the first colour revolution in Ukraine. It did not come out of the blue as a knee-jerk reaction to some external event, but was a result of activities going on for decades.

              This does not mean that events in Syria are not connected, because they are (being frontlines in the same global war), but correlation does not mean causation.

              Reply
              1. K.M.

                The USA at that time was very busy with its Arab Spring. The colour revolution in Ukraine was meant to send a message to Russia for its role in the war in Syria. It was the russian reaction by annexing Crimea that shaped the following events in Ukraine.

                Russia could have dealt with the events differently as it had done before. But it was clear that the Russian leadership was just waiting for a US provocation in Ukraine to take the US off guard and annex Crimea.

                Reply
                1. Joker

                  The USA is getting busy with many things at the same time (being a superpower*). Colour revolutions are not organized for “messaging reasons”, but in order to take control of countries. This should go without saying. Repated colour revolution attempts were bound to happen in Ukraine, regardless of the situation on other fronts.

                  Also, this is not a game of checkers. Trying to present stuff as a sequence of moves, is the ol’ square-peg-round-hole exercise.

                  * https://www.nakedcapitalism.com/2024/06/israel-boosterism-keeps-israel-bonds-afloat-even-as-some-top-global-investors-exit.html#comment-4049807

                  Reply
                  1. K.M.

                    Everything depends on the context of the country targeted.

                    Russia can undo any US attempt to destabliize the countries that matters to Russian interests as it did in Kazakhstan in 2022, and Belarus and Kyrgyzstan in 2020, and Syria of course.

                    In Ukraine, Russia acted differently and seized the opportunity of the colour revolution to settle the issue of Crimea, taking the US by surprise.

                    As far as the US is concerned , the colour revolution in Ukraine was aiming at distracting Russia attention from the war in Syria and , why not, using Ukraine as bargaining chip for any settlement in Syria. The USA was absolutely in the dark about the russian plans regarding Crimea.

                    Reply
                    1. Joker

                      As far as the US is concerned, Ukraine was/is a long term project that has been going on for a while (as I already wrote), and not a bargaining chip. Also, USA does not bargain but uses all the chips for upping the ante.

                      You write “the colour revolution in Ukraine” like there was only one. It seems like lot of context that “everything depends on” is missing here. SInce explaining it would take way too much time and space, I won’t go beyond saying that colouring of Ukraine has been a thing long before the battle of AlQusayr.

    2. MD in Berlin

      AFAIK the provision on NATO not expanding eastwards was not in the treaty itself, but was agreed verbally between the leaders. The archive record documenting Baker’s statement to this effect has been published.
      The treaty does include a provision that foreign military forces will not be stationed or deployed in the former East Germany.

      Reply
      1. K.M.

        As in evey treaty there are certainly secret clauses that would never be known to the public, but we know that the russian army is in Kaliningrad and that the Nato is not allowed to deploy any weapon in East Germany.

        With such arrangements Russia no longer needs to have any soldier in East Germany, and the Nato expansion does not make any sense, militarily speaking, and I think this is why there was only “verbal agreement ” for Nato not expanding eastwards. But let’s keep in mind that “verbal agreement” does mean anything in International relations.

        Surely each party had his own calculations and thought that he had time on his side.

        Reply
      2. Fritz

        “A man is known by the company he keeps”
        ― Aesop
        The NATO treaty is an imperial document, of the U.S. empire, after 1991 its continuation is based only on lies.

        Its Article 13 https://archive.is/ijR3h states how a member-nation may quit, it places the U.S. Government in charge of this process. If any member does quit, it will be interpreted as constituting a hostile act. It fails to include any provision by which the charter can be amended or changed in any manner. No charter or constitution that fails to include a provision by which it may be amended can reasonably be acceptable to a democracy. The United States of Atrocities (USA) is the world’s bully, and it has demonstrated repeatedly it can not be trusted.

        Reply
  6. JohnnyGL

    When Michael Hudson says the Ukraine war is a US project to colonize Europe, and loot it, I thought it was somewhat true, but exaggerated.

    Conor shows me that is EXACTLY what’s underway.

    Reply
  7. CBBB

    As I have said many times Germany’s fundamental weakness is its export-oriented economic model HIGHLY reliant on foreign (increasingly US) demand to keep their population employed. Germany’s massive wealth-inequality is a by-product of this model and not some nefarious plot by US private equity/capitalists. German capitalism is heavily dominated by export-oriented manufacturing businesses, the owners of these businesses exert immense influence on government economic policy. The social contract in Germany has essentially been:

    Workers accept highly restrained wage growth and high income and consumption taxes in exchange for very stable, for many essentially lifetime employment with a single employer and a fairly robust social system. Take home pay for the vast majority of workers will be just enough to cover housing costs and food and some very minor luxuries and a little vacation to somewhere cheap once a year but absolutely not enough to acquire assets or do serious consumption spending.
    This allows the export firms to keep unit labour costs low and continue to compete internationally, workers get stable employment but can never afford to acquire assets.

    This strategy fundamentally relies on a beneign international situation and is therefore risky. But the wealth inequality is baked into how this whole thing works.

    Reply
    1. chuck roast

      Completely in line with the Hartz Reforms which made German workers de jure second class citizens.

      Reply
  8. divadab

    I guess it makes sense that Germany has been colonized by parasitic US financialization of its economy – there is still an army of occupation in the country, after all. I wonder how long the German people will tolerate this destruction of their country. Why do they tolerate such a weak and treasonous government like Scholz’s, who lets Biden publicly insult him while meekly accepting the insults? It’s hard to believe that this nation was once the colossus that challenged the combined might of the USA, USSR, and UK. NOw it’s a weak sister, a pathetic echo of its glorious past.

    Reply
    1. CBBB

      Germany is much more of a parasite, they run their economy based on beggar-thy-neighbour policies; suppressing wages and consumption at home, keeping wealth creation for the top only.

      Reply
  9. Pearl Rangefinder

    Excellent article Conor, thank you.

    I’ve been thinking about these same issues (albeit over the combined Western world) for some time now, and at first I thought the same, that mostly what we are seeing is a giant looting operation perpetrated on us by ‘our’ ‘elites’, but I really do worry that our situation is the much more serious one of our leaders *really are this fu***** incompetent*.

    Consider that our leadership class is one that ‘leads’ via spreadsheets and graphs from a cozy office someplace. Their connection to reality is tenuous at best. They are measuring effectiveness via spending. I’ve been guilty of that in the past as well, I think we all have been at one point or another – of doing things like looking at charts and graphs comparing military budgets around the world, and coming to the erroneous conclusions that “golly gee, look how big our budgets are! Our militaries are absolute powerhouses!”. When the reality might be anything but.

    For people like Pistorius or Scholz (or whatever bankster takes his place), signing that $100 billion cheque means they ‘solved’ the problem. They’ll then take a look at Russia or China’s military budget and graph it against the USA’s, and smile smugly thinking “look how badly we’re beating them! HAHAHA”. Then these morons will get us into a shooting war that we will lose, badly, and then who knows what happens after.

    Reply
  10. The Rev Kev

    Many thanks for this extensive coverage. The good news is that even in ten years from now, the Bundeswehr will be in no shape to fight the Russian bear so probably won’t be. The bad news is that the Russian boogeyman is being used to re-militarize the country while holding a fire sale of all its assets and businesses in Germany itself. They seem determined to turn Germany into a neoliberal hellhole and maybe use their remaining power & influence to help crack down on the smaller countries of the EU. Things are pretty dire indeed when you wonder if there is any salvation to be had from a far right party to bring back a bit of sanity.

    Reply
  11. David in Friday Harbor

    This is an excellent presentation but two pieces of evidence stand-out to me as illustrating how American Inverted Totalitarianism is designed to facilitate looting by a tiny self-selected elite.

    The first bit of evidence is the shocking graphic showing how the once-great German landesbanks` have ceded control of the German economy to American private equity vampires.

    The second is the passage stating that, “Reports are that Rheinmetall 155-mm shells go for anywhere from $4,000 to $8,000 a pop. In contrast, Russia’s production costs for its 152mm shells are $600.”

    I keep beating on my drum that this system, invented by Lewis Powell and Ronald Reagan and imposed by Slick Willie Clinton, Newt, and Dick Armey, took (depending on the source) roughly 40 American billionaires in 1992 and raised that number to roughly 600 by 2019 and around 800 today. Things are going swimmingly for these neo-oligarchs and their total control of policy in the NATO states.

    NATO is a key part of Inverted Totalitarianism, because this system functions best under “war” conditions, where blue-sky no-bid contracts gifted to the Military-Industrial Complex hide massive over-charging of the public fisc behind Orwellian faux-patriotism against Muslim, Russian, and Chinese “monsters” who must not be allowed to “win.”

    Everything is going according to plan…

    Reply
  12. pjay

    Thank you for this very relevant discussion Connor. Perhaps the most disturbing passage in your excellent summary is toward the end:

    “The comparisons to Hitler’s Germany can be overdone, but one obvious similarity is that some of the key Third Reich industrialists then weren’t necessarily big believers in Nazi ideology; they were believers in making money. Similarly today, the private equity goons cashing in on the fear of Russia might not believe in any of the Russian threat, but the forces unleashed by constant Russophobia might spin out of control – if they haven’t already. Is it possible that the financial calculations of the major Germany stakeholders show that a widening of the conflict would be more profitable even is there is a sizable risk that those calculations err in their prediction of the Russian response?”

    What I fear is that the cynical material incentives of the most powerful economic interests will continue to converge with the ideological obsessions of the neocons embedded throughout NATO and the national security establishment to the point of no return. And the pattern you describe for Germany seems to have followed throughout the West, while countervailing forces that used to exist have all but disappeared. Very disturbing indeed.

    Reply
  13. Susan the other

    We can’t afford to adopt the EU but we also can’t afford to allow the EU to join the Eurasian economic community. Clearly NATO is a US construct to straddle this dilemma. Add to NATO the new RIMPAC for the Pacific and we have self isolated. Austin recently did a weird PSA saying (claiming) “We want Western Africa.” I wonder what Western Africa is thinking about that one. The truth emerges that we are trying to maintain the same old MIC economy, wasteful, exploitative, dangerous and murderous as it is, to secure our economy regardless of the fact that we can no longer compete without excessive returns. Which do require that we control sufficient oil/gas to fund it all – and which returns are basically squandered. It’s godawful because the first casualty is always the environment. It requires perpetual devastation. The worst part is that it is absurd. It doesn’t have to be this way at all.

    Reply
  14. DG

    The Euro-trash running Germany are the most obvious group of traitors in the world, and the Germans are thrilled about it!

    Reply
    1. MD in Berlin

      Hmm, not sure “the Germans” are thrilled. Some of them are, and they get a lot of coverage. In the European Parliament election today the parties that form the current coalition (SPD, FDP. Greens) got just 31 percent (and some of that is more voting against the right than for the party). The CDU/CSU got 30 percent. So 40 percent voted for parties that have never been in national government. I’d say the mood in many parts of society is disaffection and resignation, with underlying anger in places.

      Reply
      1. DG

        Where is the anger for the destruction of NS2 a critical infrastructure for the German economy? How can Germans accept that without a whisper of protest?

        Reply
  15. renard

    I wonder if the NSA has all of Scholz’ communications regarding Cum-Ex, Warburg, Wirecard etc. Of course that wouldn’t serve as an excuse of his spinelessness, au contraire.

    As of Feb 7th 2022, standing next to Biden’s announcement to ‘bring an end to Nord Stream’ with that stupid grin on his face, I always see him in a sailor’s suit, courtesy of Donald Duck.

    Reply
  16. Fritz

    “Security and defense are fundamental cornerstones of our democracy,” said club chair Hans-Joachim Watzke.

    “Elections cannot be allowed to change economic policy”.
    — Wolfgang Schauble, German Finance Minister February 11, 2015

    Reply
  17. Cervantes

    There’s an important disconnect here between the conversation about private equity and the conversation about BlackRock and Vanguard (along with other shareholders of Rheinmetall). BlackRock is not a private equity company. Let’s take another round. BlackRock is not a private equity company. BlackRock (along with Vanguard) is an asset manager that primarily invests in publicly traded equities (and also bonds) on behalf of investors. BlackRock is the opposite of a private equity behemoth. BlackRock’s companies are publicly traded and subject to the minimal transparency and accessibility rules imposed by securities regulation. Many of the banks listed on Rheinmetall’s shareholder list are probably also listed by virtue of holding securities on behalf of other investors.

    Blackstone, not the same company as BlackRock, is a private equity company; so are companies like Apollo and KKR. Private equity companies take a lot of criticism for rolling up competitors in small markets to create market power and disregarding the interests of non-owner stakeholders (especially employees), much more than publicly traded companies (which have their own issues).

    If there’s a disconnect like this about the article, how can I trust the author’s commentary on anything else?

    Reply
    1. Yves Smith

      I regularly have to scold readers about effectively conflating BlackRock and Blackstone, and further not understanding that investors in public companies have effectively no influence unless they acquire a big block and make trouble, which indexers like BlackRock never do (plus they’d lose hugely lucrative 401(k) business).

      However, I do not see how your observation at all invalidates what the article says. Conor merely claims that the companies listed as shareholders benefitted. He failed to say that BlackRock et al are fund managers and the ultimate beneficiaries are the limited partners in these funds. But the sort of “ownership” table he presents is used pervasively in the financial press and fund management world, so this sort of simplification that Conor made is pervasive.

      And his statement is accurate even narrowly. An increase in stock price helps the asset manager by increasing his AUM and hence fees. So BlackRock et al did benefit from the big share price increase.

      His other point was that a former BlackRock exec is very influential in German politics. Do you contest that?

      Reply
  18. hk

    Am I the only person weirded out by the fact that possible next chancellor of Germany is a Fred Merz?

    Reply
    1. AG

      nope

      But THIS will be SPD´s argument, may be even by the Left zombies, for next year´s election. With SPD turning completely right-wing since Lafontaine´s ouster 25 years ago we have no opposition at least concerning a true option for power. So Scholz´s current game plan might be scaring people over a Merz chancellory.

      So for many, voting for Merz next year, this might turn out an election against not in favour of a government.
      Which – for the first time may be – makes the opposition (Merz) even worse than what we already have.

      Either Connor or The Duran pointed out that even purely fictional 30% for a BSW wouldn´t change much. Because we have 80+% uni-party. Considering the fall of the “House of Labour” today this is much worse than the 1950s, when you had protests of 1-2 Mio. people against a WWIII.

      p.s. I would not write off Söder btw yet. He is not known well outside Germany, since he leads the small CDU sister, CSU, limited to the state of Bavaria. But had he not conceded the candidacy to Laschet 2021, elections might have gone differently for the Union parties.

      Reply
      1. The Rev Kev

        The SPD must be getting rattled-

        ‘During a panel discussion on the n-tv broadcaster on Sunday evening, the SPD’s Lars Klingbeil said he expects better results in the federal parliamentary election next year. “I believe that the result of the European election will wake up many people to the fact that the Nazis have become stronger,” he stated. Consequently, voters will “fight for democracy,” Klingbeil predicted. AfD co-chair Alice Weidel asked Klingbeil to clarify who in particular he had branded “Nazis,” to which he replied: “You know that I mean: the AfD and you.” Klingbeil doubled down on the remark after Weidel had asked “Did you just call me and the party Nazis?” – prompting her to respond: “OK. Interesting.” ‘

        https://www.rt.com/news/599069-germany-spd-afd-nazis/

        Not the actions of a confident party that.

        Reply
        1. AG

          Indeed not.
          But then again: This Nazi comparison is not new.

          And one shouldn´t blame ordinary people (i.e. non-politicians, non-VIPs) too much – nobody tells them since media are never reporting what those “non-Nazis” are doing and what they bear responsibility for. And that the “Nazis” are their creatures. (I know this from my own circles. There is considerable naivité among the academic class.)

          As you say, the true background for labeling them as Nazis is the admission that them Nazis are in too many cases in too many regions not Nazis. But the Nazis are unfortunately stating things as they are in thi country. And thats a problem.

          Any difference there to regional CSU, CDU, SPD parts of the Left and BSW? No. They all know what is going on. Why it is that party base and leadership have major infights in SPD and the GREEN party.

          But how are you gonna counter that as SPD if at the same time you want to implement your Atlanticist agenda? Only by creating straw-men.

          p.s. I once met – by accident – Weidel´s former life partner. We didn´t speak about politics. But she struck me as very guarded. And the fact that she is #1 a “she” #2 ethnically from India, just wouldn´t escape me noticing considering the framing of the AfD discussion. As I said months ago, this contradicition on private level re: the persona of Weidel never hit the news. Odd. As well as her once working for Goldman Sachs never was used against her.

          Reply
    2. caucus99percenter

      At this point, if they were still alive, William Frawley or even Vivian Vance could probably do a better job of managing Germany…

      Reply
  19. DG Bear

    This is me:
    “An illuminating article. Thank you.”

    There are two DG’s. I will change to DG Bear.

    Reply
  20. Altandmain

    Without affordable energy, any German military buildup is little more than hot air. No doubt that a small amount of rich people will make a fortune off of this grift.

    It takes an enormous amount of energy to build up military equipment, to have an industrial base that can both supply civilian and military equipment, to train people, and to keep a high standard of living.

    Private equity and other financial games will only make this worse. They know nothing about building a productive economy and everything about rent seeking. Building an industrial base is not something that can be done with a financialized system. They are going to suck up capital where it is needed in industry.

    We can expect the standard of living in Germany to take a further plunge. At some point, assuming no nuclear weapons are used, we can expect to see the German people demand change and the existing regime in Berlin to fall. At that point, a much poorer Germany will have to beg Russia and China for forgiveness.

    Germany and the Nordic nations were once some of the most admired countries on earth. Increasingly, they are going to be looked upon as a cautionary tale and the warning about the risks of being subservient to the US.

    Reply

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