Wolfgang Streeck: the era of German domination is over

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The economic historian discusses the German crisis and the future of Europe

by Non-herd personnel

The technocratic class tends to hero-venerate the German state for its efficiency, pragmatism, post-war modesty and liberalism. Former Chancellor Angela Merkel is remembered as their standard-bearer: strong, rational, possessed of the stern dignity to which every leader should aspire. Book 2021 by John Kampfner How Germans Do Better: Lessons from a Grown Country represented the culmination of this sycophancy.

Few titles have seemed so outdated so quickly. Last week, the German economy entered a total crisis. The price of electricity is soaring, currently at 14 times the average. A recession is predicted, inflation already in full swing. The euro plunged below the dollar for the first time since its conception. And most of the German population is not satisfied with their leadership. What happened to Europe’s modern success story?

Economic historian Professor Wolfgang Streeck has long been a critic of Merkel-mania and never fell for Kampfner’s school of thought. He predicts that a combination of historic political failures and the collapse of the “globalized economy” will lead to the end of German rule in Europe. Germany’s fall from grace will be precipitated and its effects will be widespread. As war in Ukraine rumbles, a strategically independent Europe will give way to dependence on America, and the strength of the European Union will diminish.

The conditions that led to Germany’s astronomical rise – a globalized economy, minimal trade barriers, an artificially low euro – are collapsing. Today, the optimism that once surrounded Germany and its too-big-to-fail state seems increasingly naive.

“There was a very strong belief that the kind of borderless global economy in which Germany thrived would exist forever. In other words, this globalization had reached a stage where it was irreversible,” Streeck says.

Thirty years later, we have learned that the globalized economy, integral to Germany’s success, is in fact very sensitive to “crises, interruptions, fractions”. Evidenced by the shock waves caused by the invasion of Ukraine, rising tensions between the West and China and the disruptions to supply chains caused by the pandemic.

“We hear that we should no longer trade with China. Now you can imagine that a company like Volkswagen, which sells more cars in China than anywhere else in the world, can have a real problem if the Chinese market is closed to German products, the same way the Russian market is now closed for German products.

As hopes for a permanent globalized utopia fade, Germany will face “a huge adjustment”.

First, it will have to endure a harsh winter aggravated by an energy crisis of a magnitude not seen for generations. Germany’s overreliance on Russian gas will make it particularly painful and must be understood as one of the worst examples of short-termism in political history. The Greens’ anti-nuclear bent is encoded in their DNA. And since the 1970s, the German Social Democrats and the Christian Democrats have been vying to bring the party into a coalition, at the cost of an anti-nuclear policy.

When Angela Merkel came to power, she was a big fan of nuclear energy. But when she wanted to change her coalition partner from the Social Democrats to the Greens, within a few weeks she relaunched the denuclearization of Germany. “That’s why the energy had to be purchased elsewhere. Because we couldn’t produce it anymore.

The consequences of this crisis for the European Union will be profound. Germany and France are the EU’s central locus of power in the European Union, akin to an empire fed from the center but sufficiently benefited by the periphery. But when the center begins to collapse, what happens to this periphery?

“The Union is already on the verge of disintegration. Think of the countries of the East – Hungary plays the role of a loot sport. Poland has its own ideas about the purpose of the EU, namely to help Poland prosper and nothing else. And anti-German sentiment, both in the East and in the South, is growing. Meanwhile, Britain is gone.

At the same time, calls for extending membership to Ukraine and several Balkan states are growing. They will have to be subsidized by central economies but will also alter the balance of power within the Council, and the whole system will become politically untenable.

“The result is that I think the European Union will lose its importance for its member states in a process of gradual decline, where more and more you will find subsets of member states like the East, like the Mediterranean , doing their own thing.”

Could Germany even turn its back on it? As he navigates the vast difficulties looming, Streeck thinks we shouldn’t rule him out. When Trump was elected, he inherited a nation in a decrepit state. And the American electorate, in its majority “emphasized that they now want a government that does not deal with an empire, but with America itself. It was America First’s idea. Trumpian America The first thing was not “Now we’re going to conquer the rest of the world”, but it was quite the opposite: “Now we have to take care of our own country”.

If a Germany-first movement is conceivable, the war in Ukraine could be the ultimate catalyst. Despite early claims that the invasion will be complete in 3 weeks, the stalemate shows no signs of abating.

“Wars always take longer than expected when they start – they feed on themselves and the harder it becomes to try to reach out and get a deal done.”

As the war drags on, the emerging global power dynamics will become more entrenched. The Eurasian continent will divide. On the one hand, a “Russian-Chinese alliance, where the Chinese make the law”. And on the other, a Europe that has little strategic autonomy but rather acts as an auxiliary force “in the coming battle between the United States and China“.

Germany will find itself strategically and economically diminished, its status as a European superpower a victim of a changing world. The global economy, in its current form, is proving unsustainable. And in its place comes a bifurcated world with an American sphere of influence and a Chinese sphere of influence. In between, a weakened and restless Europe will be forced into the orbit of the United States.