DGermany’s business model is in crisis. Everywhere you look, pessimism has spread over the past few months. This model is in danger, said Industry President Siegfried Russwurm recently on television. The head of the Ifo Institute, Clemens Fuest, calls for changes to it. They all fear “de-industrialization”: SPD leader Lars Klingbeil, Covestro boss Markus Steilemann and the economists at Deutsche Bank. The view from the outside is also darkening: the world-renowned economic historian Adam Tooze believes that things are “looking bad or even particularly bad” for the German economy.
Pessimism in itself is nothing new when it comes to Germany’s business model. The country has long been annoyed that it cannot manage as many large Internet companies as it would like. That the production of solar and battery cells now takes place primarily in China. And that the car industry is developing far too slowly. Recently, however, the mood in the country has deteriorated significantly. In the wake of Russia’s aggression, energy has become expensive – so expensive that warnings of deindustrialization are pouring out of dozens of mouths. And then there is globalization. The former export world champion Germany suffers particularly when international trade is restricted because blocs of countries form between which dependency is to be reduced.
On the one hand, Germany has to think carefully about where it will get its raw materials from in the future. At least as important, however, is the question of what Germany will still need raw materials for in the future: What will the Federal Republic produce? How is the country supposed to make money in the future – the money it needs to feed its aging population and service the accumulated national debt?
Germany is used to expensive energy
Here’s a bit of reason for optimism: Germany’s prospects may be better than it seems in the difficult year of 2022. There are three reasons for hope – and in the end there is still a lot to do.
The first bit of optimism comes from simply looking at the situation in the existing industry. Although electricity and above all gas have become very expensive in recent months, overall production has hardly decreased.
Last but not least, there are two closely related reasons for this: Firstly, it is not the case that Germany was a cheap energy country before the Ukraine crisis. In Europe there have long been countries with cheaper gas, in the USA it was much cheaper. And the industry has long complained about the electricity price, which is one of the highest in the world. Now two things emerge: energy-intensive companies have always been here despite the high energy prices, some can handle it halfway (though not all). And even in sectors that are generally considered to be energy-intensive, not every single company is a large electricity or gas consumer. Overall, the endangered companies apparently make up a smaller part of the German economy than had been feared – and their problems are not being transmitted unchecked to the other companies.