Ian Welsh

The horizon is not so far as we can see, but as far as we can imagine

Category: Age of War and Revolution Page 1 of 31

Text of the Iran/US MOU

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On June 18, 2026

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From Dropsite:

Paragraph 1: (end military ops including in Lebanon: this is the one that may blow it up.)

The United States of America and the Islamic Republic of Iran and their allies in the current war by signing this M.O.U. declare the immediate and permanent termination of military operations on all fronts, including in Lebanon, and undertake from now on not to initiate any war or any military operation against each other, and to refrain [from] the threat or use of force against each other and ensuring the territorial integrity and sovereignty of Lebanon. The final deal will confirm the permanent termination of the war on all fronts, including in Lebanon and other provisions of this paragraph.

Paragraph 2:

The United States of America and the Islamic Republic of Iran undertake to respect each other’s sovereignty and territorial integrity, and to refrain from interfering in each other’s internal affairs.

Paragraph 3: (This ain’t final, more to negotiate.)

The United States of America and the Islamic Republic of Iran commit to negotiating and achieving the final deal in maximum 60 days extendable with mutual consent.

Paragraph 4: (Immediate end of US blockade, Iran has 30 days. US to remove forces.)

Immediately upon the signing of this M.O.U., the United States of America will begin the removal of its naval blockade and any disturbances or impediments against the Islamic Republic of Iran, and will fully end the naval blockade within 30 days. During this period, the traffic of vessels will be in proportion to the numbers of prewar traffic being restored by the Islamic Republic of Iran. The United States of America further undertakes to remove its forces from the proximity of the Islamic Republic of Iran within 30 days after the final deal.

Paragraph 5: (no charge for passage thru the strait. At least for 60 days, I suspect Iran/Oman will try and have charges after that.)

Upon the signing of this M.O.U., the Islamic Republic of Iran will make arrangements using its best efforts for the safe passage of commercial vessels with no charge for 60 days only from the Persian Gulf to the Sea of Oman, and vice versa. The traffic of commercial vessels will immediately start, and considering the need for removing the technical and military obstacles and demining by the Islamic Republic of Iran, will be instated within 30 days. The Islamic Republic of Iran will conduct dialogue with the Sultanate of Oman to define the future administration and maritime services in the Strait of Hormuz, in discussion with other Persian Gulf littoral states in line with the applicable international law and the sovereign rights of coastal states of the Strait of Hormuz.

Paragraph 6: (US pays 300 billion in restitution. This is why Iran agreed to no fees for passage, at least for now.)

The United States of America undertakes with regional partners to develop a definitive, mutually agreed plan with at least U.S.D. 300 billion for the reconstruction and economic development of the Islamic Republic of Iran. The mechanism for the implementation of this plan will be finalized as part of a final deal within 60 days. All required licenses, waivers and permissions needed for the relevant financial transactions will be granted by the United States of America.

Paragraph 7: (End of sanctions.)

The United States of America undertakes to terminate all types of sanctions against the Islamic Republic of Iran, including the United Nations Security Council resolutions, I.A.E.A. Board of Governors resolutions, and all unilateral U.S. sanctions, primary and secondary, in an agreed-upon schedule as part of the final deal. The Islamic Republic of Iran and the United States of America acknowledge the critical importance of the sanctions termination issue above mentioned, and express their intentions to immediately address these issues in the negotiations in order to achieve mutual agreement on them.

Paragraph 8: (No nukes for Iran. Downblending in Iran under IAEA supervision.)

The Islamic Republic of Iran reaffirms that it shall not procure or develop nuclear weapons. The United States of America and the Islamic Republic of Iran have agreed to resolve the disposition of stockpiled, enriched material pursuant to a mechanism that will be mutually agreed upon in accordance with the schedule mentioned in Paragraph 7, with the minimum methodology to be down-blending on site under the supervision of the I.A.E.A. The two parties also agreed to discuss the issue of enrichment and other mutually agreed matters related to the Islamic Republic of Iran’s nuclear needs, based on the statutory framework being agreed upon in the final deal. The final deal will confirm the provisions of this paragraph. The United States of America and the Islamic Republic of Iran acknowledge the critical importance of the nuclear issues above mentioned, and express their intention to immediately address these issues in the negotiation in order to achieve mutual agreement on them.

Paragraph 9: (No new sanctions, no new nuclear program.)

Pending the final deal, the United States of America and the Islamic Republic of Iran agree to maintain the status quo. The Islamic Republic of Iran will maintain the current status quo of its nuclear program, and the United States of America will not impose any new sanctions, and will not deploy additional forces in the region.

Paragraph 10: (Again, end of sanctions: this time for oil products.)

The United States of America undertakes that immediately upon the signing of this M.O.U., and until the termination of sanctions, U.S. Department of Treasury will issue waivers for the export of Iranian crude oil, petroleum products and derivatives, and all associated services, including banking transactions, insurances, transportation, etc.

Paragraph 11: (Release of all frozen funds.)

The United States of America undertakes to make fully available for use the frozen or restricted funds and assets of the Islamic Republic of Iran upon the implementation of this M.O.U. The United States of America and the Islamic Republic of Iran will mutually agree on the procedures related to the release of these funds during the negotiations. Such funds, whether retained in the original account or transferred, shall be made fully usable for payment to any ultimate beneficiary designated by the Central Bank of the Islamic Republic of Iran. The United States of America undertakes to issue all necessary licenses and authorizations accordingly.

Paragraph 12:

The United States of America and Islamic Republic of Iran agree that an executive mechanism will be established to monitor the successful implementation of this M.O.U. and the future compliance of the final deal.

Paragraph 13: (Negotiation not over yet.)

After signing this M.O.U. and subject to the beginning of the implementation of Paragraphs 1, 4, 5, 10 and 11 of this M.O.U., and the continuing implementation of these measures, the United States of America and the Islamic Republic of Iran will start negotiations regarding the final deal exclusively on the other paragraphs.

Paragraph 14:

The final deal will be endorsed by a binding U.N.S.C. resolution.

Commentary:

This is a decisive victory for Iran and a loss for Israel and America, though I’d argue that the US ending sanctions and military efforts in the Middle East is good for America. Still, there’s no question that this is the sort of deal that gets signed when one side (Iran) won and the other side (Israel and the US) lost.

I mean — 300 billion in reparations. The US end their blockade first. The US says it’ll get move forces out of the region. The US ends pretty much all sanctions and gives Iran back their money.

Massive win for Iran. Iran is now a great power in the region, and no one can deny it.

The obvious problem here is Israel. If Iran is serious about an end to violence in Lebanon, then this will wind up as a dead letter unless the US tightens Israel’s leash (which it can do, Israel is entirely dependent on US aid). Alternative the US could simply shrug, and make the deal only between them and Iran, and say “if Israel wants to keep fighting, it’s on its own.)

The question here is the power of the domestic lobby, and whether or not Israel has enough blackmail on Trump. (Signing this deal at all makes it look like the answer to , which I thought was “absolutely” may well be “nope, not enough.” We’ll see.)

The US is no longer a superpower. The world no longer has any superpowers. It’s still a great power with worldwide reach, but the days where it was the world’s “super cop” are over. It can still push around weak nations, but not strong regional powers. Took a little less than 30 years from the fall of the USSR for American elites to screw up a completely dominant position.

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Americans Today Have Little To Be Proud Of

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On June 1, 2026

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Pride in one’s nation is one of the weakest and most pathetic types of pride because a nation’s greatness is a result of so many different people’s contribution. Unless you are FDR level, you contributed very little.

But American pride in being American is ridiculous.

Americans have nothing to be proud of, not today’s Americans anyway. The people who made America great are all dead. The people in power today are those who threw away the greatness their predecessors: their betters, created. The same is true of the English. Victorians or even Regency English would despise their descendants pathetic weakness, foolishness and stupidity.

What are you proud of, exactly? Getting you asses whipped by Iran? Impoverishing 60% of your own population? Helping Israel commit genocide? Killing millions in Iraq for no goddamn reason, since Iraq never attacked America? Gutting the Bill of Rights? Having the most corrupt President in American history?

One can criticize FDR and the post-war liberals of the 40s and 50s and 60s for various reasons: but they built an America which was great in many ways: that worked for more and more people, that delivered a good life for many, and which became more fair over time (civil liberties, for example, and increased rights for women.)

Americans were given the best hand in the world: the industrial and tech lead, and they pissed it away. They literally, voluntarily, shipped their industry to China acting as if making a an extra percentage point more profit was all that mattered.

America’s always been evil. All Empires are, and so are all settler colonial states. It’s just the way it is. But Americans of previous generations were competent, and starting with FDR, they at least took care of their own people. They were an American Athens, where immigrants were welcome, where people could make something of themselves, where the world’s great scholars and scientists wanted to be.

America had it all, and pissed it away.

No country, like no person, is of a piece. There is always good and evil, things to be proud of and things to be ashamed of.

But everything great in America was created by people who are dead or old, or are downstream of the post-war liberal period. The tech for the internet was created by post-war government agencies. The world wide web was invented by a government scientist working in an agency created by post-war liberals. Modern GUI interfaces were created in the early 70s and everything that flows from all this, including cell and smart phones is a result of technologies created by government or Bell Labs.

The great tech revolutions of the 80s, 90s and 2000s were all matters of exploiting fundamental discoveries and work done in the post-war era and the cupboard is now bare. America is cutting spending on research, burning its seed corn, even as China ramps up research. America is impoverishing its own people, even as China forces housing prices lower and works to improve wages and living standards for the majority.

To be proud of being American today is pathetic. What is there to be proud of? Destroying the bill of rights? Having a president who openly takes bribes in office? Losing the the tech and industrial lead? Making most of the population poor? Being the attack dog of Israel, with most politicians doing the bidding of a foreign country to the detriment of their own people?

Everything great about America is a legacy of the past, not a product of the present and being proud of being American is like being proud your parents left you a billion dollars, and you’re now worth a hundred million.

 

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The Year of Chaos: 2027

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On May 22, 2026

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Every society is three meals from chaos

-Vladimir Lenin

On May 4th I wrote that a year of hunger and famine is baked in for most of the world.

This was based on the effects of Six Week War and the continued blockade of the Strait of Hormuz. But, in addition, we have the strongest El Nino is a hundred and fifty years incoming:


I’ve personally seen my food prices, before any of this is baked in, rise about 20% this year. I just saw a 33% increase in the price of tomatoes, beef is up over 40%, and so on. Almost nothing isn’t more expensive and this is BEFORE the absolutely catastrophic harvests we will have this year.

It’s easy to say that America and the West won’t have a famine because they can outbid most of the world for food, but the prices will be extremely high and a lot of people are going to go hungry.

I’ve been wondering for a long time what it would take to get Americans to actually do anything about their elites. The recent defeat on Thomas Massie (a noted Israeli critic) in his Republican primary has made it very clear that the powers of reaction in America are extraordinarily strong still.

Thomas Neuburger has an excellent article asking if the election was stolen. 

I don’t know if it was stolen, and I’m not sure that it matters much. If it wasn’t, well Jews spent 30 million and bought the election. If it was, well Jews spent 30 million and bought the election. (The most expensive House primary in American history.)

“Those who make peaceful revolution impossible will make violent revolution inevitable.”

-John F. Kennedy

America has few problems it can’t, in theory, fix. It has no significant problems it can fix if current elites remain in charge, and its foreign policy can’t be improved as long as Israel controls Congress, and most State governments, which it does. (I don’t regard this as in question. Anyone arguing against it is arguing against massive evidence to the contrary.)

Opposing Israel is political suicide. That’s why AOC dances around pretending to be anti-genocide while actually covering for it. It’s why Mamdani has kissed the ring repeatedly.

They will come for you. If they fail, which is rare, they will try again. Eventually they will destroy you.

And that means that peaceful change is impossible.

Combined with the continued impoversishment of Americans, the building of AI centers in communities where the majority is opposed, mass lay offs due to AI, a very likely financial crisis next year, rising fuel prices, shortages of diesel, bunker and jet fuel, I’m going to be very interested to see how many riots there are and how many people  decide to go after politicians and CEOs.

As for the rest of the world: oh yes. There are going to be riots, revolutions, civil wars and coups in multiple countries. The question is how badly first world countries will be effected.

I remind readers to stock up now on as much as they can and I remind rioters that your job is to riot in the neighbourhoods of rich people, or industrial or office areas, not in your own neighbourhoods. Burning down your own homes is foolish.

I will also add that any competent government that cared could easily have made sure that most of the planting happened. Prices were the primary issue, and prices can be controlled and government can decide who gets how much diesel, prioritizing, y’know, tractors and trucking related to agriculture. This is something every western government could and would have easily handled in the 1950s.

Letting people go hungry and starve is entirely a result of government action (a war that was unnecessary, fought for Israel, not America), and government inaction. If people go without food next year, the people who caused it are known: they live in Washington, Tel Aviv and in every country which failed to take effective action they are your politicians the people who bribe them to not care about ordinary people.

You know who they are. They are you enemies. Their actions will kill or impoverish you, if they haven’t already.

And you know what you should do to enemies.

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It Doesn’t Matter What Europe’s GDP Is

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On May 14, 2026

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Well, mostly.

Krugman shared this chart, as part of an argument that it’s ridiculous for Europe to be scared of Russia:

GDP indicates the value of the parts of the economy which are subject to money. (If you do something but don’t use money, it doesn’t get measured.) As such it theoretically measures how much you can mobilize using money. Back when most people lived off commons, before that was enclosed, and didn’t need to do much paid labor, you couldn’t mobilize much.

But that’s theoretical ability. It’s important, but what matters is what you do with it.

And the thing is that Russia does with it is build drones, advanced missiles, advanced jets and other weapon systems. And they build them in large amounts. Europe’s production of weapons is much smaller, and they’re less advanced than the Russian weapons. Russia also produces lots of oil and natural gas and has a huge refinery sector. They have a lot of rare minerals and resources in general. And they do still have both heavy and light industrial sectors.

Meanwhile Europe is hemorrhaging industrial jobs and its industrial energy costs are much higher than Russia’s.

So Europe may have more theoretical economic capacity, but it can’t translate that capacity into state capability where it matters. Russia is stronger than Europe.

It’s not that it necessarily has to be this way, but for Europe to match Russia it has to maintain and expand its industry, find cheap energy, and source natural resources that are scarce in Europe. It also needs a lower cost structure than it has in general terms.

These are not trivial problems. Europe is pushing on renewables, to be sure, but has some way to go and effectively has to buy those from China. It needs to get resources like oil and minerals from other countries and the closest and cheapest source of hydrocarbons, which it needs during the transition, is far more expensive than it otherwise would be. American oil and natural gas is FAR more expensive.

The other traditional source of resources was Africa: mostly ex-French colonial possessions. France never forgave their debts, had military bases all over and often forced them to sell resources at very low prices. But now that Africa doesn’t need European goods, they’re kicked the French out and raising prices and moving to do primary processing domestically.

So sources of cheap minerals are drying up.

All of this could be worked around, if Europe was a technological leader, but…

Now legacy industry matters. Machine tools. Steel. Chemicals. Stuff that Germany is good at. (Automobiles are dying, because yes, the future is EVs.) But Germany and Europe are losing those industries. And they aren’t producing the industries of the future. Everything they have is basically legacy industry, developed in the late 19th and 20th centuries. They aren’t creating, mostly, the industries of the 21st century.

GDP only matters if you can use the resources it suggests you have to produce what you need. When it comes to competing with Russia, Europe’s ability to do so is limited. Not non-existent, Germany has significantly increased artillery shell production, for instance, but not what it needs to be.

Without a colonial empire and without resource rich nations willing to trade Europe the resources it needs at reasonable prices, and without a tech lead, What does Europe have?

Very little.

And this is why Europe’s in for a long fall. There’s no easy route out and no one is even talking about doing what’s right. The center still thinks that the problem is that workers have pension and time off, the rising right are complete idiots who think the US is a good model and the left is not, in most cases, in contention. Germany’s AfD will not make Germany better off, it will continue destroying Germany. The same is true of UK’s Reform part and France’s right wing.

GDP is a stupid stat. It conceals more than it reveals. It doesn’t tell you much about the structure of a country. India, which in GDP terms is a great power just lost a minor war to Pakistan. High GDP can actually be bad, since it includes waste, billionaire income that does nothing for the country, and all the money earned in harmful industries like finance and private equity.

Europe’s high GDP isn’t meaningless, precisely, but it isn’t what matters. If it was, Ukraine would have won the war already and the EU wouldn’t constantly be on its knees groveling to America.

What matters is what an economy CAN do. And Europe’s economy can’t create what Europe needs.

 

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The Law Of Elite Consequences Continues To Demolish America

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On May 8, 2026

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There’s a lovely quote in the WSJ that encapsulates everything wrong with America in the last 50 odd years:

Many of the investors, bankers and corporate chieftains who took over the Waldorf and Beverly Hilton this week have become desensitised to President Donald Trump’s whims. The stock market hitting new records, even if investors are attempting to pull tens of billions of dollars from some private funds, has helped those spirits.

Financiers largely brushed off concerns that have dominated conversations on Wall Street in recent months, including the ongoing war with Iran, which has driven up petrol prices across the US and is now dividing policymakers at the Federal Reserve over whether they can eventually cut interest rates.

“Does anyone really care if the Strait of Hormuz is open?” one high-powered banker posited.

Counterpoint:

Back in 2009 I wrote a post called Essential Insanity, trying to diagnose what was causing American problems. It had three main points: here’s the last one:

The second type is worse, in a sense. When Diamond wrote his book on why societies collapse he came to the conclusion that it occurred when elites weren’t experiencing the same things as the majority of the society–when they were isolated from the problems and challenges the society was facing.

For 30 years, ordinary Americans haven’t had a raise. And despite all the lies, Americans are beginning to get that.

But, for the people in charge, the last thirty years have been absolutely wonderful. Seriously, things haven’t been this good since the 1890’s and the 1920’s. Everyone they know–their families, their mistresses and toyboys, their friends–is doing well. Wall Street paid even larger bonuses for 2007, the year they ran the ship into the shore, than they did in 2006 when their bonuses equalled the raises of 80 million Americans. Multiple CEOs walked away from companies they had bankrupted with golden parachutes in excess of 50 million. And if you can find a senator who isn’t a millionaire, (except maybe Bernie Sanders) you let me know.

Life has been great. The fact that America is physically unhealthy, falling behind technologically, hemorrhaging good jobs, and that ordinary Americans are in debt up to their eyebrows, haven’t seen a raise in 30 years, and live in mortal fear of getting ill–because even if they have insurance, it doesn’t cover the necessary care–means nothing to the decision-making part of America because it hasn’t experienced it. America’s elites are doing fine, thanks. All they can taste or remember is the caviar and champagne they swill to celebrate how wonderful they are and how much they deserve all the money federal policy has given them.

This is the second insanity of the US: The decision making apparatus in the US is disconnected from the results of their decisions. They make sure they get paid, that they’re wealthy, and let the rest of society go to hell. In the end, of course, most of them will find that the money isn’t theirs, and that what they’ve stolen is worth very little if the US has a real financial crisis.

During the Covid pandemic, Western elites got richer. A lot richer. The worse everyone else does, the better they do.

This is the fundamental disconnect in the West: the people who are making the decisions do well no matter how much ordinary people are hurt; no matter how much they weaken their own countries. In fact, it’s worse than that: the worse their countries and citizens are doing, the better they do.

Every disaster is used to allow more looting. Are there oil shortages? Raise prices even more than costs? Food? Same thing. Are some companies going bankrupt? Buying opportunity! Are citizens desperate? Great, they’ll work for less.

Life is good for our elites and the more they destroy our countries, the better life is for them.

Of course they don’t care that Trump is driving America and the West into the dirt? Why should they? They don’t think it effects them. Of course, in time, it will, but they don’t see that or they don’t care: after all India’s richest people live great lives, who cares if India is a corrupt shithole?

So sorry about high gas prices, high food prices, high health care costs and no future for you or your children. None of that matters. Trump’s getting rich being President and so are American elites and in the eternal honest words of George W. Bush “who cares what you think?”

You don’t matter. It’s been 60 years since anyone in power in America cared about America or Americans. Europe’s leaders are about the same.

Suck it up buttercup. Life’s getting worse and no one with the power to change that cares, because they’re doing more than just fine—they’re the richest rich in the history of the world, and life is good.

 

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Iran Has Broken The US Middle East Raj

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On May 7, 2026

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It turns out that Trump’s plan to help ships go thru the Strait was ended when both Saudi Arabia and Kuwait refused to let the US use their airspace or US bases in their countries to launch attacks.

The reason is obvious—Iran has repeatedly said that if the war restarts they will hit the Gulf States much harder than before, going after oil infrastructure in particular.

America has proved it can’t protect its Gulf allies. It’s low on interceptors, and what they have goes to Israel. Even with interceptors attacks get thru.

Bases have gone from defending countries to being liabilities. Being American allies drew the Gulf states into a war that devastated them. The Sauds and Kuwaitis have nothing to gain from letting the US launch attacks from their territory. The lesson was painful, but it has been learned.

This also puts an end to the idea that countries can’t deny the US. They just did, as did Spain.

The US Empire is dead. Officially dead. It does not come back from this because the new way of war centered on drones and missiles means that it is impossible for the US to protect its allies.

Likewise the US can no longer guarantee free navigation. This has been obvious for a couple years: if they couldn’t even defeat the Yemenis, they weren’t going to stand a chance against any real nation.

It’s over.

Again this doesn’t mean the US isn’t still a Great power, especially regionally. It can still shove around weak countries which aren’t willing to bear the heavy cost of standing up to it, like Venezuela.

But as time goes by the missiles and drones will spread from China, Russia and Iran to everyone else. Aircraft carriers will be forced way back, reducing sortie tempos, and blockades using ships will become harder and harder. Probably the best way to do a blockade against a far away country will be drone carriers, but even they will be vulnerable to counter-strikes.

This is also going to be a huge problem for the American military industrial complex: their weapons suck. No one is going to want to buy them. The key weapons needed are missiles, drones and air defense and all of those are cheaper and in many cases better from other suppliers.

At this point without data centers the US wouldn’t have essentially zero GDP growth. The stock market is being held up by a few major internet firms who are engaged in a massive circle jerk of financing their customers purchases. Chinese AI is behind American, but 95% cheaper, open source and will converge on the same general abilities, but better for real world tasks involving robots, autonomous vehicles and so on.

If you need to buy something you don’t want to get it from the US. Odds are China has it for less and at least as good, possibly better.

The world doesn’t need American goods. Everyone’s going to move off oil as fast as possible and it’s China that sells that stack. American weapons are crap. American alliances do nothing but give you a nuclear umbrella you can’t trust the US to deploy.  Trade is increasingly moving off the dollar and on to the Yuan, so sanctions will work less and less well and in less than five years will be basically useless except against vassals.

All that will be left is a wasting ability to use a legacy 90s tech military against the weak, and that’s going away too.

The US Empire is cooked. America’s elites were handed one of the strongest hands in history and pissed it all away in three generations. Truly late Roman Empire levels of incompetence.

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American Elites Have Reverse Empire Dysmorphia

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On May 6, 2026

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There’s a clinical diagnosis called body dysmorphia, where people think there’s something wrong with their body when it’s fine. Colloquially, some people refer to “reverse body dysmorphia” where someone thinks their body is better than it is.

In late middle aged men this often exhibits itself as thinking that they’re stronger, tougher and better in a fight than they are, feeling they’re as good as they were when younger. Some find out the hard way they’re wrong, picking a fight they can’t win.

This applies to American elites. They think America is as powerful as it was back during the Gulf War: able to crush opponents. It leads to constant incorrect decisions. The first major one was believing that sanctions would destroy the Russian economy and lead to victory for Ukraine.

The second major error was the second Iranian war. They thought they could easily beat Iran and overthrow its government. Instead all their local bases were smashed, they Strait of Hormuz was closed by the Iranians, their carrier groups forced back, and their one attempted ground action in Iran, to seize Iran’s enriched uranium reserve, was a bloody fiasco.

Since then they’ve tried to escort out ships and retreated. They’ve put on a blockade of the blockade, and Iran hasn’t buckled and Trump in particular keeps spouting on about how Iran is essentially already defeated and eager for a deal even as Iran has repeatedly refused negotiations.

The world economy is shuddering, the price of oil and its distillates are soaring, American farmers can’t afford enough fertilizer and Russia and China turn out to be two of the nations most able to weather the storm.

Woops.

And American elites keep talking like there’s a military solution when there isn’t. They keep talking like Iran lost the six week war, and not them. They keep offering peace terms which amount to “give us what we can’t win on the field of battle”.

They think they’re still America in the 90s. They don’t get that America is about half de-industrialized and that its military is set up to fight wars of the 90s, not modern drone and missile wars.

They have Empire dysmorphia, thinking they’re still in their prime, when they are no longer a hegemonic power, but only a Great Power. They can push around weak nations like Cuba or Venezuela, but not great powers, and Iran is a great power, as they proved by beating the US.

As long as America keep thinking they’re the only big dog, with the possible exception of China, they’re going to keep walking chin first into fights they can’t win, and their collapse is going to accelerate as a result. Their sanctions on China completely backfired and instead of China’s old stance, which was to trade with the US and let it slowly decline, China has pushed on ever tech lead that the West has.

Europe is similar. They don’t get that they aren’t even a Great Power any more. They are just weak, corrupt, sclerotic nations without any significant resources, who even added all together aren’t in the technological race. They’re deindustrializing. And they keep talking tough and making enemies.

Insanity. Sheer insanity.

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Germany Wants to Double Down on Failed Policies

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On April 21, 2026

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The neoliberal era, which is dying but not yet dead, has been extremely tiresome for anyone with an IQ higher than a tomato, and even a scintilla of intellectual honesty.

Witness the current German chancellor, Merz, intent on doubling down on the same policies which have failed to work for generations:

“With 450 million consumers, we are already larger than the United States. We must break free from what is holding us back. We are being slowed down by labor costs, energy prices, taxes, and social contributions. We must push through reforms, and overcome resistance.”

My bolding, of course.

So, let’s demolish this. We’ll start with productivity versus corporate tax rates:

 

So, the lower the tax rate, the lower the productivity increase (and thus competitiveness.) This is correlation, not causation, but it does clearly indicate that lowering corporate tax rates doesn’t automatically increase productivity. Looking that this table, you’d assume the opposite.

What actually matters is how much of profits are kept inside the company and used for investment in the business. High tax rates on non retained earnings, combined with high tax rates on dividends and executive income encourage firms to reinvest rather than disburse. The neoliberal story is exactly wrong: high tax rates on corporations and high progressive taxes on income and wealth encourage growth. You want ordinary people to pay to lower taxes, so they buy products, and you want high income people to pay high taxes so they don’t take wealth out of the companies they own and run, but rather insist those companies re-invest.

Now let’s look at wages:

There are some ups and downs, but generally speaking during the earlier periods wages increase at a higher percentage of productivity.

Now there are two important recent breakpoints. First is the tax changes of 2000: you’ll notice that wage increases and productivity increases from 2000 to 2020 are abysmal. Corporate tax rates were dropped from 40% to 25%: if neoliberalism worked, then reduced taxes should have led to more investment, instead it lead to more stock buybacks and more executive compensation, in part, because at the same tiem they changed tax laws in ways that made stock buybacks and stock options for executives far less taxed.

So the freed up money, instead of going to reinvestment, went to shareholders and executives.

They also made it so that investments in other countries, not Germany, were taxed less than investment in Germany.

I want to say that the sheer stupid is breathtaking, but of course, this wasn’t done to improve Germany productivity and ordinary people’s wages, it was done to make the rich in Germany even richer.

The actual strategy which works, if anyone cares, is high corporate taxation, with tax relief if money is spent inside Germany to improve a company’s productivity: if it’s actually reinvested.

So the tax changes of 2000 hurt productivity and hurt wages and made Germany’s rich even richer. Quelle surprise.

Now let’s take a look at what happened post 2020 – a radical change. This is German de-industrialization. There’s a massive inflation shock, both from increased energy prices due the Ukraine war and pipeline destruction, plus inflation from Covid and corporate price gouging. Wages rise because they have to: after years of slowing wage increases, Germans need enough money to pay for housing and food. Corporations have to pay more or people won’t work.

Productivity actually DROPS. This is the energy shock that has caused so much German industry to relocate out of the country or to shut down entirely. It’s not just that China has advantages, it’s that Germany shot itself itself in the foot going along with anti-Russian energy sanctions and not fixing the pipelines.

Merz is in a panic. His actual constituents, Germany’s rich (he doesn’t give a damn about ordinary people) are in trouble. So his idea is to reduce taxes and force down wages.

Never improved Germany’s economy in the past, of course, quite the opposite.

So what will happen if he reduces corporate taxes? They’ll move industry out of the country faster because he hasn’t dealt with energy prices. (He mentions them, but he has no plan.) Reducing individual taxes might allow for decreased wages, or at least decreased wage increases, but if German companies aren’t competitive with Chinese companies, any extra consumer spending from reduced taxes will flood out of the country, and in the long term reduced wages means less potential domestic income.

Again:

Germany companies won’t invest more in Germany, they’ll invest more outside of Germany, including in China, if taxes are reduced without any legal changes to force reinvestment in Germany.

The actual solution is to force reinvestment in Germany thru tax changes that make foreign investment less profitable, and targeted tariffs, subsidies and industrial policy to make German goods more competitive.

Oh, and to end the Ukraine war, fix the pipelines and get energy costs down, though that may no longer be possible, as Putin has indicated Russia is no longer interested in long term energy deals with a Europe who hates Russia.

There is no cheap source of hydrocarbons any more and that situation is just going to get worse, even leaving aside the shock from the Iranian war. So Germany’s ultra-double-fucked. They need to figure out how to build nuclear fast and cheap and double down on renewables, primarily solar and perhaps tidal (the exact opposite of what right wing fools want.)

There’s no easy way out. Reducing taxes without restructuring taxes to force domestic investment will accelerate de-industrialization. Lower taxes on individuals might help lower wages somewhat, but will damage the German state’s fiscal ability at a time when massive public investment in energy is required.

Neoliberalism failed to do anything but make the rich, richer. If Merz happened to want to actually rescue Germany from de-industrialization he’d have to raise corporate taxes and change taxation and compensation rules to force reinvestment in Germany, while massively increasing public spending on energy. Any corporation which won’t reinvest needs to be taxed into the ground, and that money should be used for the energy build-out.

Taxes on the rich, including a wealth tax, should be increased. (No, they aren’t leaving the country in large numbers. Where would they go? China won’t take them if they can’t bring their money with them, and maybe not even then. America is no longer attractive, and the rest of Europe is doing badly too.)

In general, laws need to force Germany corporations and rich to invest in Germany, and make it so they can’t move their resources out of Germany. (Or perhaps not out of Europe.) None of this is ideologically, and thus politically, possible.

Merz won’t fix anything. Instead he’ll make everything worse. If the German hard right gets in power they might cut a deal with Russia, and that would help somewhat, but they won’t fix anything fundamental either.

A complete revision in economic ideology, of the same magnitude as the New Deal is required, and Merz and the opposition parties are incapable of that.

Germany, and Europe, will continue an inexorable decline.

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