Multiple industries. Germany, much like the US, but even more so, let China pick up, among other things, much of the tool making industry, especially those related to auto manufacture.
Ouch.
When you consider this is an absolute terms and not relative, it’s even worse.
This comes on top of anti-Russia sanctions and the sabotage of the Nord Stream pipelines cutting off Germany’s access to cheap energy.
Germany is a relatively small country without a lot of natural resources. To be wealthy it needs to produce high value goods, and to do that it needs inexpensive inputs for its industries, or it needs to have much higher industrial productivity than everyone else.
Outsourcing so much of the supply chain for its manufacturers was an understandable mistake: it made those inputs cheaper.
But if you’re a small country without a lot of resources, you have to keep your supply chains and trading relationships stable. German leaders at the start of the Ukraine war expressed the most doubts about massive sanctions and they were right.
Germany is, as predicted at the time, in real trouble. Their model had flaws, and was a mean one, impoverishing and de-industrializing other EU nations, so there’s a certain irony to EU consensus Russia policy now screwing them over, but at this point if Germany goes down it’ll take the entire EU’s economy with it.
Germany cannot afford to follow the US into a cold trade war with China.
Moreover, this is a demonstration of something simple: what is good for Western EU countries and what most Eastern EU countries want (anti-Russia policies and NATO expansion) are two different things. Germany needs good relations with cheap resource suppliers and the only practical one was Russia.
It’s all very well to say, as many have, that this is the price of standing up for “freedom”, but if Germany goes down, so does the EU.
Likewise, what is “good” for the US, is not good for most European countries, and especially not good for Germany. (Ironically, Macron is the only major EU leader to be honest about this.)
The EU, if it continues on this course, will be reduced to an even weaker American satrapy than it was is the cold war period, and one with a lot worse living conditions.
China’s moving up the value chain. Sanctions against China, rather than slowing this down are speeding it up. Correct industrial policy would have been to negotiate with China about what industries or segments of industry each country is going to specialize in.
Incorrect policy is to have a cold war against both your cheapest energy supplier and the country that is now the world’s manufacturing floor.
Damn near suicidal policy, in fact.
Europeans need to get thru their heads that the European/American near monopoly on tech and high productivity is broken and that Europe, in particular, is coasting on legacy industry, without a great number of natural advantages. It was a backwater for most of history, and is reverting. The job of European leaders is to keep that reversion from happening for as long as possible and to slow down whatever reversion occurs.
Now, it could be that full commitment to a “US and Europe+Anglo countries” trade block, with full re-shoring would be a viable policy, if aggressively pursued, but that’s not what’s happening, the US is, instead, taking advantage of EU and German weakness to grab up high energy cost industries.
As for Europe’s elites, they should remember that owning overseas resources is dangerous. Britain’s “hidden empire” — its overseas investments, was a huge part of its strength, and essentially liquidated in WWI. Germany’s chemical patents and electrical patents were broken by the Allies in WWI and they didn’t reinstate them after the war was over.
Anything you own in another country doesn’t really belong to you unless you have the troops and willingness to occupy that country and the ability to then administer the country.
Germany in specific, and Europe in general, if they don’t change their policies and their commitment to being American satrapies, are on the path to ruin.
(Oh, and as I said at the time, most of the Eastern European countries should never have been let into either NATO or the EU. They offer little but vulnerability; are economic soaks, and have interests contrary to those of Western European countries. The only way they could have been absorbed effectively was if the EU decided to become a real federal nation with former countries reduced to provinces at most, and in most cases divided into multiple provinces.)
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sbt42
“To be wealthy it needs to produce high value goods, and to do that it needs inexpensive inputs for its industries, or it needs to have much higher industrial productivity than everyone else.”
Germany sure isn’t importing inexpensive inputs from the US, last I heard. What burgeoning world power in this brave new, multipolar world has been offering these sorts of things to the rest of the world, and happens to be on the same land mass as Germany?
To imagine Europe siding with China (instead of the USA) over the next 20 years, piece by piece, is rather astounding. All the more so because it’s possible… “Eurasia,” and all that. I think if Germany goes, they all go.
StewartM
Oh, and as I said at the time, most of the Eastern European countries should never have been let into either NATO or the EU. They offer little but vulnerability; are economic soaks, and have interests contrary to those of Western European countries. The only way they could have been absorbed effectively was if the EU decided to become a real federal nation with former countries reduced to provinces at most, and in most cases divided into multiple provinces.)
Spot-on!
As currently constituted, Eastern European nations (and, to be truthful, the former states which composed the USSR as well) are problems because their leadership (lacking any means, knowledge, or ability to actually improve living conditions) justify their existence by (in post-US Civil War terms) “waving the bloody flag”, focusing and exaggerating past wrongs done to them while minimizing the wrongs that their own leadership did to them, or the wrongs that they were willing to do to others. Currently, most of the ‘bloody flag waving’ is directed against Russia (even though Soviet Russia in some cases quite literally saved these populations from the extermination plans of the Nazis). For these internal reasons, the leadership of these countries are wont to prod the Russian bear (witness Lithuania’s blockage of Kalingrad) and ‘poison the pot’ in regards to any peaceful settlement. The Poles and the Baltic states are probably the worst offenders in this.
The only remedies thus are:
1) Kick them out of the EU and NATO. They might try to ally with each other, but the same ‘waving the bloody flag’ meme applies to a lesser extent to their neighbors as well. Being weak and dependent will drive better behaviors among them in regards to Russia. Despite the horrors of the US foreign policy establishment at the thought, “Finlandization” is NOT a bad thing, all things considered.
2) Fold them into an EU state where they lose independence, and would likely just get outvoted or at least have their belligerence counterbalanced by the tangible and sensible needs of other EU nations. Maybe another benefit of an EU state might be that Germany couldn’t export misery so easily (I mean, then the Italians, Spanish, and Greeks might outvote them).
Feral Finster
German elites will do just fine, and they do not care whether their countrymen freeze or starve.
Europoliticians are proud of how little they care about the concerns of the masses, and flaunt how out of touch they are.
Feral Finster
“As currently constituted, Eastern European nations (and, to be truthful, the former states which composed the USSR as well) are problems because their leadership (lacking any means, knowledge, or ability to actually improve living conditions) justify their existence by (in post-US Civil War terms) “waving the bloody flag”, focusing and exaggerating past wrongs done to them while minimizing the wrongs that their own leadership did to them, or the wrongs that they were willing to do to others. ”
It is rich that the Poles, Baltics, etc. believe themselves entitled that the rest of the planet start WWIII on their behalf because of some historical beef or perceived injustice that may be hundreds of years old.
At the same time, Vietnam which suffered millions of casualties all well within living memory, not to mention ongoing environmental degradation, is supposed to just walk it off.
And I won’t even get started on what the peoples of Iraq and Syria and Yemen and Libya suffered at the tender mercies of the US Empire.
elkern
I presume that the 2nd sentence of the OP should be “Germany /not “China”/, much like the US […] let China pick up, among other things, much of the tool making industry…”
Having spent (wasted?) pretty much all of my professional life in US Manufacturing, the loss of “tool making” was the key failure. In the Industrial Age, everybody knew that building the machinery to build the machines that make things is the only way to avoid losing the Next Big War. In the Modern Age, Western leaders of Business and Government seem to have forgotten this, but it’s still true.
Every machine shop I’ve seen has (had?) an old Bridgeport in the back corner, still grinding away on miscellaneous jobs, but *all* of the new CNC machines came from Asia or Germany.
The silliest Temp job I ever worked was at a bubblegum factory (Santa Cruz, CA, 1979). They hired hippies like me to put 24 packs of Hubba-Bubba into retail-size boxes, while they waited for the machine to do that automatically to be delivered… from Germany.
More recently, the Castings plant where I worked until getting [involuntarily] retired was melting high-grade steel to make jet parts in furnaces built around the same time I was (1954). The parent Corp (which changed 3 times in my tenure there) explored the possibility of installing new furnaces… to be imported from Germany. (but the ROI was never good enough, so they just kept patching up the old furnaces [with Hubba-Bubba!?]).
If Germany has lost the ability to make such equipment – because “it’s cheaper to get it from China” – then Europe has no chance to be a World Power.
Well, at least we won’t have to worry about European Colonialism any more.
JBird4049
I have never quite understood the glib explanations given by the wealthy, politicians, and economists for shipping out much of American manufacturing including its knowledge to China. That such destruction would possibly fatally weaken the country by creating a vast, impoverish, extremely bitter underclass, and reduce the very economic and military might needed to maintain its empire should have been obvious forty or fifty years ago. It blindingly obvious today.
That ostensibly well educated people insist on ignoring this speaks well for them either being fools or mentally ill and maybe both.
different clue
@StewartM,
Why does not Europe simply abolish the EU and abolish NATO ( or all withdraw from it which is much the same thing . . . ) ?
Why does not Europe return to de Gaulle’s vision of a ” Europe of Fatherlands”?
” . . . French President who enforced the Luxembourg compromise. De Gaulle described the EU Commission as “bureaucrats without a fatherland”. De Gaulle wanted a system where governments cooperated whilst remaining separate, a “Europe of Nations” or “Europe of Fatherlands”, not for nations to merge in a supra-national integration.
en.euabc.com › word › 262 ”
de Gaulle, Charles (1890 – 1970) – EUabc ”
And why does Germany do this? Does a critical mass-load of the German leadership have time-delayed guilt-onset over WWII and the holocausts to the extent that the German leadership plans to “slow-suicide” Germany itself as an act of public expiation?
If so, how does this help anyone else in Europe or anywhere else?
Purple Library Guy
Letting them in was as far as I can tell a short-term oriented decision. They wanted ’em in the EU the better to loot and break their local USSR-created industries, leaving them captive markets for core EU producers such as Germany, paying with debt and real estate. Problem being, once you’re finished you’re stuck with them. But I’m sure plenty of people involved at the time are now very, very rich.
VietnamVet
The EU was set up to economically tie Europe together. It did. But it was seized by and for the powerful jet-set not the people. To make more money, the West went on a regime change binge. Disaster capitalism seized the globe and dumped the Western middle class into the trash. Forever Wars and Pandemics are profit centers.
Donald Trump is a good representative of a nationalist oligarch who has turned the Blob (the Plutocrats’ managers) against him. Sovereign nations and the rule of law are long gone. It is one power group against another, one neo-feudal mercenary mob versus another. The restoration of constitutional democratic republics, the rule of law, a working middle class, and strong borders are the only counters to the continued escalation of the proxy European World War that can only end in a nuclear holocaust and/or the end of the Western Empire.
For the third time in a little over a century, Germany is caught in the middle. If Joe Biden did green light the destruction of Europe’s cheap natural gas pipelines from Russia, the splintering apart of the West is pretty much assured.
Jan Wiklund
As I commented to a lot of friends when the Ukraine war started, European strategy is like the strategy of the Suicide Squad in Life of Brian: https://www.youtube.com/watch?v=NUHk2RSMCS8.
But why are they so stupid? Why can’t they see their own interests?
In fact they have gone down the drain for decades. According to the founding document of the EU, the Maastricht Agreement, EU as well as the individual member states were prohibited to have any industrial policy other than following the market, i.e. the most opportunistic force in the world. When all other powers used every trick possible to strengthen their own productive forces, the Europeans sat on their buttocks doing nothing except singing the praise of the market.
Future historians will compare them to the Spanish politicians of the 16th to 17th century,
StewartM
Feral Finster
At the same time, Vietnam which suffered millions of casualties all well within living memory, not to mention ongoing environmental degradation, is supposed to just walk it off.
Funny thing is, Vietnam has done the smart thing and ‘let it go’. In all my trips there I’ve never experienced a whiff of anti-American sentiment from any Vietnamese. I’ve visited Sơn Mỹ (My Lai) and it’s a moving experience, but even there it was heartening to see all the children on their way back to school when we arrived, and the land largely healed from war. Sometimes, historical amnesia is a good thing.
(The tragic part is, the Vietnamese *always wanted* to be our friends, and to have the US on their side, but we were too pig-headed to allow it. The Vietnamese especially did not want to be dependent upon their neighbor to the north (China) given their history, and welcomed (and still do) a US counter-balance. If we really believed in ‘freedom’ instead of demanding capitalism, if we allowed countries to choose their own economic system, I think it could have been possible to get a Vietnam like today, nominally communist with Western investment and yet with more personal freedoms than any Soviet bloc country. And no one needed to have died).
It is rich that the Poles, Baltics, etc. believe themselves entitled that the rest of the planet start WWIII on their behalf because of some historical beef or perceived injustice that may be hundreds of years old.
Ah, it’s worse than that. I was made aware via a history Youtube discussing Rolf-Dieter Muller’s book on the German preparations for “Barbarossa”, the invasion of the Soviet Union:
https://www.amazon.com/Enemy-East-Hitlers-Secret-Invade/dp/178076829X
I’ve seen various Polish memes on the start of WWII, the fate of Poland, the “atrocity” of the Soviet “invasion” of Poland (often not highlighting the Nazi invasion). These never mention the fact that the Soviets offered to field over a million men in Poland’s defense (from the UK archives) in pre-invasion talks, which the English and French were hesitant to accept because they were sure the Poles would reject such an offer from the Soviets out-of-hand. It was only after the Stalin had been convinced that no deal could be made to enact a “stop Germany” alliance that he turned to the non-aggression pact.
But there’s more in Mueller’s book.
Turns out, the ‘poor little innocent Poles, who never dreamed of hurting anyone or invading anyone, who were just little innocent victims in this game of European powers’ (their story) were…..
From 1935 to 1939, the Polish and Nazi high commands held joint talks about *a joint invasion of the USSR*. The sticking point turned out how the USSR would be divided between Hitler and Poland, the Poles wanted the Ukraine while giving the Germans everything north of Belarus, while the Germans wanted to reverse this division of the spoils.
Basically, the Poles wanted to re-establish greater medieval Poland:
https://en.wikipedia.org/wiki/File:Poland_and_Lithuania_in_1526.PNG
Let’s see, much of Ukraine, most of Belarus, most of Lithuania, and various other non-Polish territories to be subjugated by our peace-loving Poles, who ‘didn’t dream of any wars of aggression and just wanted to be left alone’.
Mind you, these military talks about a joint war of aggression against the USSR continued until a few months before the Germans attacked their Polish “ally” in September 1939, something that apparently everyone else could see coming save the Polish government. Fools maybe?
someofparts
I heard that the Russians took out a Leopard tank and found that it was manned by a German crew. I think one crew member survived. The word is that the Russians will make sure the German public hears about it. Maybe that will do a little bit to snap some minds out of their suicidal somnambulism.
Rakhika Desai produces a podcast with Michael Hudson at Ben Norton’s website Geopolitical Economy. She just got back from a trip to Moscow, meeting with other economists there. She reports that everyone she spoke with agrees that Russian has made a permanent turn to the East because they see the West as stagnant.
the pair
https://archive.ph/ZMIim
archived/non-paywalled version of the FT link.
the pair
also:
slow down your economies for a few months to slow covid: “you’re literul HITLER!”
wreck your economy for the next few years to screw with russia and/or china even though it will backfire: “SLAVA UKRANIA!”