Kaput E-Book

Wolfgang Münchau

• Herausgeber: Forum
• Kategorie: Geisteswissenschaft
• Sprache: Englisch

Seitenzahl: 277

Veröffentlichungsjahr: 2024

Beschreibung

'Compelling' Guardian 'Eloquent and comprehensive' Financial Times 'Excellent' The Telegraph 'Astonishing' The Times 'An eye-opener' Gavin Esler Until recently, Germany appeared to be a paragon of economic and political success. But recent events – from Germany's dependence on Russian gas to its car industry's delays in the race to electric – have undermined this view. In Kaput, Wolfgang Münchau argues that the weaknesses of Germany's economy have, in fact, been brewing for decades. The close connections between the country's industrial and political elite have left Germany technologically behind, over-reliant on authoritarian Russia and China, and with little sign of being able to adapt to the digital realities of the twenty-first century. It is an essential read for anyone interested in the future of Europe's most important economy.

Leseprobe

To Susanne, Joshua and Elias

Contents

AcknowledgementsPrologue1. The Canary 2. Neuland 3. Low on Energy 4. The China Syndrome 5. Breaking the Brake 6. We and the Others EpilogueSources

Acknowledgements

This book would not have been possible without the generous help of Bill Bollinger, who encouraged me to write it and who agreed to fund the research for it. I am especially indebted to Frederick Thelen, who provided a large volume of research for this book, and whose work informed several of the key chapters – on finance, on Russia and China, on technology and on immigration.

I also would like to thank my colleagues at Eurointelligence, present and past, who have worked on several of the strands in our narrative. Eurointelligence has been an important source for several of the narratives of the book. Anonymous thanks also to the countless colleagues, interlocutors and readers who over the years have contributed to a deeper understanding of the issues I discuss in this book.

Prologue

The town in which I grew up in Germany was not very large, but it had large companies. Mülheim is situated at the western edge of the Ruhr basin, and today has a population of 170,000. On my daily tram journey to my high school in the centre of town, I passed two factories located next to each other. They were surrounded by large grey apartment buildings, characteristic of industrial towns in Germany and other parts of central Europe at the time. The first of the factories made pipelines. The second one made nuclear power reactors. The parents of several of my friends used to work in those factories – some as engineers or managers, and one as a nuclear physicist. Pipelines and nuclear reactors were the gears that powered the German economy. They were the life force of Germany’s industrial model.

This was in the 1970s. Back then, Germany was the world’s leading producer of nuclear plants, and opted for nuclear power for its future energy needs. Pipelines, too, played an important role in German energy policy, especially after the first oil crisis in 1973. It was these pipelines that would later give Germany access to Norwegian oil and Russian gas.

There was another strand of the German economic miracle that was prominent in the 1970s – that of the self-made entrepreneur. This era of entrepreneurship had started in the late 1940s and early 1950s, and it lasted approximately until German unification. Of all the entrepreneurs in Germany, Mülheim was the home of the country’s most successful – and most secretive. Karl Albrecht was the elder of two brothers who, in 1946, took over their mother’s grocery store in the neighbouring city of Essen. After the introduction of the Deutschmark in 1948, the two brothers invented a new retail concept – the discount store, with a limited range and very low prices. They called it Aldi, which stood for Albrecht Discount. By 1955, Aldi had already expanded to one hundred stores in the home state of North Rhine-Westphalia. In 1961, the two brothers went their separate ways. The younger brother, Theo, moved to the north of Essen, while Karl moved west to Mülheim, where he ran Aldi Süd.

The Albrechts were the ghosts of our city – ever present with their stores, occasionally spotted, but mostly invisible. We all assumed that Karl lived locally, but nobody really knew for sure. Not only were the Albrecht family invisible to us, they were also invisible to the media and politicians. A local newspaper even went so far as to charter a plane to scour the neighbourhoods where they suspected Karl Albrecht lived, in an effort to find him. The Albrechts never gave interviews. By the time Karl died, at the age of ninety-four, in 2014, he was not only the richest man in Germany, and number twenty in the world, he had also never met a German chancellor in his lifetime. He, like much of his generation of entrepreneurs, did not owe his success to politics.

The Aldi brothers and the heavy engineering companies I passed on my way to school could not be more different. But, together, they made up the two pillars of the German economic miracle – the corporatist industrial and the entrepreneurial. Aldi is still there, but the entrepreneurialism it used to represent is gone.

The two factories are also still there. Several of Germany’s best-known industrial companies were founded in the nineteenth and early twentieth centuries. Some are struggling. Higher energy costs have made industrial companies less competitive. The old Mannesmann pipeline factory is nowadays owned by Europipe, which supplied two of the oil pipelines that connect Germany with Norway. The other company used to be called Kraftwerksunion, a joint venture between Germany’s two largest electrics companies, AEG and Siemens. Today, the plant is run by Siemens Energy. The company was briefly in the national news after Vladimir Putin reduced the output of gas through the Nord Stream 1 pipeline during the summer of 2022, a few months after he invaded Ukraine. Germany’s chancellor Olaf Scholz paid a visit to the Mülheim plant because he was desperate to get a gas turbine that was sitting there back to Russia so that the pipeline could resume operations. It reads a like a story from a long time ago, but, in the summer of 2022, Germany was still relying on Russian gas. The gas flows ended in late September 2022 with the explosion of the Nord Stream pipelines. The last of Germany’s nuclear power stations went offline in April 2023.

The change of my town’s fortunes were a microcosm of what happened in the country at large. Germany was the industrial powerhouse of Europe, and the world’s largest exporter at one point. But its specialisation created vulnerabilities and dependencies. It became dependent on Russia for gas, and China for exports. Before Brexit, the UK was the largest source of German current account surplus – which measures the gaps between exports and imports and investment flows. Then came the break with Russia. Relations with China, the largest trading partner a few years ago, are also no longer what they used to be during the heyday of hyper-globalisation. Perhaps the biggest of all shocks came from technology. Germany was the world champion of the analogue era. But digital technologies have been progressively encroaching into our lives. Germans invented the fuel-driven car engine, the electron microscope and the Bunsen burner. But they did not invent the computer, the smartphone or the electric car. Over the years, that has become a problem.

This book is the story of the rise and decline of a hugely successful industrial giant. It is not a policy book. I am not giving prescriptions for what I feel needs to be done to reverse Germany’s industrial decline. That would require a very different and much larger book. This is the story of how and why it happened. Neither is it a ‘sick man of Europe’ book. The trophy that passes from one European country to another represents little more than a snapshot of the economic cycle. By the time this book is published, I would expect Germany to have come out of the recession that started with the pandemic in 2020 and continued with Russia’s invasion of Ukraine in February 2022, lasting until at least late 2023. The underlying malaise, however, will persist, and it is this that forms the subject of this book. The German economic model has come unstuck, and the economic recovery won’t fix it.

*

The German social market economy model has a lot of admirers abroad, especially in the UK. One of them, a British journalist and friend of mine, warned me not to write this book. He said the overarching lesson in his professional life had been never to bet against the German economy. What I am trying to do here is to ignore his advice, yet respect the underlying sentiment behind it.

Germany has had its fair share of detractors, who often mock the German obsession with industry and the country’s failure to accept that modern Western economies are based on services, not manufacturing. I do share this perspective to some extent. Germans have a far too narrow view of services, which are often seen as an adjunct to industry. But I also feel that the anti-industry sentiment in some parts of the West has gone too far. Industry creates powerful network effects that are often underestimated in places like the UK and the US.

Germany has a history of bouncing back when you least expect it. Periods of strength were the 1950s and the early 1960s, then from the mid-1980s until the mid-1990s, and again during the first half of the last decade. Could the current weakness that started around 2017 be just another interlude? Would I not be repeating the mistake of so many detractors of the German model if I were to prematurely declare the decline of Germany, only to be surprised later by its rebound?

I think not. Germany’s current economic malaise differs in one important respect from those of previous periods. If companies become uncompetitive, the government can cut taxes, introduce labour reforms or manipulate the exchange rate. But if you are a specialist in making gas heaters or diesel engines, your problem today is not cost, but the product itself. If people are forced to install heat pumps instead of gas heaters, or forced to buy electric cars after the 2035 cut-off for the production of fuel-driven cars in the EU, you have a different problem. While German car makers are still competitive in their classic product range, they cannot compete against the Chinese in electric cars. It’s no longer about how you do it; it’s about what you do.

Another important difference is the arrival of new competitors. Germany’s reliance on manufacturing exports used to work so well because nobody else did it. For most of the period of hyper-globalisation, from 1990 to about 2020, Germany was unchallenged as an industrial producer. The US, the UK and France had vacated the field. China was not yet there. Since the pandemic, the rest of the world has rediscovered engineering and has started to crowd in on what used to be a German fiefdom. President Joe Biden introduced the Inflation Reduction Act that provided instant subsidies to companies that moved over to the US, in segments like green tech. China, too, shifted its growth model from subsidising infrastructure investment to subsidising manufacturing exports.

The world changed, but Germany did not, and this is a story of how Germany mismanaged industrial capitalism, and misjudged technology and geopolitics. It is also a story of national narratives, the myths we keep telling each other and eventually start to believe. And, like all tragedies, this one begins during the good times.

The post-unification era was the good times. I have a story from that period that gives us an early glimpse of what would go wrong later. By the early 1990s, the telecommunications industry in Germany was still largely unreformed. Deutsche Post, the national postal service, was also the national telephone operator. Using a phone in Germany was a very analogue experience. Whether you had one with an old-fashioned dial or push-buttons, it would take time for the analogue exchange to make the connection. If you are old enough, you will remember the ticking sound – a number nine would be represented by nine ticks. This is why the emergency number in continental Europe is not 999, but 112 – a difference between twenty-seven ticks and four.

By this time, the US had already introduced digital telephone exchanges. One effect was that phone calls were instantly connected. Travelling to the US in the late 1980s, I also noted, to my naïve surprise, that local calls there were free, whereas in Germany you paid twenty-three pfennigs for a local call – and much more for national calls.

In the mid-1990s, as a young foreign correspondent for the Financial Times in Germany, I went on a trip with Siemens. It was the beginning of the big telecom liberalisation era. Deutsche Telekom had been split from Deutsche Post and privatised in 1995. It also marked the beginning of a short phase of German shareholder capitalism, similar to what had happened in the UK a decade earlier.

At around that time, demand for mobile telephony services and telecommunication infrastructure expanded rapidly, and Siemens was the main German producer of telecommunications equipment, including the first generation of mobile phones. The phones offered only a few rudimentary services, like text messaging. They were also much larger and heavier than modern smartphones. During the trip, I asked a senior Siemens manager what plans they had for the mobile-phone business. He responded to me, condescendingly: ‘You mean, those little devices that people carry?’ He left no doubt that this was not a business for grown-ups like him. He then explained to me that the big money was not at the consumer end of the market, but in network technology. Siemens had just produced a state-of-the-art analogue telephone exchange. As it turned out, it was the last of its kind, another piece for the museum. What he did not see was that digital would beat analogue technologies, and that the big money was indeed in smartphones.

Today, it is easy to mock the lack of digital sophistication in Germany – but it is astonishing, if you consider the history. Germany was the country where the digital revolution originated during the twentieth century. German physicists – Max Planck, Max Born, Erwin Schrödinger, Werner Heisenberg – were among those who discovered quantum mechanics, the physics that led to the development of both the nuclear bomb and the semiconductor. Christopher Nolan’s film Oppenheimer depicts a scene in which the hero as a young man is advised by the Danish physicist Niels Bohr to study in Göttingen. Göttingen was Germany’s most famous university at the time and accounted for forty-seven Nobel Prize winners, including world-renowned physicists like Born and Heisenberg. Göttingen played an equally important role in mathematics, producing academics such as Carl-Friedrich Gauss, Bernhard Riemann, David Hilbert and Emmy Noether.

All that changed, however, when the Nazis rose to power. Many scientists fled to the US, which at the time had no significant capability in this area. During and after the Second World War, the US became the centre of research into quantum physics, which is the foundation of modern digital technology and digital communications. Its global leadership remains unchallenged, even today. Germany had experienced a similar virtuous circle with the motor car, a product invented by Gottlieb Daimler in the late nineteenth century that kept on giving until deep into the twenty-first century. The big difference is that the era of the fuel-driven car is coming to an end, whereas the digital era has only just begun.

Germany had come out of the Second World War with its great universities depleted of physicists and mathematicians, but it was still hanging on to a few areas of technological excellence, including mechanical and electrical engineering, and chemistry. By the 1970s, Germany was still a player in the early phase of computers and software. (One of the companies founded at the time, SAP, is still a software giant today, the only meaningful German representative in the global tech industry. Of the world’s top fifty tech companies, it is the only one that is German. The EU has three, including SAP.)

It was also around this time that the German government started to realise the importance of digital technology. A committee set up by former chancellor Willy Brandt in the early 1970s laid out a timetable for the introduction of optical fibre networks – to get ready for the upcoming computer age. It was a very rare case of German policymakers correctly identifying a mega-trend and trying to plan ahead, and it was probably the best tech call ever made by a German government in modern times. Had Germany stuck by the timetable the scientists suggested, the country would have been years ahead of everyone else in the West in the roll-out of fast digital networks, and the German economy would look very different today.

I remember when my father’s company acquired a computer in the mid-to-late 1970s – a monster that took up half the office. The computer was made by Olivetti, in Italy, and ran German software made by SAP. Its software allowed companies to streamline all their invoicing, payroll management, logistics and accounting functions. The personal computer was still a few years away. It was during the 1980s, after the launch of the IBM PC and the original Apple Macintosh computer, that Germany and the other European nations irrevocably started to fall behind the US. But the bigger problem with the Germans was not that they failed to invent the PC, but that they kept betting against the digital universe.

When Helmut Kohl became chancellor in 1982, he favoured schemes that produced gratification in finite political time. Together with the French president, François Mitterrand, he championed high-definition cable television, an analogue-age technology which promised to produce what the two leaders thought would be a massively popular viewing experience. As with many such projects, the implementation took longer than expected and ran into unforeseen technical and regulatory difficulties. In 1990, during the football World Cup in Italy, the Italian state broadcaster RAI transmitted HDTV coverage of the football matches, but it was only shown in eight Italian cinemas. The whole exercise was technically exceedingly difficult, and analogue-era HDTV was formally abandoned in 1993.

In 1995, Nicholas Negroponte, then head of the MIT Media Lab, published a highly influential book in the US, Being Digital. Negroponte explained how digital technologies would encroach into all aspects of our lives – it was not just about desktop computers. He also explained why analogue technologies, like high-definition television or Siemens’s analogue telephone switches, were doomed in an age of fast-advancing digital alternatives. Negroponte’s book played a huge rule in attuning corporate America and US universities to the opportunities that were lying ahead.

It had much less impact in Europe, except in one unfortunate respect. The digital revolution of the 1990s and the liberalisation of telecommunications in Europe created a short-lived financial bubble, globally known as the dot.com bubble. It was particularly ferocious in Germany, where the dot.com hype was concentrated on a newly created penny stock market, the Neuer Markt. The Neuer Marktsaw a flurry of new tech companies being listed, mostly of dubious pedigree, on which many ordinary savers and investors placed large bets. Speculation was fuelled by newspapers and self-declared market gurus, who made their money by providing dodgy share tips. It felt like a modern version of tulip mania, a notorious seventeenth-century bubble in tulips in the Netherlands, the quintessential example of an irrational asset price bubble.

As a member of the team that launched the Financial Times Deutschland in 2000, I was living in Hamburg at the time, and I followed the story with increasing exasperation. I remember picking up a taxi from Hamburg’s train station late one evening. When the driver found out that I was a financial journalist, he asked me immediately whether I had any special insights into the current initial public offers of a particular company that was about to be listed on the Neuer Markt. He was quite shocked when I told him that I did not know, nor did I care, and that my savings slumbered in a boring investment fund. But I realised at the time that, when taxi drivers ask you about IPOs – in Germany, of all places – things must have gone too far. The market started to collapse a short while later. The Neuer Markt index reached a peak of 9,666 points in March 2000, and fell to 318 by October 2002 – a loss of 96 per cent. That was a crash of tulip-mania proportions – worse, in some respects, as most of the Neuer Markt companies were worthless. If you were unlucky in Amsterdam in 1637, at least you would keep the tulips.

This experience was the German public’s initial brush with the digital world. It left Germany with a sentiment of ‘never again’, as one newspaper put it. In the US, the dot.com bubble also burst, but it was not the end of dot.com, rather the beginning of a new phase of the digital industry, which saw the rise of large digital corporations – Amazon, Apple, Google and Facebook, all American. For Germany, it was the end of dot.com as we knew it.

Germany still had its traditional industries. People do what they are good at, and so, in aggregate, do countries. The US has the digital industry and Hollywood. France has food and fashion. The UK has finance. Germany specialised in cars and mechanical and chemical engineering. By the time of unification, Germany had some of the most illustrious industrial companies in the world, including Siemens, Volkswagen, Mercedes-Benz, BMW, Continental, Hoechst, BASF, Bayer, Linde, Mannesmann and Bosch.

Below those megastars were thousands of medium-sized companies, usually family owned, which tended to operate in niche markets. Many of the so-called Mittelstand companies – medium-sized enterprises – were considered the hidden champions of the economy. They were often world leaders in their respective specialisations. In England, the products are often caricatured as widgets – like ball bearings, hydraulic equipment or precision tools, and so many more. But these were hugely successful businesses, and some still are. Many of these companies were world champions of engineering, and had flourished in a post-war Germany that was both entrepreneurial and innovative. The economic miracle was for real.

What happened was that new technology – invented and made by others – intruded. The US economist and journalist Paul Krugman once made a wise observation about trade: the real benefit of trade, he said, comes through imports, not exports. It is hard to imagine a commentary on economics that is more countercultural to the German thinking about economic success than this one. Germans defined success in terms of exports. But Krugman’s point is that imports allow you to consume goods and services that you either could not make yourself, or that you could not make at a profit. The same goes for digital technologies. You may not be the one who makes it. But you could at least be the one who uses it, or the one who buys a minority stake in the companies that make it. This is what Negroponte tried to tell everybody: digital technologies encroach upon the analogue world. German companies and successive governments did not see that. And when they did, they reached the wrong conclusions and doubled down on what they already had.

A good example of digital encroachment is the modern mobile phone. The smartphone encompasses functions that previously required several mechanical, electrical and other physical devices – the camera, the torch, the compass, the map, the rolodex and, yes, the telephone too – many of which were made in Germany. Smartwatches can already measure our heart rate and produce a long-term electrocardiogram. Digital devices can already, albeit imperfectly, monitor our sleep. In 2024, we are not far away from the introduction of smartwatches that can measure our blood pressure. A smartphone contains sensors but zero mechanical components.

Digital technology is taking over car manufacturing too – Germany’s most important industry. A car will always need wheels and axles that turn. But a modern electric car is not a fundamentally mechanical product anymore: most of its value lies in the software and the battery.

As software encroaches on traditional hardware, new companies invariably spring up. The digital giants of today are companies that were founded relatively recently. It was not Smith Corona, the US typewriter company, that invented the PC. Smith Corona tried to integrate the computer into its typewriters and was rather good at it. But it could not think beyond the typewriter. Its strategy worked well, up to the late 1980s – until it didn’t.

Germany has a Smith Corona problem. It has been hanging on to old technologies and old companies for too long. Innovation was inextricably linked to existing companies. Innovation was defined by what VW, BMW and Mercedes decide to innovate. That, too, worked until it didn’t.

The digital world, by contrast, is a world of start-ups. Start-ups need support – in the form of a strong capital market – and mostly need to be left alone and not encumbered by bureaucracy. Germany offers a great support network for existing companies, but not for start-ups. It lacks a modern venture capital industry. Subsidies are geared towards large companies with legal departments, not to entrepreneurs whose mind is focused on their business. The problem with bureaucracy is that large companies find ways to manage it. Small companies do not.

Since the early 2000s, the gap between Germany and the rest of the world has grown wider. In 2013, Angela Merkel famously called the internet Neuland, meaning ‘unknown territory’. By that time, the iPhone was already six years old and the US was rolling out Web 3.0. The big-data revolution had started. Germany had already fallen behind in all aspects of digital development, from optical-fibre networks and mobile communications to the roll-out of digital technologies in schools and artificial intelligence. The German healthcare system and police service are still using the fax machine today.

The refusal to adopt modern technologies is, in many ways, the original sin. As time went on, German CEOs and political leaders continued to double down with poor technological, geopolitical and economic bets – and with an economic ideology that equated the economy at large with industry. This is why the biggest concept in the entire German economic debate is competitiveness, something of huge importance for companies, but a concept rarely used for countries. You hardly hear about it in economic debates in the UK or the US. You hear about almost nothing else in Germany.

I recently came across a book written by Hans-Olaf Henkel, a former president of the Federation of German Industry lobby group, who in later life became a member of the European Parliament for the far-right AfD. One of Henkel’s big complaints was that Germany had lost the textile industry; he failed to mention that this was the case for every other country in the Western world, too. If he had understood David Ricardo’s theory of relative comparative advantage, he would have known that it is perfectly normal for advanced nations to lose certain sectors to developing countries. But Henkel’s narrative is the one that stuck in Germany. It is the fight against Ricardo. More competitiveness became the answer to every economic crisis.

In the period from 2005 until about 2015, this focus on competitiveness appeared to work. This is the story of the modern German miracle – the story that got a lot of people confused. Germany managed to prolong an outdated industrial model for a few more years due to a series of fortuitous accidents. At a superficial level, that decade seems to be the counter-narrative to my story. At a deeper level, it is not. That decade is not so much the exception that proves the rule, but a period that laid the foundations for a future crisis.

The rebound started with Chancellor Gerhard Schröder’s labour-market reforms in 2003. One of the effects was a long period of wage moderation. The baby boomers were still in employment at the time, aged between forty and fifty-five. They had a reasonable standard of living but were fearful of unemployment. Many would have struggled to find work elsewhere at that age. The most important reform was the reduction in welfare benefits for those who refused to accept job offers. The reforms and the ensuing wage moderation explain, to some extent, how German companies managed to improve their competitiveness against the rest of Europe and the rest of the world during this period.

At the same time, German industry was helped further by cheap gas from Russia, the liberalisation of container shipping and logistics, and globalisation that demanded German plant and machinery. German companies were one of the main beneficiaries of the global supply-chain revolution.

The fast rise of China and other Asian tiger economies created a strong demand specifically for industrial plant and machinery, a technology in which Germany specialises and in which other countries had nothing comparable to offer. China and India would flood the world markets with their products. Germany would flood China and India with German-made production equipment. It was a win–win situation. Until it wasn’t.

The euro crisis, which started in 2010, also ended up benefiting German industry in unsuspected ways. The euro crisis was triggered – though not caused – by a massive overshoot of the Greek public-sector deficit at the end of 2010. The crisis spread through the eurozone periphery and, by 2012, it threatened the very existence of the eurozone itself. Mario Draghi, the president of the European Central Bank at the time, intervened and made his famous declaration that he would do whatever it took to save the euro. The crisis caused the massive devaluation of the euro against the dollar, which further raised the competitiveness of German industry by making exports cheaper.

I used to call this a beggar-thy-neighbour strategy: entering a monetary union to fix the exchange rate with your trading partners, and then cutting your wages to improve your competitiveness. This, too, worked exceedingly well – until it didn’t.

But, for a while, everything had suddenly turned in German industry’s favour – the gas, the exchange rate, globalisation and the revolution of global logistics. The fanboys in the national and international media celebrated the new Wirtschaftswunder, ‘economic miracle’. The trophy of the sick man of Europe had long passed to others.

But it was at this time – the 2010s – when many of the worst decisions were taken. Germany increased its dependence on Russian gas. It underinvested in optical fibre, digital infrastructure and digital technology. It increased its reliance on exports. In the second half of the last decade, Germany registered current-account surpluses of more than 8 per cent of economic output for several years. For an economy the size of Germany, this is unbelievable.

All this is part of what I call the neo-mercantilism mindset. Neo-mercantilism is not a policy. It is a system. And everybody in Germany was supporting it. The main protagonists were the two largest party groups: Merkel’s Christian Democrats, the CDU, and her Bavarian sister party, the CSU; and the Social Democrats, the SPD. The Social Democrats have been in government since 1998, with only a four-year interruption. At one level, the goal of neo-mercantilism is to create large export surpluses. It is the twenty-first-century pursuit of eighteenth-century French trade policies, with nineteenth-century companies, using the technologies of the twentieth century. That also worked, until it didn’t.

Mercantilists, old and new, are suspicious of disruptive technologies. They like to trade physical goods. The mercantilist mindset goes hand in hand with technophobia. Add the two together, mix in some fiscal and monetary conservatism, a protectionist financial model, and voila, you have the German economic model in a nutshell.

Support for the neo-mercantilist model extends beyond politics, and is also reflected in how the media reports on the economy. Newspapers write about surpluses in the same way they write about football. For several years running, the German media declared Germany the Export-Weltmeister, the ‘export world champion’, despite the fact that this category has no economic meaning. It was a celebration of an economic imbalance – and of a political and economic dependency that later turned out to be very unhealthy, and costly.

The domestic-policy counterpart to neo-mercantilism is corporatism. For a country to pursue mercantilist policies, it needs to work hand in hand with the corporate sector. For decades, governments of the left and right subordinated national politics in the interest of specific champion industries. The CEOs of those chosen industries in turn had special access to government – unlike Karl Albrecht, the entrepreneurial anti-hero of my home town. It felt at times as though the car industry chiefs had their own private keys to the chancellery in Berlin.

This is why errors of judgement in the corporate sector get amplified. Everybody hangs together. Everybody believes in the old industrial model. If you believe, as so many Germans still do today, that you need a fuel-driven-car industry to run a successful economy, you may not spot an electric car when it is coming your way and running you over. The German car-industry chiefs, all male, initially thought of electric cars as toys for girls. VW’s erstwhile chairman, Ferdinand Piëch, famously said that there was no space for electric cars in his garage. This attitude was the same as that of the Siemens manager who dismissed the smartphone as a ‘little device’. They all committed what I call the Thomas Watson error: Watson was a chairman of IBM in the 1940s who infamously predicted that there would only be demand for five computers in the entire world.

Watson’s successors saw it differently, and went on to invent the personal computer. The problem is that, in a mercantilist world, when a misjudgement is made, there is nobody there to correct it. Everybody is in the same boat. The German government colluded with the car industry, and even continued to help them when they installed software cheating devices in order to mislead emissions testers. Instead of investing in software or electric batteries, or investing in companies that made them, the German car industry went to criminal extremes to keep the old technology kicking for a little while longer. What the neo-mercantilists in the German government did was to turn a bad bet by a single industry into a bad bet for the whole country. This was not just a case of beer and sandwiches, as corporatism was known in the UK; it was economics the equivalent of Russian roulette.