We are witnessing the end of Germany as a great power. German capital is experiencing its worst crisis in a century as the economic consequences of the war make the industrial model unsustainable and working class poverty is accelerating. The German ruling class wants to respond however by simultaneously accelerating all the strategies that increase its contradictions: militarism, Green Deal, austerity and imperialist aggressiveness.
The flow of gas is slowing down
Sharp drop in June in Russian gas supplies to Germany.
Under pressure from the US, Germany cancelled the Nord Stream 2 pipeline amongst its first responses to Russia's invasion of Ukraine. During these months, the flow of gas has been declining. Among other things because the G7 itself blocks critical gas-related equipment from reaching Germany as part of the sanctions on Russia. In addition, Siemens, like almost all major German companies, joined the sanctions and abandoned the maintenance of Nord Stream 1. As a result, Gazprom has already reduced the flow by 40% and cis now announcing a 10-day shutdown for maintenance in July. The German importer, Uniper, is already insolvent and threatens to become a German-style Lehman Brothers.
In reality, the surprising thing is the ongoing supply of gas. The German media atmosphere is one of open warfare. Germany is leading the way in imposing new sanctions on Russia - seven rounds already. The German government has not only participated in the NATO summit in Madrid but has also shown no hesitation in presenting Russia as its main enemy and Ukraine as a proxy army in the war against Russia to be fully equipped.
Is it any wonder that Russia is cutting off their supplies? What is apparently "strange", but shows well the class nature of the war on both sides, is their intention to send a whole generation of Russians and Ukrainians to the slaughter and in the meantime to carry on trade as if nothing had happened.
German industry on the pillory
The availability of cheap Russian gas is one of the pillars of the German accumulation model. As soon as costs have skyrocketed, companies like BASF have seen their profits fall by 30%. If gas deliveries were to fall below 50%, the company's giant factories would have to close down, say executives.
BASF is a chemical and gas-intensive company. But lighter, almost fully electrified industries, such as machine tools, are no better off either. The price of industrial electricity is designed in Germany to be almost 30% cheaper than in Spain, whose electricity production is made from cheaper sources. But when electricity market prices rise 320% in a year, there is no state design that could save the cost structure.
And to top it off, Germany can't even consume all the gas coming in via Nord Stream. Austria, the Czech Republic, Hungary, Poland and Slovakia depend on the German infrastructure for their access to gas and are demanding that when the time comes when the supply runs out, Berlin must deliver. The German government is theoretically willing to do so. After all, German factories are the biggest consumers in these countries.
According to the Bavarian industrial research institute, should Russian gas supplies not be resumed this July after the "technical stop", German industrial production would fall by 12.7 percent and over 5.5 million workers would be laid off almost immediately. No one wants to speculate in public about what might happen after the first cold weather in autumn.
A first blow to German workers
Evolution of the poverty rate in Germany before the Ukrainian war.
One should not mimic the German media in their fake nostalgia for a supposedly "happy German model" which from the post-war period to the invasion of Ukraine would have guaranteed the working class a standard of living equivalent to that of the petty bourgeoisie.
The Poverty Report 2022, with data from 2021 before the start of the war, was presented last week in Berlin. Basically what it reflects is the effect on workers' lives of pandemic policies focused on saving investments rather than lives.
In global terms poverty in Germany in 2021 affected 16.6% of people, 13.8 million total, 600,000 more than before the pandemic. If before in 2019 9% of working people were poor, during 2021 the percentage rose to 13.1%. Among retirees poverty already reached 17.9% and among young people 20.8%. In the Ruhr, one of the largest workers' concentrations in the country, poverty affected more than 21% of the population.
These are not good-looking numbers. But they predate the escalating food and consumer staples inflation which, as everywhere else, more than proportionally affect the most precarious workers. "What will the situation be like this fall, when the bills with extraordinary charges for electricity and gas arrive in the mailbox?" wondered Spiegel. Today no one dares to give a figure.
Shock plan, war economy and trade unions
Food Bank in Germany
Seeing the disaster coming and fearing an anti-war response, the government has approved a multi-million shock plan, which is in reality a new step towards a war economy: reduction of the fuel tax (3.2 billion euros), end of one of the electricity surcharges (6.6 billion), flat rate of 9 euros on trains -traditionally very expensive- (2.5 billion) and a deduction in the income tax quota of 300 euros for the self-employed (3.1 billion).
The "plan" has served to cushion inflation data in June, but the cumulative annual inflation rate is 7.6%, the highest since reunification. In reality, its goal was to free up part of the workers' monthly budget, sucked directly by the state, so that workers could spend it on consumption. An indirect subsidy to companies and farmers with sedative side effects for wage earners.
The reality? German workers are seeing even their ability to buy food reduced. 39% of the population is trying to spend less on food, 10% "significantly less". And obviously their confidence in the future that the system and the nation holds for them is plummeting according to official surveys.
So, fearing a social outburst beyond what the far right and "Die Linke" can articulate, Scholz is already talking about an Income Pact with trade unions and employers. That is, reinforcing the War Economy and state capitalism in order to impose a lowering of wages to curb inflation, taking out of the pocket of the workers what they must now overpay to the energy suppliers.
The contradictions of the German bourgeoisie
Volskwagen in Shanghai
1 The German ruling class is trapped by its own ideology. On the one hand they see clearly the bet on militarism whose costs they would impose - as was outlined at the NATO summit - in the name of the "sacred union" against the "Russian enemy"; and furthermore they want to accelerate the Green Deal to "reset" accumulation under the banner of the "sacred union" for the climate. But on the other hand they pursue "austerity", that is to say, they want at the same time to reduce the general costs of exploitation of labor: health, schools, integration wages, etc.
At the moment they are shifting military spending to extraordinary items that do not count for deficit and debt purposes. But although the liberals in the coalition government are the kings of "creative accounting" - that is the reason why they are there -, the message uniting the government and the CDU-CSU opposition is that of "fiscal rigor"... above all for the other European states. The problem is that if they combine all the offensive strands against the workers' ability to meet their needs, their own model of accumulation will collapse.
Militarism and Green Deal mean in the first place massive and general transfers of income from labor to capital. That is why they are inflationary. But if to that inflation is added transferring the costs of exploitation of labor to the workers themselves directly... the result is a fall in demand and a brutal social fracture... which would damage the very model of accumulation whether the workers do react politically as a class or not.
This is not a novelty, it is the model represented, for example, by Putin and Lukashenko, Erdogan and Nazarbayev. But as in these cases, it is unsustainable without foreign markets absorbing almost unlimited exports and without an authoritarian development of the state. That is to say, if the bourgeoisie "goes all out", the path is the socialization of militarism and an even more aggressive imperialist policy to secure markets and investment opportunities and capture new ones, as in the original models. War economy and politics for war.
2 A part of the German bourgeoisie believes that the only way to escape and maintain "the model" is to integrate the EU into the US economy as much as possible as long as Biden holds out. The problem is that in order to get US support they have to tear apart the production chains of German industry and "decouple" them from China.
The idea has been on the table for some time and is the basis of German imperialist policy in the Balkans, but it was never intended to go as fast as Washington intends, nor was it ever intended that China's only advantage would be the possibility of producing more cheaply for the Atlantic markets. In fact right now the profit streams of its Chinese subsidiaries from sales in China are crucial for German industries. And German industry keeps reminding the government of this. The statements of the Volkswagen CEO, for example, are more than just a wake-up call.
SPIEGEL: You are also increasingly caught between the fronts of the new East-West conflict between the U.S. and China. Which country do you feel closest to?
Diess: All major markets are important to us. In the USA we are profitable again for the first time in decades, and with a market share of only four percent, we still have greater potential. And China is indispensable for us as a growth market and driver of innovation.
SPIEGEL: You constantly warn against the formation of geopolitical blocs between the U.S. and China. Should corporate bosses like yourself do even more to bring Western values to the world?
Diess: Both of us should also bring Eastern values to the West. We should mediate between the two blocs and shake up Germany. In this country, the extent to which China co-finances our prosperity is extremely underestimated. If we were to disengage from this, Germany would look completely different.
Diess: We would have much less growth, prosperity and employment. Volkswagen, for example, employs 20,000 to 30,000 developers in Germany. Half of them work for customers in China. Four billion euros in profits flow here from the People's Republic every year. I always tell my managers: a large part of your bonus is generated in China.
What should we learn from the German situation?
Family photo from the NATO summit in Madrid last week.
The contradictions of the German bourgeoisie are the same as those of a good part of the European bourgeoisies: to "pull ahead" with Green Deal, militarism and austerity means to pass at a stroke from the outline of a war economy to an economy at war against the great social majorities and especially against the workers.
Following the US and accelerating and intensifying at the same time the imperialist quarrel with Russia and China, as we saw in the G7 and NATO last week, puts the perspective of the globalization of war on the immediate agenda, projecting it as the main horizon of the states in this decade. Ukraine has only been the first victim of the rubbing and tearing of globalization into commercial, political and military blocs. A tearing that will not stop.
That is to say, the path of "sacrifices" and "sacred union" not only means pauperization on the rise - it is already seen, and we are only at the beginning - but its end, its ever closer and now also visible horizon is war, mass and general slaughter in favour of national capital on behalf of its imaginary transcript, the nation, as unviable, decadent and anti-human as that, its material base.
In what is to come, there will be no truces in the antagonism between the system and human life. Only new episodes and phases, more and more cruel, more and more bloody. And there is no support in the establishment and its political and trade union apparatuses. We workers are alone in the face of a system that is convulsing in a terrible way, but with a world to win. It is possible to win it. We must prioritize organizing.