I caught this Twitter thread last week, and wanted to make sure I got a chance to talk about it. It’s by Andrew Hammel, an American living in Germany. The first people to pass it around to are all of your friends who still think Angela Merkel was the real leader of the free world over the last six years.
After that? Pass it on to all of your friends and relatives who think that “Social democracy – Socialism lite – is financially self supporting, and doesn’t depend on literally everything going perfectly.And while it’s about European macro economics, there is an inevitable Minnesota angle below Mr. Hammel’s piece, which follows. And speaking of Minnesota – whenever “Germany” is mentioned in the piece below, fill in “Minnesota”. It doesn’t all fit, but enough of it does that it’s worth sitting up and taking notice.
I think many Germans don’t realize how the energy crisis directly threatens Germany’s future as a prosperous country. Germany has a huge bureaucracy and social-welfare apparatus, and provides comparatively generous subsidies for the arts.
Universities are free, which means the taxpayer pays for them, and lots of vocational training is also heavily subsidized.
Where does all the money to pay for this come from?
If you ask the typical lefty voter, they have only the vaguest idea: Big companies and the rich people in modernist villas who always turn out to be the real killer on German crime shows.
The German media do a terrible job conveying the basic principles of economics and management to viewers and listeners, so most Germans who aren’t engineers or executives or factory workers or otherwise directly involved in producing goods don’t really understand where Germany’s wealth comes from.
But no, the only reason Germany can afford all these dead-weight investments which don’t yield any returns (or only indirect, generalized, time-delayed returns) is because Germany makes things people want to buy.
That’s what brings the money in. Germany doesn’t have many natural resources (at least, that it is willing to recover), so those don’t bring in the cash. Germany’s exports are the main, nearly the exclusive, source of its wealth.
Germany has much higher manufacturing costs than many other comparable countries, and the only way it can keep competitive is through a well-educated workforce, efficiency, high technology, and high quality.
That’s what generates enough value added to make it worthwhile to produce something in Germany, rather than in Hungary or China or the US or Russia, where all input costs are cheaper.
But the energy crisis has the potential to nearly or completely destroy this competitive advantage.
When energy costs are merely three times what they are in a competitive country such as the USA or Romania or China (depending on the product), German efficiency and technical quality and brand reputation can make up for that.
When energy costs rise to 10 times or even 15 times those of competitive countries, and the markets become convinced this is a lasting situation, Germany becomes unsustainable. It becomes impossible to manufacture high value-added products for a profit within Germany.
They may be designed in Germany, but they won’t be made there. It will just be too expensive, period. There’s no way to make the numbers work.
And this leads to long-term erosion of the tax base.
Gradually the money dries up for things which aren’t vital to the survival of the country. And what are those things vital to the survival of the country? Massive government subsidies to make energy and food affordable to the average person.
This is where much of the budget of many developing countries goes right now: to subsidies on diesel and wheat and rice which enable ordinary people to be able to pay their (artificially reduced) bills.
Half of the time you read about riots in places like Indonesia or Egypt, the cause is the government being forced to reduce subsidies on food and energy, often by a mandate from the IMF.
Once Germany reaches the point where it has to subsidize energy and food to prevent social unrest – something it’s about to start doing right now – then money for non-essential things dries up.
Those things include generous welfare, arts subsidies, free education, generous pensions, etc. There will be even more privatizations, and many arts institutions will simply go bankrupt.
Train travel might become something reserved (even more) for the well-off, since (1) subsidies which keep the Deutsche Bahn (even remotely) affordable will disappear; and (2) the average German consumer will not have enough disposable income to pay for a non-subsidized train ticket. Universities will gradually wither on the vine unless they introduce tuition fees, and even then, they’ll shut down entire degree programs which don’t channel graduates into well-paying jobs.
Goodbye humanities, it was nice knowing you.
Sorry regional symphony orchestra, we can’t afford you anymore. Bye-bye small museum, you’re becoming an Aldi. And sorry 2nd-oldest church in Hepperhausen, there’s no money to maintain you anymore.
We can just barely afford the 1st-oldest church, which we have to keep up because it’s a tourist attraction, and we are desperate for every tourist dollar.
And all those state-funded “streetworkers” and “night buses” providing basic assistance to the growing numbers of homeless? Sorry, you’ll have to find money elsewhere.
And then Germany will find itself in the trap many developing countries find themselves in: It will lack the productive industries needed to support the subsidies which it must continue paying to avoid social chaos.
It will go further and further into the red, and will need help from outside entities. And those entities will point out that the only way out of the red is to cut the broad subsidies for basic survival.
Which Germany won’t be able to do without plunging millions of people into genuine, real, not-enough-food-to-eat poverty.
Germany will survive, of course, but it will keep getting steadily poorer and poorer.
And that is very bad for a country’s psyche, since humans regret what they have lost much more bitterly than they regret losing a chance to get something they’ve never had. Deaths of despair will increase, as they did in Russia in the 1990s.
This is why the energy crisis poses a grave threat to Germany’s future as a prosperous country. There is still a way to avert it, but certainly not with the strategies currently favored by the administration. We’ll see whether the EU can pull a rabbit out of the hat.
I’m not optimistic.
The side angles – about things that Germans do when things break down – are too obvious and awful to think about.
Minnesota, and US, angle: we don’t have the Soviet…er, Russian government shutting off gas and raising energy prices by an order of magnitude.
Or do we? I mean, this winter is going to suuuuuuck, and we’ve got a governor who thinks, like Angela Merkel, that shutting off nuke and coal plants and driving people to solar and wind power makes perfect sense.
Originally in this tweet thread:
It will lack the productive industries needed to support the subsidies which it must continue paying to avoid social chaos.
Indeed. “Exorbitant Rise In Energy Prices” Forces Europe’s Top Steelmaker To Close Plants
Putin is not interested in Ukrainian neutrality. He wants to subsume it and elsewhere into Russia and create a Russian world, as he pointed out in last year’s essay and his recent foreign policy document.
Everything Putin and his cronies stand for must be destroyed. He must be defeated in Ukraine. There will be no diplomatic solution until Putin is on the ropes. And that is progressing steadily.
The best European security architecture is NATO. It clearly works and that is why Ukraine and others wish to join it. The EU has always placed the well-being and safety of its citizens above all else, Putin is challenging this because it threatens him and his cronies.
This winter will no doubt be difficult, but what Russia’s sympathizers and Putin haven’t figured is not only the resilience and power of Europe but also how tightly valued democracy and sovereignty are held across the continent. Putin will lose precisely because of this. Despite Putin sympathizers desire for his aggression and imperialism to rewarded.
Wrong thread, Emery.
Sad to see what’s happening in Germany, and I’m praying they wake up before they go full California. It only takes repentance from foolishness.
“how tightly valued democracy and sovereignty are held across the continent”
Right, they love them some Sovereignty. That explains why European countries have given up control of their currency and their borders, replaced their national colors with a faggy blue flag and replaced their populations with 75 IQ African and Pakistani thugs.
Pffft…you’re such an idiot, rAT. Whenever you take the risk of posting your own thoughts, rather than stealing those of your intellectual betters, it’s hilarious.
Germans are getting what they voted for…real hard.
Germany’s energy crisis: storing up trouble for a full-blown recession?
Germany isn’t taking any chances and is preparing for the worst-case scenario
should[when] Russia turn off its gas supply before the winter comes.The outlook is precarious. Germany’s economy is already suffering as its manufacturing industry grapples with supply chains disrupted by the pandemic and the war in Ukraine. If its struggling economy is pulled down further by a full-blown energy shortage crisis, it could shake other eurozone countries too, including Italy, France, Poland, and Spain.
lol. Well, at least the beer will be cold for a change!
“EU ‘loser’ in Ukraine conflict – Hungarian official
The EU has already suffered defeat regardless of the outcome on the battlefield, the parliament speaker insists”
“The EU has suffered severe political and economic damage from its handling of the situation in Ukraine, and can already be declared the loser in the conflict, the speaker of Hungary’s National Assembly claimed on Sunday.
Laszlo Kover, who is a member of Prime Minister Viktor Orban’s Fidesz party, accused Brussels of failing to prevent the conflict through political means, with the result that it’s “unable to restore peace diplomatically.”
“Under external pressure, the EU is acting against its most basic economic interests and should already be considered a loser, regardless of which of the parties directly involved in fighting will declare itself the winner,” he said.
Powers outside Europe are trying to condemn the bloc’s members to “military vulnerability, political subjugation, economic and energy incapacity, financial indebtedness and social disintegration,” with Brussels helping them to achieve this goal, the parliament speaker claimed.
“The EU is grappling with soaring natural gas prices, the prospect of energy shortages in winter and spiking inflation in the wake of sanctions it imposed on Russia over its military operation in Ukraine.
Brussels has largely followed the US stance of seeking to weaken Russia through sanctions, while supplying Kiev with weapons and financial aid.
Hungary has remained relatively neutral since the outbreak of fighting in late February. It has refused to send arms to Ukraine and criticized EU sanctions against Moscow, calling them ill-conceived and self-defeating. Budapest, which is heavily dependent on Russian energy, was also able to negotiate an exemption for itself from the bloc-wide ban on Russian oil.”
Lol…cracks beginning to form….
“Austrians take to the streets over living costs
Activists gather to protest against inflation and the effects of anti-Russia sanctions”
“An estimated 3,000 people took part in the rally, as reported by the Heute newspaper, citing the city police force. Another gathering, dubbed the “patriots’ march,” also took place in downtown Vienna.
Protesters called for the lifting of “suicide-sanctions” – an apparent reference to the punitive measures imposed on Russia in the wake of its military operation in Ukraine. Others denounced “NATO’s warmongering,” and a perceived push for militarization in Europe in general.
Last Saturday, some 70,000 turned out for a march in the Czech capital, Prague. Demonstrators demanded that the government secure direct contracts with gas suppliers, including Russia, to get ballooning energy prices down. They also called for the Czech Republic to become militarily neutral, and denounced NATO and the EU.”
lol
The funniest part of the whole German situation, is that Trump predicted this three years ago. The German delegation were very amused, as judging by their laughter and expressions. What’s that old saying; “he who laughs last, laugh best?”
Bad economic policy is correctable, especially in a democracy. But the error signal sent to the policy makers by the voters is delayed and distorted at all scales. Only big signals are received at the same amplitude that they are sent at. But human beings are . . . not rational at any scale of organization. A single individual may decide that the Jews are responsible all of the wickedness in the world, so may a nation of thirty million people.
People will sacrifice prosperity in return for achieving a higher valued goal, even across generations. But willingness to commit to that sacrifice that implies a certain knowledge of the future. There were many Soviet citizens who accepted poverty and much, much worse because, like Trotsky they believed that “[a]s long as I breathe I shall fight for the future, that radiant future , in which man, strong and beautiful, will become master of the drifting stream of his history and will direct it towards the boundless horizons of beauty, joy and happiness!”
The belief in the “radiant future” of Soviet socialism was wrong. It was never to come to exist, and no sacrifice on the part of Trotsky or anyone else could make it exist. But people believed in it for seven decades.
Nobody likes to be poor, so the system self corrects to a certain extent.
But we know, too, that sometimes it fails.
One of my science heroes is Richard Feynman. Feynman was a physicist and frikkin’ genius by all accounts.
The reason Feynman is one of my science heroes is because he had a very cold blooded attitude towards science. It gives you a set of tools, and if the problem you are trying to solve falls in the domain where those tools work, you can solve the problem. If it doesn’t fall into that domain, you are doing something with your science tools, but it ain’t science.
Worth reposting in light of this thread. Illuminating.
https://www.breitbart.com/europe/2022/09/08/certain-industries-will-stop-producing-admits-german-vice-chancellor-in-car-crash-interview/
And then there is this:
Freeze for Global Agenda: U.N. Demands European Nations Do Not Return to Fossil Fuels over Energy Crisis
Pingback: In The Mailbox: 09.12.22 : The Other McCain
“CDU Secretary General Mario Czaja added: “Next chapter: This is not a blackout. We just don’t have electricity anymore.”
LMAO. Peak leftist logic.
First, you must shut down your business to flatten the curve. Now you must shut them down to prop up a corrupt, organized crime regime.
germany is foolishly green yes but making its problems worse by sanctions which hurt germans worse than russia the war is over russia won germany is just figuring out they lost
but the offenseeive what abou tthat image wisconsin conquered all of minnesota east of the mississippi but we are righting back have taken almost half of st louis county and are closing in on ely hope to take it before winter thats what this big offensive is like propaganda telling a good story to keep the money flowing from usa to ukrain
how long will germans sit freezing in the dark to support lesko brandons bagmen before germans say enough and tell ukraine to surrender or face a two front war does germany have submarines wonder how hard it would be to mine the harbor at odessa end ukraine import and export entirely
Are you talking Russia or Ukraine here? Both are well advanced in the corruption dept, although I think Russia has the clear lead.
Are you talking Russia or Ukraine here?
This turn of phrase was also taken into use by EU President Ursula Von der Leyen regarding electricity use among the EU peasants.
https://www.americanexperiment.org/european-union-president-calls-for-a-mandatory-target-for-reducing-electricity-use-to-flatten-the-curve/
This is what they call “demand side economics.”
How you liking it so far?
Which corrupt regime is NATO propping up at the risk of their own economic survival, Nerd?
Russia is every bit as corrupt as Ukraine, they’re all part of the same syndicate, just tow families going to the mattresses for awhile. But Russia isn’t getting piles of cash from willing Western rubes; he’s bleeding them.
Putin has Germany’s head in a *fuckin* vice.
Well, the Swedish right seems to have pulled off a victory. Kind of a pyrrhic victory. Now, just as things go all to hell because of decisions made by the left over the years, the right will get the responsibility to fix things. While the left sits back, feet up and snipes.
I think the Swedish Democrats should demand concessions being the largest party and all.
jdm, job #1 is a repatriation program, for any “migrant” that has not yet even bothered to apply for legal residency.
Russia the new Nigeria!
Good Day,
I am Mr. Viktor Zubkov an investor and a director with Gazprom Russia. Considering the current economic sanctions melted on Russia by some European countries and United States of America which is seriously affecting us now, I’m soliciting for your consent transfer Sixty eight Million Dollars ($68M) investment funds deposited with an American bank into your personal bank account for investment and also to escape confiscation by USA Government. Please respond back for more details.
Yours Truly,
Mr.Viktor Zubkov
Chairman of the board of directors Gazprom