Deutschland’s Denouement
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Bibliographic details
- Authors: CHRISTOPH B ROSENBERG
- Published: March 3, 2025
Overview
- Title reviewed: Kaput: The End of the German Miracle by Wolfgang Münchau, Swift Press, London, 2024, 211 pp., $33.
- Reviewer: CHRISTOPH B. ROSENBERG, economist and former deputy director of the IMF’s Communications Department.
- Publication: F&D Magazine, March 2025.
- Central thesis highlighted: Germany’s postwar neo-mercantilist export model is in crisis amid stagnating growth and high living costs.
Diagnosis of structural weaknesses
- Manufacturing fixation, especially on fossil-fuel-powered cars.
- Dependence on energy imports from Russia and on exports to China (recently replaced by the United States).
- Scarcity of skilled labor.
- Excessive bureaucracy and slow pace of digitalization.
- Parochial financial system.
- Gross neglect of infrastructure investment because of rigid fiscal rules.
- National mindset element: desire not to put at risk what has been attained ("Besitzstandswahrung").
Underlying macroeconomic factors emphasized by the reviewer
- Historically high national saving rate and related capital account surpluses.
- Behavioral links identified:
- Households that save rather than consume incentivize companies to export rather than sell domestically.
- Government obsession with keeping budget deficits low rather than making necessary investment.
- Banks channel household savings into risky foreign investments (as happened in the run-up to the euro crisis in the 2010s).
- Deep-seated aversion to incurring debt framed as the flip side of the export obsession.
Critique of Münchau’s approach and gaps
- Strength: microeconomic narrative built around individual actors, trade competitiveness, and industry fates, supported by anecdotes.
- Omission: limited development of the macroeconomic story of saving, investment, and capital flows.
- Additional missed elaboration: the post–World War II mindset ("Besitzstandswahrung") that underpins reluctance toward start-ups, new technologies (fiber-optic networks, electric vehicles), and investment.
Policy suggestions and reform opportunities (as inferred from review)
- Modify the fiscal "debt brake" to increase public investment.
- Support start-ups and entrepreneurial culture.
- Advance digitalization in earnest.
- Advance the European capital market union (noted as Münchau’s only concrete proposal, presented in the epilogue and dismissed as unrealistic).
Outlook and scenarios
- Book ends on a downbeat, almost defeatist note, according to the reviewer.
- Glimmers of hope:
- Ongoing debate about the viability of neo-mercantilism in a postglobalization era.
- Presence of successful nonmanufacturing German companies (example given: SAP).
- Potential return of expat German entrepreneurs and researchers if conditions are right.
- Implication: "All may not be lost for Germany," per Münchau as interpreted by the reviewer.
F&D Magazine — CHRISTOPH B. ROSENBERG, March 2025.
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- Deutschland’s Denouement