Lach doch mal: Why are Germans so angry?

Kurzgesagt: With only two and a half weeks before the Federal Elections in Germany, I want to have a crack at what’s going on in the minds of many Germans as they head to the ballots on February 23rd. If you’ve checked German polls over the past few years, you could not have missed the staggering increase in support for parties on either end of the political spectrum. At the heart of this budding call for a drastic regime change is an income distribution struggle between workers and owners of capital that has been brewing for over a decade. The result is a group of angry and polarised Germans yearning for someone to rip up the playbook.

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Surplus - Made in Germany

To see how Germans came to feel this way, we have to look at what’s been driving the economy. For a long time, the key contributor to German GDP has been its vast export share, produced by two parallel developments. Cheap gas from Russia, a skilled domestic labour force as well as favourable economic relations with China meant German goods enjoyed international competitiveness. Simultaneously and arguably more significantly, has been the persistent decline in domestic demand and investment. This has been fuelled by a set of policy decisions that have weakened workers’ income share relative to national income.

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The resulting wealth transfer from those with a high propensity to spend to those with a higher propensity to save, has lowered consumption and raised savings relative to output. But those savings are not being reinvested in German production capacity: from 1999 to 2018, Germans have invested €2.6 trillion more abroad than non-Germans have invested in Germany*. Plus, with purchasing power subdued, Germany has been unable to soak up its own products. Consequently, German growth has heavily relied on foreign demand for German goods, at the expense of the working class.

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Between a (Dwayne the) Rock (Johnson) and a (Kevin) Hard place

This ensuing surplus has allowed the developments of the last few years to put Germany in quite a pickle. First, after a sluggish recovery after the pandemic Germany’s main energy supplier started a war in Europe, explicating the perils of economic dependence. On top of that, China’s increasing geopolitical assertiveness, Chinese industrial overcapacity (also due to weak domestic demand) and protectionist pressure from the US have increased pressure to reduce dependence on Germany’s biggest trading partner. With Trump back in the White House, the trade surplus has put yet another target on Germany’s back.

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Sidenote: Personally, I think the likely trade war between the US, China, Europe and the rest of the world will not solve this problem but rather exasperate it. If Trump wanted to show truly impressive statecraft, he would convince China and Germany of a policy shift that increases domestic purchasing power by enriching their working classes. Anyway…

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These parallel shifts in global trade, geopolitical tensions and policy trends put the German economic model under existential pressure. This pressure is most acutely felt in the pockets of the German working class, voicing their anger through intense labour strikes, clogging up the streets with tractors and increasingly hostile anti-migration sentiment. Of course, the latter is also substantially fuelled by migration-related attacks on civilians all around Germany. Nonetheless, these are all symptoms of a distribution struggle, with an ever-growing part of the population feeling they deserve a bigger piece of the pie.

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Enter the AfD

Angry Germans are looking to political extremes for a paradigm shift. As it so happens, Germany’s second strongest party currently polling around 21%, is the far-right Alternative für Deutschland. This no-longer fringe party, riddled with highly controversial characters, has been prominently lending an ear to Germans’ growing dissatisfaction, promising drastic reforms. However, none of the AfD's proposals include a convincing account on how to address Germany’s weak domestic demand and subsequent trade surplus amidst a rapidly changing geopolitical and economic climate. Instead, I personally think the AfD will achieve nothing beyond further frustration and polarisation. But as we head to the polls the Sunday after next, this anger among many Germans will dominate their voting behaviour. So, in an attempt to laugh through the pain, I appeal to all my fellow Germans: Lach doch mal!

*Trade Wars are Class Wars, by M. Klein and M. Pettis