Why is the current government harming Germany’s middle class so much?
by Christian Kreiss,* Germany
(9 January 2023) A lot of recent political and economic measures clearly harm our middle class, the backbone of our prosperity. Leading business representatives say: “the substance of our industry is threatened”1 or: “we are simply getting poorer. I’ll draw you a picture for Germany and I wouldn’t be surprised if we end up 20 to 30 percent poorer.”2 The conservative “Handelsblatt” newspaper speaks of a threat of deindustrialisation of Germany.3
Instrumental to this decline are the policies of both our foreign minister and our economy minister. What are the effects of such policies, what could be their motives, and who benefits from them? (This text was written late October 2022. Edit.)
Policy measures and their impact
Energy policies
Even before the start of the Ukraine war, on 3 February 2022, Annalena Baerbock said: “only one person benefits from Nord Stream 2: the Putin system.”4 This statement is wrong. The cheap and very environment-friendly Russian pipeline natural gas benefits our middle class and our citizens to a great extent. It provides cheap energy supply for our households at competitive costs for the companies in our country. The statement shows well the one-eyedness and ideological lens through which the Secretary of State views the world. For her, the interests of people and businesses in this country play no significant role worth mentioning.
Sanctions policy and vilification of Russia
Since the Ukraine war, Ms. Baerbock has been stirring up resentment against Russia to a great extent, denigrating the country and its people, thereby further fuelling the war and preventing any attempts for peace negotiations. Statements such as “This will ruin Russia”5 on February 25, 2022, on the eve of the first sanctions package or her remarks that she intended to damage Russia in such a way that “it will not be able to get back on its feet economically for years”6 are fuelling antipathy and hostility against the Russian people and preventing all efforts toward peace. The constant demands of Green politicians for more and more arms deliveries contradict decades of Green policy principles.
On a margin: to me, it is a scandal of the highest order that Health Minister Lauterbach can declare war on Russia via Twitter and not be immediately removed from office for diplomatic misconduct of enormous proportions.
The German sanctions regime against Russia is hurting German SMEs to the greatest possible extent. This summer, gas prices for German industry were around eight times higher than those of the US competitor.7 Our SMEs will not survive this for long. Added to this are sanction-related delivery failures and supply bottlenecks, which are also affecting production.
The German government’s energy policy is also fatally flawed from an environmental point of view. Instead of sourcing gas directly from Russia via the pipelines, it is now being liquefied, sent around the world and ends up back on the European market at highly inflated prices. In addition, larger quantities than before of extremely environmentally harmful U.S. fracked gas are now arriving in Europe at much higher prices than Russian pipeline gas. Something similar is happening with Russian oil, which now ends up back on the European market via costly and environmentally damaging triangular deals because of the sanctions. This is an absurd policy that massively damages the environment and the economy.
Economic policy
The Minister of Economy, Habeck, excels in incompetence, economic policy zigzagging and misjudgements. A few examples. The Minister of Economy believed that the Federal Financial Supervisory Authority (Bafin) was in charge of checking tradesmen’s invoices.8 Faced with dramatically rising gas prices, he wanted to introduce a gas price levy that would have raised gas prices for end users even further. Then the exact opposite, the about-face of a gas price cap.
Mr. Habeck’s idea of shutting down the three remaining nuclear power plants on 1 January 2023, when it starts to get really cold, is hard to beat in terms of economic short-sightedness. Instead of working out a detailed energy roadmap through the winter months based on the Swiss model, the Minister of Economy seems to prefer counting on a mild winter and good luck.
Statements such as “we don’t have an electricity problem, we have a gas problem,” or “stores aren’t insolvent, they just don’t sell anymore” speak volumes. For companies, competence, planning security and reliability are important. These cornerstones of the economy are being ruined by such a minister of economy.
I fully agree with Sarah Wagenknecht’s statement: “the Greens are the most dangerous party in the Bundestag.”9 Moreover, the policies of the two leading Green politicians do not help Ukraine in any way and, in my opinion, harm the Russian economy far less than the German economy.
Who is benefitting?10
This raises the question: why do our top Green politicians pursue such anti-business policies at the expense of the citizens? One man’s grief is another man’s joy. Not everyone is unhappy about this Green policy, which is damaging to small and medium-sized businesses. For years, the USA has wanted to cut off Germany from the cheap Russian natural gas supply.
Nord Stream 2 has been a thorn in the side of the USA for years. For example, even before the Ukraine war, U.S. President Biden said on 8 February 2022, “if Russia invades Ukraine, the Nord Stream 2 pipeline has no future.” Asked how he would manage that with a project under German control, Biden said, “I promise you we will get it done.”11 It has since been accomplished. Top U.S. economist Jeffrey Sachs suspects that the U.S. carried out the blasts.12
This final cut-off of Central Europe from the Nord Stream pipelines was described by U.S. Secretary of State Anthony Blinken as a “tremendous opportunity” six days after the blasts on 2 October 2022.13 Apart from rising fracked gas exports, the weakening of Germany’s middle class also means very good and, above all, cheap entry opportunities for corporate buyers from the United States.
Already in 2018, large US investment companies such as Blackrock or Vanguard owned 34.6 percent of the shares in all DAX companies. Another 20 percent belonged to British and Irish asset managers.14 The problem: this business model does not work for medium-sized companies because they are not listed on the stock exchange but are family-owned and the families do not want to sell in the normal course of business. The cheap money policy of the USA over the last 15 years has created a great deal of investment-seeking money that is now urgently seeking lucrative exploitation.15
Should there indeed be a weakening and bleeding of the German middle class, this offers a “tremendous opportunity”, a great opportunity to buy up many of them cheaply. The Nord Stream blasts have cemented this favourable opportunity.
Whose side are our (Green) leaders on?
And so the question arises: which side are our top politicians on? Whose interests do they represent? The interests of our middle class, our citizens or other interests?
Even during the lockdown policy era, Green politicians distinguished themselves with demands for lockdowns that were as long and as harsh as possible. The lockdown policy weakened small and medium-sized companies enormously. Every lockdown day brought extra billions in profits for the large corporations and the billionaires behind them.16 Even during the lockdown period, while the Greens were still in opposition, they did their utmost to pursue a policy that was hostile to small and medium-sized businesses and damaging to them.
Now the Green policies are once again supporting the interests of large international corporations at the expense of small and medium-sized domestic companies via deeply anti-business energy and sanctions policies. In my opinion, this is possibly related to the fact that Ms. Baerbock is a member of the “Young Global Leaders” of the World Economic Forum (WEF) in Davos.17 The Forum is known to represent the interests of the large international corporations and the billionaires behind them.
In her now famous statement at the end of August, our foreign minister made it clear whose side she was on: "no matter what my German voters think,” the sanctions damaging the German economy and people will remain, even if there are riots in the winter. At the end of August, Ms. Baerbock herself reckoned that people in Germany would “take to the streets and say they can’t pay their energy prices.”18 Nevertheless, she said, she wants to maintain sanctions at all costs, even against the interests of German voters.
In this context, statements by Oskar Lafontaine from August 2022 are perhaps illuminating: “Germany is not a sovereign country. [...] Germany is acting as a vassal of the USA in the Ukraine war. [...] The leading politicians of the ‘traffic light’ coalition, Scholz, Baerbock, Habeck and Lindner are loyal US vassals.” The Greens had “turned into the worst war party in the German Bundestag.” The statements “by Annalena Baerbock that we should ‘ruin Russia’ must already be called fascistoid. [...] German foreign policy harms the interests of our country and is not a contribution to peace in Europe.”19
Former SPD politician and First Mayor of Hamburg Klaus von Dohnanyi writes something similar in his book published in January 2022: “Today, Germany and Europe are not sovereign in matters of security and foreign policy. It is the U.S. that sets the direction here in Europe. Are they pursuing our interests in the process? Are they leading Europe into a peaceful future in terms of foreign and security policy? I have my doubts.”20
What to do?
The two top Green politicians are actively damaging our middle class, the basis of our prosperity. Our Foreign Minister in particular, by her own admission, is not pursuing a policy for her German constituents, but rather, in my opinion, as a “Young Global Leader,” is promoting the interests of major international corporations whose owners and bosses meet with her regularly in Davos.
The solution to this unpleasant situation would be conceivably simple, namely what Oskar Lafontaine suggests: “push for a ceasefire, the presentation of a peace plan and the activation of Nord Stream 2.”21
These recommendations by Lafontaine were made before the natural gas pipes got blown up. But at least one Nord Stream pipe is seemingly still intact and could be put back into service. This would significantly improve our energy supply, especially in the critical winter months, and thus relieve the burden on our middle class and our households.
| * Prof. Dr Christian Kreiss, born 1962: Studies and doctorate in economics and economic history at LMU Munich. Nine years of professional experience as a banker, seven of them as an investment banker. Since 2002 professor of business administration with a focus on investment, financing and economics. Author of seven books: Gekaufte Wissenschaft (2020); Das Mephisto-Prinzip in unserer Wirtschaft (2019); BWL Blenden Wuchern Lamentieren (2019, together with Heinz Siebenbrock); Werbung nein danke (2016); Gekaufte Forschung (2015); Geplanter Verschleiss (2014); Profitwahn (2013). Three invitations to the German Bundestag as an independent expert (Greens, Left, SPD). Numerous television, radio and magazine interviews, public lectures and publications. Member of ver.di and Christians for a Just Economic Order. Homepage www.menschengerechtewirtschaft.de |
(Translation “Swiss Standpoint”)
1 BDI-President Siegfried Russwurm Early September 2022: https://www.berliner-zeitung.de/wirtschaft-verantwortung/erste-firmen-stoppen-produktion-fuer-immer-substanz-der-industrie-bedroht-li.262725
2 DIHK CEO Martin Wansleben: https://www.nachdenkseiten.de/?p=86125
4 ZDF 3 Feb. 2022: https://www.zdf.de/nachrichten/wirtschaft/baerbock-nord-stream-2-russland-100.html
5 rnd 25 Feb 2022: https://www.rnd.de/politik/ukraine-krieg-baerbock-ueber-sanktionen-das-wird-russland-ruinieren-RZDYS2DEPRK5OST7ZGGRZ6UN4I.html
6 Anne Will, focus 2 May 2022: https://www.focus.de/kultur/kino_tv/tv-kolumne-anne-will-baerbock-will-dass-russland-nicht-mehr-auf-die-beine-kommt_id_92735159.html
7 Handelsblatt 29 Aug. 2022: https://www.handelsblatt.com/unternehmen/gas-und-strom-deutschland-steckt-in-einer-energiepreisfalle-in-schluesselindustrien-werden-betriebe-reihenweise-schliessen/28622880.html
9 https://www.youtube.com/watch?v=YRnovaXQ4dI
10 The following remarks partly reproduce my statements of an essay which appeared in mid-October 2022 among others on https://www.nachdenkseiten.de/wp-print.php?p=89164.
11 https://www.zdf.de/nachrichten/politik/scholz-biden-ukraine-konflikt-100.html
12 https://www.nachdenkseiten.de/?p=88831#h08
13 https://www.youtube.com/watch?v=_AL5Y3wNgBs
14 https://www.focus.de/finanzen/boerse/investment-wem-gehoert-die-deutschland-ag_id_10787791.html
15 https://www.nachdenkseiten.de/wp-print.php?p=89164
16 Kreiss, Christian on Lockdowns: https://www.heise.de/tp/features/Lockdowns-Wer-gewinnt-wer-verliert-6335550.html?seite=all
18 Welt.de 1. Sep. 2022: https://www.welt.de/politik/ausland/article240801361/Baerbock-Regierung-steht-an-der-Seite-der-Ukraine-egal-was-meine-deutschen-Waehler-denken.html
19 Berliner Zeitung 30 Aug.2022: https://www.berliner-zeitung.de/politik-gesellschaft/oskar-lafontaine-deutschland-handelt-im-ukraine-krieg-als-vasall-der-usa-li.261471
20 Klaus von Dohnanyi, National Interests: Orientation for German and European Policy in Times of Global Upheaval, Munich, Siedler, January 2022, Foreword p.10