The Tragedy of the German Commons

State interference in free market capitalism to advance social agendas has consequences

The German manufacturing powerhouse, which has made the German economy the envy of Europe and the West, recently has been running into serious problems. These problems create significant political challenges and headwinds for German Chancellor Olaf Scholz and his Social Democratic Party, whose popularity has crashed among economic woes and growing resentment towards his government’s immigration policies. Scholz, like EU European Commission President Ursula von der Leyen, is a product of the political machine built by former German Chancellor Angela Merkel. All three have strong ties to the World Economic Forum. The primary beneficiary of the resulting political turbulence will be the up-and-coming German center-right populist party Alternative for Germany (Alternative für Deutschland), which is decidedly anti-globalist.

• Germany has the largest national economy in Europe and the third-largest by nominal GDP in the world.

• It has a highly developed social market economy with a strong manufacturing sector.

• Germany recorded the highest trade surplus in the world in 2016, worth €310 billion.

• The country is a significant exporter of goods and services, with €1.81 trillion worth of exports in 2019.

The largest employer in Germany is the Volkswagen automobile manufacturing group. Approximately 6.8% of Germany’s GDP comes from Volkswagen's revenue. Volkswagen is now openly discussing the need to close current German manufacturing facilities.

• One of the largest employers in Germany, Volkswagen employs around 300,000 people in Germany, out of a global workforce of 650,000.

• As a symbol of German industrial prowess, Volkswagen's struggles, such as considering plant closures, have significant implications for the country’s economy and employment.

On September 03, 2024, Epoch Times reported:

Volkswagen Considers Historic German Plant Closures Amid Chinese EV Competition Pressure

Volkswagen is considering factory closures in Germany for the first time amid increasing pressure from cheaper Chinese electric vehicle competition.

The automaker is targeting $11 billion in savings by 2026 to survive the transition to electric cars.

“The situation is extremely tense and cannot be overcome by simple cost-cutting measures,” Volkswagen brand chief Thomas Schäfer said in a statement on Sept. 3.

As Germany’s largest industrial employer and Europe’s top carmaker by revenue, Volkswagen employs about 680,000 people. It said that amid the pressure, it also felt forced to end its job security program, which has been in place since 1994 and prevents job cuts until 2029.

It said that all measures would be discussed with its works council.

One analyst told The Epoch Times that German plant closures “are inevitable” as Chinese competition undermines Germany’s manufacturing model.

And then today, September 11, a related Epoch Times story was published:

Volkswagen Scraps Jobs Guarantees at Six German Auto Plants

Negotiations between Volkswagen management and IG-Metall union had been due to start in October, with strikes looming before Christmas.

Volkswagen has given the IG Metall trade union notice it is scrapping labor agreements, including a promise not to make redundancies at six German auto plants before 2029.

The move was made after the company’s management warned earlier this month that it could shut plants in Germany for the first time since Volkswagen was founded in 1937.

The employment guarantees, which date back decades, are being sacrificed as part of a cost-cutting drive as Volkswagen adjusts to cut-throat competition in the electric vehicle market from cheaper Asian auto manufacturers, especially from China.

Volkswagen CEO Oliver Blume said the company must cut costs to remain competitive.

Volkswagen, which also owns Audi, plans to reduce costs by more than 10 billion euros ($11 billion) by 2026.

In a statement, IG Metall said: “These cancellations arrived seconds ago.”

Negotiations were due to start in October, although strikes were forecast before the end of the year.

The head of Volkwagen’s works council, Daniela Cavallo, has promised there would be fierce resistance to redundancies and plant closures and has blamed underperforming management.

“Volkswagen’s problem is upper management isn’t doing its job,” Cavallo said.

“There are many other areas where the company is responsible. We have to have competitive products, we don’t have the entry-level models in electric cars.”

In May, Volkswagen finance chief Arno Antlitz warned that the automaker had two or three years to prepare for competition from China, which can produce electric vehicles at lower prices.

Tuesday’s move is also a blow to German Chancellor Olaf Scholz, whose popularity has crashed among economic woes and growing resentment towards his government’s immigration policies.

So, what is “driving” this slowdown at Volkswagen and across the German automobile manufacturing sector? Four key factors. The cost of energy, conversion to electric automobiles, Chinese competition, and State “management” of the German economy. Sound familiar? The Domestic US Automobile manufacturing sector is confronting precisely the same problem set.

Returning to the Epoch Times:

Politicians Have ‘Accelerated the Decline’

Andy Mayer, chief operating officer and energy analyst at the free-market think tank Institute of Economic Affairs, told The Epoch Times by email that German plant closures are “inevitable at Volkswagen and elsewhere.”

“The Volkswagen Passat in English means roughly ‘trade winds from the east impacting the people’s car,’ and this is the situation in Germany today,” he said.

Mayer said that Chinese competition is “undermining the industrial model that makes Germany an outlier in the west with 18 percent of the economy in manufacturing, versus 8 [percent to] 10 percent in most of the rest, including the UK.”

He said that the German industrial relations model of social partnership, in which costs are managed by agreement with powerful unions and political support, has at times sustained this system by restraining wages.

“But it impedes change when more radical action is required,” Mayer said.

“Companies facing global competition, for example, cannot sustain generous job protection programs, agreed when times were good and the efficiency gap with rivals large and sustainable through high levels of capital investment. Nor can they repetitively impose cuts on their efficient international operations when much of the cost and waste is within Germany.”

He also said that German politicians have “accelerated the decline by prioritizing virtue signaling on climate change, and pandering to anti-nuclear activists, over energy security,” adding that this has led to dependence on Russian gas and coal, resulting in some of the most expensive and unreliable energy in Europe.

---

The automotive industry in mainland China has been the largest in the world measured by automobile unit production since 2008. As of 2024, mainland China is also the world's largest automobile market both in terms of sales and ownership. China has a vast and diverse automotive industry, with numerous plants operated by both domestic and international manufacturers. Here’s a summary of relevant information:

• Foreign-owned plants: Tesla has a wholly-owned plant in Shanghai, making it the first foreign automaker to establish a factory in China without a joint venture partner. Other foreign manufacturers, such as Volkswagen, General Motors, and Ford, have joint ventures with local partners.

• Domestic plants: China has hundreds of automobile manufacturers, including state-owned, privately-owned, and joint ventures. Some notable domestic players include BYD, Changan Automobile, SAIC-GM-Wuling, GAC Aion, and Geely.

• Export-oriented production: Chinese automakers are increasingly focusing on exports, with many plants designed to produce vehicles for global markets. BYD, for example, has built factories in Thailand, Brazil, Hungary, and Uzbekistan, while also planning a plant in Mexico.

• Electrification: China is a leader in electric vehicle (EV) production, with many manufacturers investing heavily in EV and plug-in hybrid technology. BYD, in particular, has a significant presence in the EV market, with a global sales share of over 50% in 2023.

  

• Export friction: Growing Chinese car exports are causing friction with the U.S. and Europe, with regulators considering measures against imports of China-made electric cars.

• Consolidation: The Chinese automotive industry is experiencing consolidation, with joint venture manufacturers withdrawing from the market or scaling back production capacity.

• Electrification and sustainability: China’s automotive industry is shifting towards electrification, with a focus on reducing emissions and meeting sustainability goals.

• China’s globally dominant position in EV production capability is due to years of strategic investments in battery technology and related mineral resources, which the CCP has guided. When you hear Western governments and politicians advocating for rapid conversion of vehicle and truck fleets from petroleum to electric, you should immediately consider which Nations benefit most from such policies. And is the case with most “alternative energy”-based systems (particularly solar), the answer is clearly the CCP/China. In 2022, China had more battery production capacity than the rest of the world combined. Source: Visual Capitalist.

  

• China’s Near-Monopoly Continues Through 2027. Global lithium-ion manufacturing capacity is projected to increase eightfold in the next five years. Here are the top 10 countries by projected battery production capacity in 2027. Source: Visual Capitalist.

  

---

It is difficult to avoid a creeping sense of irony or Schadenfreude when the leading example of a social market economy, the German socialistic State-managed industrial economy, is being undermined by the long-term strategic planning of the world’s largest communist party (the CCP) and its predatory hybrid communist/free market capitalism economic model.

So, how will Germany respond to this threat, which is at least partially consequent to believing its own propaganda concerning the benefits of the social market economy model, unfounded faith in the DEI/ESG logic of WEF “Stakeholder Capitalism,” and a large dose of “Green Energy” Kool-Aid?

With Union leader denial of reality, blaming corporate leadership, protests and civil unrest, of course.

Again, returning to Epoch Times reporting:

The cost-cutting program is leading to a major conflict with the company’s works council and IG Metall, Germany’s largest trade union, which said that it will “fiercely resist” any plant closures.

In a statement, Thorsten Gröger, IG Metall regional director, said the news “threatens the very foundations of Volkswagen, endangering jobs and locations massively.”

“This short-sighted and highly dangerous course risks destroying the heart of Volkswagen,” he said.

Daniela Cavallo, chair of the General Works Council of the Volkswagen Group, said the result is “an attack” on its “jobs, locations, and collective agreements.”

“This puts VW itself, and thus the heart of the company, at risk,” she said. “We will fiercely resist this. With us, there will be no plant closures.”

A good friend of ours, a German-born reporter long working for a US-based Christian publication, recently visited us after returning from a visit to her native Germany. She said that she hardly recognized the place. Solar panels were on all the houses, including in quaint mountain communities that had remained unchanged for centuries, and giant electricity-generating windmills were everywhere. She said it was all incredibly ugly, and had destroyed the character of the country of her birth.

This is what happens when a central State controls the economy and gets caught up in bending reality to conform to its PsyWar promoted propaganda, particularly under a socialist system. The economy and businesses cannot adapt efficiently to changing conditions. Along comes a more efficient predatory competitor, and suddenly, all the feel-good social engineering and safety net promises are voided in the face of a paradigm shift, a disrupted economic reality.

Germany, stripped of cost-efficient energy alternatives such as nuclear and natural gas, is now wedded to the most expensive sources of energy, that being solar and wind. Locked into a “Green” future, the CCP/China will first destroy the German manufacturing base and then proceed to sell Germany the products that it can no longer produce for itself or export for revenue. Meanwhile, entranced by the pied piper of globalism, UN Agenda 2030, and massive uncontrolled immigration from Africa, the Middle East, and the Indian subcontinent, Germany will lose the very culture that nurtured the growth and development of that industrial base that once made Germany the envy of the world.

The combined efforts of all the German intellectual economists (and their heirs) who came up with the social market economy theory in the first place will not be able to put Humpty Dumpty back together again.

Welcome to the New World Order.

Perhaps Germany and the rising AFD party should consider the economic logic of the Austrian School of Economics, and get the German National State out of the business of “managing” the German economy.

---

Image Below Courtesy of El Gato Malo

Afuera, a Spanish word, has gained prominence in connection with Javier Milei, the newly elected President of Argentina. In various online sources, including social media, news articles, and online forums, “afuera” is used to describe Milei’s stance on reducing bureaucracy and government ministries.

Meaning in Relation to Javier Milei’s Policies

In the context of Milei’s presidency, “afuera” roughly translates to “out” or “remove” in English. Specifically, it refers to his plan to eliminate or significantly reduce the number of government ministries in Argentina, from 18 to 9, as seen in his executive order on his first day in office.

In some instances, “afuera” is used as a rallying cry, echoing Milei’s anti-bureaucratic and libertarian ideology. It is often accompanied by enthusiastic expressions of support for his policies, such as “¡AFUERA! Milei Leads the Way on Slashing Bureaucracy” or “Socialist ANC? Afuera!” (implying a call to action against socialist or communist ideologies).

Proponents of Milei’s approach argue that reducing bureaucracy will help eliminate corruption, increase efficiency, and stimulate economic growth. They cite economic logic, such as the incentives of bureaucrats to preserve the status quo, as justification for his initial move to cut ministries.

In summary, “afuera” in the context of Javier Milei refers to his plan to reduce or eliminate government ministries in Argentina, reflecting his anti-bureaucratic and libertarian ideology. The term has become a rallying cry for supporters of his policies, emphasizing the need for change and the potential benefits of a more streamlined government.

---