On the ever-changing and often turbulent stage of global economics, Germany has long been
considered one of the more prosperous countries in the world. It ranks fourth when it comes to
the largest economies worldwide, with the United States – given the sheer size and scope of fifty
states – being considered the largest. Among the other heavy hitters are China and Japan,
and much like them both, Germany has prospered greatly thanks to a number of their exports.
On a smaller, more local scale, Germany is the largest economy in all of Europe,
beating out others like the United Kingdom, France, and Italy with its significantly
higher rate of gross domestic product. For a considerable portion of the prior century,
Germany has been able to go from strength to strength in terms of growing its economy. For one,
the country itself is famed the world over for its expertise in the production of automobiles,
allowing them to dominate the market for luxury cars and other expensive, high-end products.
Industrial machinery developed and built in Germany is also one of the country’s most highly
internationally exported commodities. As a matter of fact, Germany sells so much to other countries
across the world that around half of their entire economy has been built on exported goods.
Of course, having a consistently strong economy isn’t just an arbitrary badge of honor for a
country, but also leads to significant growth and prosperity for its people. Thanks to the demand
for these exported German products, jobs have long been plentiful. The government has had no
shortage of coffers – the collected money it has to fund things like public services – while many
other countries the world over are struggling with mounting debts and low economic growth.
Other European countries have had trouble even keeping up with Germany as its economy
continues to boom, with many even looking to their success as a guide or roadmap that they
could follow to solve their own economic woes. But that long period of prosperity for the German
economy seems to now be under serious threat of regressing, risking taking the country from one
of the best performing in the world to one of the worst economies of any developed country. How has
this happened in such a short period of time? What could have not only disrupted the booming
successes of the German economy but stopped them in their tracks with enough impact to have such
a widespread negative effect? Let’s delve into the how’s and why’s of how Germany became the
worst-performing developed country in the world. A lot of the factors that have led to Germany’s
economic aren’t unique to the country, and are being experienced worldwide. Needless to say,
at the time of the making of this video, the prior few years have been riddled with
unexpected and catastrophic occurrences that have left their mark on the entire world. The
beginning of this current decade, the 2020s, has been one of the harshest in recent memory.
That’s not to say things were entirely utopian and idyllic throughout the 2010s, but back then,
we didn’t have the widespread social and economic impact of a global pandemic to contend with.
Across the world, the lasting effects of Covid 19 are still very much being felt on an economic
level. Given that the spread of the coronavirus caused a great number of people to to stay at
home to reduce the spread of infections, many businesses had no choice but to close their
doors during the pandemic. These measures might’ve seemed drastic at the time, but they were required
to keep the spread of the virus manageable and limit the loss of life Covid 19 was causing.
Although money should always be of far lesser importance than human life, there is no denying
that businesses closing due to the pandemic had an economic impact. The largest economies across
the globe – the United States, China, and European Union - all of whom are the main engines for the
global economy, experienced weaker growth during the pandemic due to lower economic activity,
and we’re now seeing them continue to experience the residual effects of that. Anybody who believed
the economies of the world would just resume from the point they left off before
the pandemic clearly didn’t have a realistic grasp of the situation and wasn’t treating the
pandemic with the seriousness it required. Covid 19 also hasn’t vanished entirely.
Thankfully, its severity has lessened, and many of the more recent cases are not as dangerous as
back when it first began to spread. However, with new variants still active, this is slowing down
production in certain parts of the world, such as China. The head of the International Monetary
Fund recently highlighted that 2023 would be “tougher than the year we leave behind”,
with the expectation that as much as an entire third of the world’s economy will
go into recession. Even those few countries that aren’t actively in recession will likely feel like
they are as interest rates and the price of basic necessities skyrocket in the wake of the pandemic.
With this expected shrink of the global and European economies,
according to both the International Monetary Fund and the European Union, things aren’t
looking good for the foreseeable future. It’s not difficult to see how– despite all their growth
over the past one hundred years – these factors would put Germany’s economy on rocky footing,
to say the least, directly following on from the Covid-19 pandemic. But the economic impact of the
coronavirus has set the stage for another recent event with far-reaching international effects
that has also contributed to the difficulty currently faced by Germany and its economy.
On the 24th of February 2022, Russia launched an invasion into Ukraine. This was an aggressive
escalation of the ongoing Russian-Ukrainian conflict that had begun way back in 2014 and is
the largest attacks on a European country since the Second World War. Thanks to this conflict,
many Ukrainian civilians have been caught in the crossfire and left as casualties,
with estimations in the tens of thousands. Around 5 million Ukrainians have been internally
displaced and forced to leave their homes, with a further 6.2 million fleeing the country as
of July 2023. This has led to Europe’s largest refugee crisis since the end of World War Two.
As well as the significant environmental damage caused by this war, widely described as ecocide by
some, the impact of Russia’s invasion of Ukraine has been felt the world over, particularly in
Europe, where it has led to an economic and energy crisis. Much of Europe – including Germany – was
dependent on cheap natural gas from Moscow to provide energy for their economies. Worldwide,
the cost of energy had already sharply increased following the pandemic, with
many offices forced to go cold as a cost-cutting measure. In many poorer parts of eastern Europe,
ordinary people started stocking up on firewood. A lot of the exports that bolster the German
economy – things like cars and industrial equipment – are energy-intensive industries. In
short, they need a lot of energy to produce these exports and meet the widespread international
demand. You reduce access or increase the price of the energy these industries need, and suddenly,
what was once Europe’s manufacturing powerhouse starts to underperform.
In mid-June of 2022, sometime after Russia’s invasion of Ukraine, one of their largest energy
companies, Gazprom, shut down one of its major natural gas pipelines that provided Germany with
much of its energy. According to the company themselves, Gazprom needed to conduct urgent
maintenance and repair work on their Nord Stream 1 pipeline, however, it’s also worth noting that
the energy company is owned and run by the Russian state. Although Gazprom has maintained that these
advanced technical problems cause the reduced gas flow, German officials have rejected this
explanation as nothing more than a cover story, believing this move to be a deliberate political
power play following the invasion of Ukraine. Germany wasn’t the only European country impacted
by this, either. Russia, through Gazprom, cut off access to the majority of its natural gas
to many of the countries within the European Union. Around twenty-seven individual nations
sourced forty percent of their overall energy from Moscow, and the resulting
cut off led to an energy crisis across Europe. Given the higher costs and tighter supplies of
energy, Europe has been attempting to change the landscape of the electricity and natural
gas markets ever since to combat the rise in energy usage amid greater demand with reduced
availability due to the war in Ukraine. One of the proposals to aid in the escalating energy crisis
unfolding in Europe was a plan by the European Union to cap the revenue of electricity producers,
essentially making it so that these large companies could only make a certain amount
of profit, disincentivizing them from raising their energy prices to take advantage of the
increased demand and decreased supply. Russia reduced the natural gas output
to thirteen European Union member nations, given their wide support for Ukraine, effectively using
the war that they instigated to manipulate the wider energy market in Europe. Many governments
of affected countries like Germany have sought out new energy suppliers and ways to conserve
their limited natural gas supplies with storage facilities. However, some options for alternative
suppliers involve more expensive liquified natural gas that needs to be shipped in from overseas.
This energy issue became particularly bad when we approached the winter months of 2022. While
certain alternatives were able to keep large parts of Europe functioning for the most part,
the subsequent energy crisis due to Russia’s actions following its invasion of Ukraine has
certainly had a lasting impact on Germany. The cheap natural gas previously provided by
Russia in larger quantities was needed to power the factories that produce most of Germany’s
largest exports. Now, the country has been put at risk of deindustrialization thanks to the
elevated costs of energy. This has led a number of companies with factories previously situated
in Germany to move their operations elsewhere so that the ongoing high demand and low availability
of energy make less of an impact on their bottom line. But this has the added effect of removing
high-paying job opportunities from German citizens, thus restricting their access to
income that would provide them with the ability to heat their homes and feed their families.
Germany’s dependence on Russian gas for energy to power its factories effectively put their entire
thriving economy at the mercy of another nation. Of course, many they couldn’t have predicted that
Russia would actually invade Ukraine in a full scale war, but this put the German economy in
a situation where its economy was at the mercy of a not so friendly foreign power.
One major German chemical company, Evonik Industries, following these changes,
was intent on shifting its operations away from its main plant in the town of Essen,
part of the Ruhr Valley industrial region. The Ruhr Valley, being such an epicentre of German
industry, meant that much of it was hit hard by the sudden lack of Russian gas to power the
factories in the region, including metal plants and coal mines that were forced to shut down,
as well as a massive BP oil refinery and Evonik Industries’ own chemical production facility.
The German government even had to ask Evonik directly to keep their power plant running a few
months longer, attempting to prevent the company from enacting an exodus, given not only the jobs
they provided but also their contribution to the country’s now struggling economy,
would go with them. Evonik, whose forty-storey smokestack fuelled the production of plastics
and other goods, was still intent on shifting away from their plant, instead opting to use
gas-fired generators that could run on hydrogen to become more carbon neutral.
The push towards renewable energy, while a hot-button issue for some, has become more of a
sought-after solution for Germany, especially given their current predicament. Some are for
this push towards renewable sources of energy, believing the political decision to rely on
Russian gas is ultimately what has led to higher energy costs since now the amount of gas being
received from Moscow is being restricted. After all, relying on that means that German
industry and their wider economy – as well as their ordinary workers – are taking the biggest
hits. Meanwhile, although the European Union has planned to cap industrial energy prices,
many environmentalists have pointed out that this, while promising, will only encourage a further
dependence on fossil fuels. Making the switch to renewable energy sooner would be a turbulent
change, but the hope is it would eventually negate the need for fossil fuels and natural gas.
With the price of gas doubled between 2021 and 2023, companies need it to maintain their normal
level of production. Factories need to be able to use heat to keep glass or metal at molten
temperatures at all hours of the day to create the materials required for production in Germany’s
leading industries – especially when manufacturing car parts. Leading to knock on effects to all
other majo industries within Germany’s economy. Yet another external economic factor that affected
Germany’s economy was that of China, as the country suffered its own economic slowdown due to
its gradual recovery from the COVID-19 pandemic. While not a part of Europe, China has the second
largest economy globally, and as a result, effects on its economy can often be felt on a much wider
international scale. In the second financial quarter of 2023, as a result of a surging rate
of youth unemployment and lower investments in property development, China’s economy missed
its previously forecasted targets for growth. Given that they were also a key trade partner for
Germany, this added to the already compounding problems that affected Germany’s own economy.
Essentially, unpredictable, and in some cases even unprecedented, global changes – especially
the coronavirus pandemic and the Russian invasion of Ukraine – are largely to blame for
Germany’s current economic struggles. However, as unforeseeable as something like the pandemic was,
its the events that have occurred in the past 3 years have exposed the foundational
cracks in Germany’s economic system, such as the reliance on gas from Russia to run the factories
responsible for production in some of Germany’s biggest exporters. As the country experienced
many years of prosperity and growth, these fundamental flaws were ignored, possibly under
the assumption that the growth would continue or unaware that nothing as bad as the pandemic
and war in Ukraine would eventually occur. Other significant fundamental factors also
contributed their fair share to the current situation Germany now finds itself in. For one,
the process for approving renewable energy products – a potential alternative to the gas
provided by Russia – is a lengthy and laborious one that can often discourage or disincentivize
the production of more renewable energy options. Clean energy projects are often slowed down by
extensive bureaucracy and heavy resistance, both from skeptics and companies that profit off the
use of fossil fuels at the cost of damage to the environment. Additionally, much of the money
that the German government previously had on hand during their more prosperous economic period was
accumulated as a result of them delaying their investment in roads, rail networks, providing
internet access to more rural areas of the country, and other public services that would have
improved the quality of life for their citizens. At present, it’s hard to say exactly where
Germany’s economy will go from here. As spending related to Covid 19 is being continuously phased
out, the country could see a gradual rebound to its former growth. According to economics experts,
while there is currently expected to be less demand for popular German exports that help fuel
their economy, continuing net exports are expected to contribute positively to overall growth.
Now watch “Germany's World War 3 Plan” Or watch this video instead!