Why is Germany (so unexpectedly) in decline?

Ten years ago, Germany didn't seem to be able to put a foot wrong. Now the country can't seem to get anything right. A search for answers...

Photo by Francesco Luca Labianca on Unsplash

It has been a decade since I moved to Germany.

In my first summer I experienced the Sommermärchen, when Germany’s football team triumphed at the 2014 World Cup in Brazil. I watched on a screen in Munich as Mario Götze controlled the ball on his chest before volleying it into the back of the net to grab a late winner in the final.

The whole country erupted in ecstasy. Grown men and women held each other in their arms, looking like they just covered the length and breadth of several football pitches. And why not? This wasn’t just a victory for eleven very talented athletes, it was a triumph for Germany - a country that did things better.

It was Angela Merkel’s victory as much as it was Götze's. Appropriately, she celebrated in the dressing room with her boys afterwards. The squad was a microcosm of modern society: east Germans, Bavarians, Tunisians and Turks. Their style of play - emphasising the collective over the individual - was quintessentially German.

Just as Sami Khedira, Lukas Podolski and Thomas Müller worked seamlessly to make the country Fußball-Weltmeister, workers from all backgrounds were busy in factories making Germany Export-Weltmeister. The economy was booming. German car manufacturers were dominating new markets in the Far East.

In the autumn, there was more cause for cheer. November 9th marked a quarter of a century since the fall of the Berlin Wall. To commemorate, 8,000 balloons were lit up where the barrier once stood. Again, Germany could pat itself on the back. The east had been rebuilt. Dresden, Leipzig and Erfurt had risen from the ashes of communism - thanks to west German money.

Merkel, the daughter of an east German pastor, had bridged society’s divides - not just between east and west, but between foreigner and native… even between Left and Right.

A glowing profile in the New Yorker from 2014 summed up the sense of wonder with which the world looked at Germany:

“While America slides into ever-deeper inequality, Germany retains its middle class and a high level of social solidarity. Angry young protesters fill the public squares of countries around the world, but German crowds gather for outdoor concerts and beery World Cup celebrations. Now almost pacifist after its history of militarism, Germany has stayed out of most of the recent wars that have proved punishing and inconclusive for other Western countries.”

While politics in the Anglo-Saxon world was becoming increasingly partisanship, Germany was a model of consensus.

In 2014, Merkel sat at the head of a right-left coalition with an impregnable majority in the Bundestag. Voters were being given everything they wanted. The age of retirement was lowered for millions of industrial workers; nuclear power stations were shut down in the wake of the Fukushima reactor meltdown; welfare spending hit historical highs; a minimum wage was introduced. And all while the government was running budget surpluses!

The country was a haven of liberalism and sanity. It was proof that sensible politicians and public trust reinforced each other in a virtuous circle.

Never in my wildest dreams would I have believed that, a decade later, a cottage industry would have emerged in books blaming the political class for driving the country to rack and ruin; that Italy’s economic growth would be outstripping Germany's; that a far-right party would be on the brink of crushing the old establishment in the east; that the national transport system would be brought to its knees by strikes.

And, if you’d told me that Germany would have been knocked out of the World Cup in the group stages in consecutive tournaments? Scarcely believable!

But here we are. 

Germany in 2024 is a country haunted by the spectre of de-industrialisation, terrified that the model of wealth it has known for seventy years is coming to an end. Attitudes to immigration have flipped. The economy has been stagnating for years. Energy bills are increasingly unaffordable.

Where did it all go wrong?

Well, it turns out that 2014 was the high-water mark. Things started to go south pretty quickly after that.

Just two years later, the narrative of two Germanys becoming one seemed hopelessly out of date. Merkel’s refugee policies had split the country. Polling conducted in 2016 showed that three-quarters of voters in the East wanted her out. Later, Covid lockdowns and Russia sanctions would expose even deeper divisions between East and West.

By 2018, the country was on the brink of recession, as tensions between America and China revealed just how sensitive the economy was to changes in the global landscape.

Covid acted as an accelerant, wreaking havoc on industrial supply chains. The Russian war on Ukraine hammered the final nail into the coffin, exposing just how dependent German industry was on one (very capricious) energy supplier.

It would be easy to blame the outside world. If it wasn’t for Trump, Putin, and Xi, perhaps Germany would still be basking in the same sunshine it enjoyed in 2014.

Certainly, there are politicians on the far-right who are eager to dust off old narratives about peace-loving Germans being victims of the machinations of great powers.

But that would ignore how comfortable Germany was in its role in a “non-political” 21st-century order. The elite lulled themselves into believing that politics had ended with the fall of the Berlin Wall.

They were in thrall to Francis Fukuyama, the theorist who coined the phrase “the end of history.” His technocratic vision of a world in which nations judged each other by the quality of their goods rather than the strength of their armies suited them perfectly.

The elites didn’t want to hear the other version of 21st-century history, the one put forward by Samuel Huntington, the Harvard academic who predicted that the new era would be marked by a “clash of civilizations.” In Huntington’s vision, culture and tradition would re-emerge as defining factors, and wars would be fought to determine the boundaries of these cultures.

Believing that major war was over, Berlin cut funding to its military and intelligence services, kept its distance from regional conflicts, and reinvented the role of chancellor as chief lobbyist for German industry.

Things Germans found distasteful—soldiers, mining, fossil fuel extraction—were outsourced. Things they liked—wind turbines, civil society NGOs—were generously funded.

And that worked fine… for a while.

But the arrival of over a million refugees fleeing war in the Middle East showed that you can only pretend geopolitics doesn’t exist for so long. Even then, that mass movement of people was treated like a natural catastrophe rather than the consequence of deliberate actions taken by leaders on the world stage.

By the same token, Germany was caught off guard by the rise of Trump. For them, his willingness to use tariffs as a weapon was unfathomable. It seemed self-evident that a tariff-free world was one that benefited everyone.

The same goes for Russia’s invasion of Ukraine. Even in the intelligence services, people couldn’t comprehend that a country would risk its vital economic interests in the name of a 19th-century war over a few kilometres of land.

Germany’s elite bet on the rest of the world being as rational as they were. But it wasn’t. And they expected German voters to be as rational as they were. But they weren’t either.

Polling figures of around 20 percent for the far-right Alternative for Germany demonstrate that—given the choice between having a doctor from the Middle East and having no doctor at all—many people are apparently willing to choose the latter.

Where does Germany go from here? How does it develop rational policies in a world that doesn’t think in the same way it does?

A first step would be to admit the hypocrisies in its old articles of faith.

The fact that Germany still shows no inclination to extract its own gas reserves but is happy to buy shale gas from the US suggests this is unlikely to happen. The same goes for the rare metals imported from China for Germany’s green energy transition.

Whether Germany will now realise that shaping world politics involves risk is also open to debate. The country has started to invest in defence, and it is now the second-largest weapons supplier to Ukraine. But there are still many people (including the faction leader of Olaf Scholz’s SPD) who hold onto the delusion that we just need to “freeze” the Ukraine war and everything will soon be forgotten.

On the domestic front, faced with voters reluctant to accept large-scale migration into the workforce, German elites will finally have to do something controversial, like raising the age of retirement or cutting welfare payments.

Whatever happens next, politicians can expect it to be deeply unpopular with many voters.

The days of consensus are over.

Maybe, though, if the national football team defies all expectations and wins the European Championships, we’ll get that winning feeling back… at least for a few weeks this summer.