Miguel Afonso Caetano

"A cursory glance at the economic and social development of service-oriented economies dampens any such optimism. There is a reason why manufacturing jobs occupy such a central place in contemporary populist rhetoric. As a rule, they generate significantly higher value added per employee and per hour than jobs in the service sector. In countries such as Germany and the UK, this difference is typically 15 to 40 percent. In addition, around 70 percent of all private investment in research and development in Germany comes from the production sector. An economy that allows an uncontrolled decline in its industrial production willingly accepts a future of stagnating productivity growth and declining real wage growth. This would be no different in Germany.

Britain is the prime example of a country that, despite a large service sector with highly productive services (such as IT, consulting, and finance), is trapped in a vicious cycle of low investment, productivity, and real wage growth as well as high inequality. This reflects that the so-called “productive” services are accompanied by high exploitative rents (from capital income) that inhibit economic activity in other areas while driving up asset prices.

The UK economy is paradigmatic of the “dual” or permanently “K-shaped” type of economy, in which income gains benefit the top 20 to 30 percent (but especially the top 10 percent) while the rest stagnate or shrink in the face of rising living costs. While Germany has not been exempt from these trends (inequality has been increasing and wealth disparities are anomalously high), a UK-ification of its economy would worsen them.

The relative indifference to deindustrialization from the liberal center can hardly be justified."

https://jacobin.com/2026/03/germany-deindustrialization-trade-green-elite

#Germany #Deindustrialization #Manufacturing #Economy #EU

German Deindustrialization Is Self-Inflicted

Germany is in the midst of an industrial job loss wave worse than the one during COVID. The Right blames the green transition, and parts of the Left blame the Ukraine war. But the real cause is the shortsightedness of Germany’s political elite.

Mar 7 at 1:36pmWeb
Show threadMiguel Afonso CaetanoMar 7

"To the extent that higher energy prices did hurt industrial production in previous years — the energy costs of competing industrial firms abroad have fallen in recent years — was largely due to the broader shocks in gas and oil during the pandemic and war. However, the decisive factor in this context was not renewable energies but the blatant German and European general dependence on imports of fossil fuels. The implication is that renewable energy capacity has not been expanded enough.

The argument that the energy transition is to blame is also self-serving. It shields Germany’s political and economic elite from accountability for deliberately damaging the country’s economic prospects. The political class bears collective responsibility for the enormous investment backlog that accumulated during the fiscal consolidation of the 2010s, when they pursued debt reduction through budget balancing despite the fact that interest rates on German government borrowing were very low or even negative. Key infrastructure projects are stagnating, as are private capital investment and capacity utilization, which are further depressed by weak domestic demand in the context of ongoing efforts to reduce debt."

Show threadpoldemoMar 7
@remixtures whether „austerity policy“ or allocating budget (which was/is still quite big for Germany) wrongly (subsidizing eg large companies during the pandemic via „Kurzarbeitergeld“) shielding old industries instead driving future ones (like infrastructure for renewables) as the failure of the political elite might still be worth discussing.
In any case, the economic „elite“ (i.e. DAX execs) relies way too much on federal subsidies. That‘s where I‘d see the bigger failure.
Show threadMiguel Afonso CaetanoMar 7
👉💯 "Beyond the large headline trade surplus, the explosive import growth of Chinese motor vehicles to Europe has attracted most of the attention, but this trend is continuing in the other key industries. China’s industrial goods can compete with German products in terms of quality, frequently surpassing them, but are significantly cheaper. The recent drastic shift in competitiveness is not so much due to wage differentials and the highly efficient production lines, but is rather due to the extensive and intensifying network of industrial policy subsidies in China and the currently extremely undervalued currency, the appreciation of which China has been resisting. Both contribute significantly to the fact that Chinese exports are unsurpassably competitive in terms of costs." 💯👈
Show threadMiguel Afonso CaetanoMar 7

"If anything, China’s experience shows that there is no connection between the expansion of renewable energy capacity and the decline of heavy industry or complex industrial production. Yet in Germany, much of the party-political spectrum is using the specter of industrial decline as a pretext to mobilize against green energy policies. As for the incumbent: while Merz is aware of the role of trade competition, he apparently still construes it as a regulatory problem and sees an opportunity to implement his unreconstructed neoliberalism: longer working hours, cuts to social benefits, and cuts in income tax.

From the point of view of industrial exports, he is thus pursuing a ruinous race to the bottom, which, against China, cannot be won. Whatever the outcome of his trip to Beijing, it is clear that preventing further decline requires taking a leaf out of China’s book: going all in on renewables and pursuing urgently needed investment-based supply-side and industrial policies."