Since 2018, the German industrial sector has been grappling with a significant crisis that has intensified over the years. The combination of policies implemented during the pandemic, the ongoing energy crisis exacerbated by western nations’ backing of the Ukraine conflict, and the fallout from global trade wars have catalyzed a swift decline in German capitalism.
Among the G20 nations, Germany stands out with some of the bleakest economic growth projections for both this year and the next; stagnation appears to be the most optimistic outcome. However, this stagnation fails to fully capture the extent of the industrial decay that is currently unfolding.
Critical sectors such as automotive, machinery, and chemicals form the foundation of the German economy. Collectively, industry contributes approximately one-fifth to the nation’s gross value added (GVA) and comprises around 16 percent of the workforce. When factoring in connected services like trade and logistics, this contribution rises to nearly one-third of the GVA.
Nevertheless, we are witnessing a concerning collapse in industrial production levels. Compared to its zenith in the years 2017/2018, production in energy-intensive sectors has plummeted by over 15 percent. The energy generation sector has experienced a staggering drop of more than 20 percent, while overall manufacturing has also taken a hit, falling roughly 15 percent. Additionally, incoming orders—both from domestic and international markets—have equally diminished by similar margins.
Fewer cars, chemicals and machines
The costs incurred throughout the entire manufacturing process—ranging from energy expenses to the procurement of crucial microchips—have skyrocketed. This untenable rise in costs has not only precipitated a slump in production but also tanked anticipated profit margins. Major corporations like Volkswagen have begun imposing wage cuts, shutting down plants, and laying off workers, setting a precedent that others in the automotive industry are likely to follow.
Import prices for energy spiked dramatically in 2021, and they remain 50 percent higher than levels recorded in January of that year. This severe energy crisis can be traced back to the United States’ actions, which were uncritically supported by the German capitalist class, plunging Ukraine into a devastating war with Russia in early 2022—all in a bid to weaken their geopolitical rival at Ukraine’s expense.
German steel and chemical companies are currently struggling to remain competitive in the global marketplace. In mid-2022, coinciding with the destruction of the Nord Stream pipeline by allied forces, gas prices soared to nearly four times their January 2021 levels. Even now, gas prices are still 15 percent higher than they were back then, while oil prices have surged by 50 percent.
This acute energy crisis has had dire ramifications for industries that are dependent on high energy consumption. Production in these sectors has fallen by 15 percent compared to 2017, with steel production now at its lowest level since the global financial crisis of 2008. The chemical sector is also feeling the strain, given its reliance on fossil fuels for both energy and raw materials.
German companies, including renowned names like Thyssenkrupp, BASF, and BayWa, find themselves grappling with a dearth of competitiveness in the international arena, as demand dwindles for vehicles and machinery production. This unfortunate trend has resulted in plant closures and job cuts, affecting thousands of workers.
Escalating costs for energy and raw materials are driving up production expenses for all components of industrial goods. Furthermore, the significant and sustained decline in output figures for cars and various finished products is reverberating through the supply chain, impacting suppliers whose operations are also faltering. This domino effect has triggered plant closures and workforce reductions at major firms like ZF, Continental, and Bosch.
As this crisis cascades through the industrial sector, mechanical engineering firms are becoming increasingly affected. Rising costs are prompting these companies to face substantial redundancies and even insolvencies, with well-known mechanical engineering enterprises like Franken Guss, Illig Maschinenbau, and Deubis Group feeling the pinch.
The working class pays the price
The spiraling crisis within industry inevitably carries consequences that ripple through society at large. This situation raises a pressing question: who will bear the financial burden? The specter of class struggle is resurrected as corporations attempt to shift the economic burden onto the working class, even as they scapegoat workers for the stagnation. Workers are told their wages are excessively high, that they are underperforming, that they are too frequently ill, or that they lack consumer confidence and save too much.
Media narratives perpetuate the falsehood that wages have risen substantially. In reality, workers have faced wage erosion over recent years due to inadequate wage negotiations and rising inflation. Many find their financial situations deteriorating markedly.
Fundamental goods such as bread, rice, flour, beef, pork, fish, milk, eggs, jam, chocolate, and mineral water have seen price increases of 30-40 percent since 2021. Other staples, including poultry, cheese, butter, frozen vegetables, spices, and juices, now cost between 40-50 percent more. The dramatic inflation affects cooking oils, snacks, and basic household items, with certain products experiencing price surges of up to 200 percent. Leisure and entertainment costs have escalated by 19 percent, while restaurant prices have surged by 30 percent.
When stable, well-paid industrial roles begin to vanish and wages decline across the workforce, the market contracts. This contraction prevents goods from being sold, exacerbating competition among companies vying for dwindling consumer interest. The resultant chain reaction leads to a wave of insolvencies, layoffs, and closures, impacting various sectors—from high-profile fashion brands like Esprit to corner bakeries.
The dead end of capitalism
This tumult is not restricted to the domestic market; it also permeates the global economic landscape. The current turmoil gripping German industry is a symptom of extensive overproduction worldwide. As articulated by Marx and Engels in the Communist Manifesto:
“Society suddenly finds itself put back into a state of momentary barbarism; it appears as if a famine, a universal war of devastation, had cut off the supply of every means of subsistence; industry and commerce seem to be destroyed; and why? Because there is too much civilisation, too much means of subsistence, too much industry, too much commerce.”
Germany’s heavy reliance on exports—the cornerstone of its economy—is now revealed as a critical vulnerability. Export activities support 25 percent of jobs and constitute 47 percent of economic output. Yet the competitive edge enjoyed previously by German industry has severely eroded.
German capital struggles to keep pace with the United States and China in the increasingly aggressive imperialist competition for trade, resources, and emerging technologies. The fight for market dominance, along with tariffs increasingly imposed by the USA, EU, and China, yields an environment where production costs have soared. Companies must now reduce prices significantly to remain competitive, inadvertently intensifying their own overproduction by undermining rival firms. In this high-stakes competition, German industry lags behind its counterparts in the USA and China.
The declining share of Germany in the global market has plummeted from 3.45 percent in 2019 to a mere 3.06 percent in 2024, unveiling a political crisis for the ruling class. In an attempt to navigate the turmoil, the capitalist class is likely to unleash further austerity measures, increasing exploitation, and laying off workers. This situation will compel the working class to rise in resistance, signaling the onset of a new chapter of class struggle.
Crying for state intervention
The air is thick with anxiety in corporate boardrooms and government circles alike. Once proponents of a free market, many business leaders are now clamoring for state investment into infrastructure, subsidies for businesses, and guarantees for purchases made by the government. According to the Federation of German Industries, approximately €1.4 trillion must be allocated by 2030 to address these concerns.
While calling for urgent investment, capitalists simultaneously request reductions in taxes and social security obligations for companies. They implore trade unions and workers to accept lower wages while advocating for increasing the retirement age and promoting flexible working hours—essentially a push for extended working hours.
The coalition government, formed by social democrats, liberals, and greens, is treading cautiously, fearing an outbreak of class struggle. Society stands increasingly polarized, with public trust in the institutions of capitalism deeply fractured. The government finds itself stalemated, attempting to appease capitalist needs while avoiding the necessary budgetary reforms, perhaps facing disintegration well before the next general election.
The ruling elite finds itself ill-equipped to address this systemic crisis, which arises from the inherent chaos of capitalist markets. This turmoil reflects the fragmentation of the global economy constrained by the limitations of private property and nation-state dynamics. The relentless competition for profit has set the stage for a downward spiral, endangering the entire capitalist framework.
Fight for communism!
In light of the evident weakness and lack of foresight displayed by the German capitalist class and the government, it is imperative for the working class to take proactive measures. Class struggle emerges as a crucial avenue to ensure that the economic fallout of this crisis does not unjustly burden the working class; instead, we must resolutely declare: we will not shoulder the costs of your failures! We will dismantle your system!
The Revolutionary Communist Party rallies for an engaged labor movement and advocates for revolutionary changes within society itself. The ongoing wage disputes within the metals and electrical sectors, as well as debates surrounding labor conditions in companies like Volkswagen and public services, provide a strong platform for showcasing the collective strength of workers across the board.
The path towards recovery from this crisis lies in the collective will of the working class to establish a socialist planned economy. This includes the expropriation of banks and corporations, ultimately placing them under community control and management. By doing so, the workforce can realign economic priorities to meet societal needs. Together, we have a world to gain!
