Crisis of German Industry: The Decline of Capitalism and the Working Class Struggle

Since 2018, German industry has grappled with an escalating crisis, compounded by pandemic policies, energy turmoil instigated by Western support for the Ukraine war, and escalating global trade conflicts. These factors have exacerbated the decline of German capitalism at an alarming rate.

[Originally published in German at derkommunist.de]

Germany stands among the G20 nations with the bleakest economic growth forecasts for this year and the next, with stagnation emerging as the most optimistic projection. However, this mere statistic obscures a much more profound deterioration plaguing the nation’s industrial landscape.

Core sectors like automobiles, machinery, and chemicals serve as the backbone of the German economy, contributing a substantial one-fifth to the nation’s gross value added (GVA) and employing roughly 16 percent of the workforce. When accounting for services supporting the industrial sector, including logistics and trade, this figure soars to nearly one-third of the GVA.

Recent data indicates a dramatic collapse in industrial production. When juxtaposed with the production peak of 2017/18, energy-intensive industries have witnessed a staggering decline of over 15 percent, while energy generation has plummeted more than 20 percent. The broader manufacturing sector has contracted by approximately 15 percent, a trend mirrored in订单数量 declining significantly both domestically and internationally.

Fewer cars, chemicals and machines

The entire production chain is experiencing soaring costs, from energy to fundamental components like microchips. This surge has triggered a profound downturn in production levels and projected profit margins. Notably, Volkswagen, in a bid to mitigate the crisis, has announced wage reductions, plant closures, and mass layoffs, with other automotive manufacturers likely to follow suit.

Import prices for energy have already surged dramatically since 2021, remaining around 50 percent higher than they were at the start of that year. This unprecedented energy crisis traces back to actions taken by the USA, with enthusiastic backing from the German capitalist elite, as they navigated Ukraine into an imperialist conflict with Russia, prioritizing geopolitical aims over the nation’s economic well-being.

As of mid-2022, coinciding with the sabotage of the Nord Stream pipeline by Germany’s supposed allies, gas prices soared to almost four times their levels from January 2021. Currently, gas prices persist at 15 percent above those levels, with oil prices now sitting 50 percent higher than they were previously.

This crisis has inflicted severe ramifications on energy-intensive industries, prompting a 15 percent decline in production since 2017. Steel production is plummeting to its lowest figures since the 2008 global economic crisis, and the chemical sector faces substantial challenges as it relies on fossil fuels for energy and as a raw material.

German steel and chemical firms are struggling to compete on the international stage, and a downward trend in car and machinery production has further eroded demand. Major companies like Thyssenkrupp, BASF, and BayWa find themselves embroiled in crisis, leading to significant plant closures and layoffs impacting thousands of workers.

Rising expenses for energy and raw materials are driving up the costs of producing various components necessary for industrial goods. Concurrently, the prolonged slump in production volumes for cars and other finished products significantly strains suppliers, leading to further collapses for companies such as ZF, Continental, and Bosch, which are now facing plant shutdowns and workforce reductions.

The unfolding crisis in the industrial sector is also affecting mechanical engineering companies, which are grappling with a rise in operational costs. With reduced orders from other industrial entities, there’s a waning demand for new machines and equipment, resulting in increased layoffs and insolvencies in firms like Franken Guss, Illig Maschinenbau, and Deubis Group.

The working class pays the price

The cascading crises engulfing the industrial sector have far-reaching repercussions for society at large, raising the pressing question of accountability for these challenges. As the struggle between classes re-emerges on the national agenda, corporate leaders are shifting the financial burden onto the working class while simultaneously attributing economic stagnation to them. Workers are frequently told that their wages are excessively high, their productivity is insufficient, and their consumption is lacking, rooted in an alleged loss of ‘confidence’ that compels them to save instead of spending.

The media consistently propagates the misleading narrative that wages have seen significant increases. In stark contrast, the reality reveals that capital has systematically eroded wages over recent years through inadequate wage settlements coupled with surging inflation rates, resulting in real wage declines for the majority of workers.

Essential commodities including bread, rice, flour, and various meats have skyrocketed in price, witnessing increases ranging from 30 to 50 percent compared to 2021. Essentials like olive oil and sugar have seen alarming price hikes, some soaring between 50 to 200 percent, while leisure activities and restaurant prices have also surged significantly.

This downward spiral is compounded by decades of austerity measures, casualization, and a dismantling of collective bargaining structures. Alarmingly, by 2019, the lower half of the working class was already facing a decline in purchasing power compared to the early 2000s. Meanwhile, corporations continue to report substantial profits amidst the crisis, distributing hefty dividends to shareholders while undercutting worker wages, enacting layoffs, and shuttering facilities.

This ultimately propels the economy into a vicious cycle of downturn, as the disappearance of well-paying industrial jobs leads to widespread wage suppression. Consequently, reduced market activity results as fewer goods are sold, heightening competition for consumers among companies, thereby inciting further insolvencies and layoffs across the economic spectrum, from major fashion brands to local bakeries.

The dead end of capitalism

The trajectory of this crisis extends beyond national confines, reverberating globally. The spiraling turbulence within German industry reflects a broader phenomenon of rampant overproduction worldwide. As Marx and Engels articulated 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.”

The over-reliance on exports is proving a critical vulnerability for the German economy, with exports accounting for approximately 25 percent of jobs and 47 percent of economic output. The competitiveness of German industry is dwindling at an alarming pace.

Competing in a brutal imperialist marketplace, German capital is unable to keep pace with the aggressive trade policies and subsidies of the USA and China. The escalating contest for global markets, technology, and resources necessitates substantial investments. The era of globalization appears to be waning, giving way to a fragmented world market.

Moreover, the capitalist class, alongside government authorities, has borne significant responsibility for this predicament over the past several decades. Insufficient investment in new machinery, equipment, and infrastructure—on which they have relied heavily—has led to stagnated productivity levels that have only seen marginal increases per worker annually, a trend that is now manifesting dire consequences for the economy.

Germany’s dwindling share of the global market—from 3.45 percent in 2019 to an anticipated 3.06 percent in 2024—transforms the growing crisis in its industrial sector into a formidable political challenge for the ruling elite. The capital class may attempt to navigate the crisis through intensified exploitation and austerity, further aggravating unemployment and psychological stress among the working population. In response, the working class will be compelled to resist these measures, signaling the arrival of a turbulent era of class struggle.

Crying for state intervention

The palpable anxiety permeating corporate headquarters, business associations, and the Ministry of Economics is hard to ignore. Initially asserting that the market should self-regulate, there is now a clamor for substantial state investments in infrastructure, company subsidies, and government purchase guarantees. The Federation of German Industries has indicated a staggering €1.4 trillion in investments may be needed by 2030.

Simultaneously, corporate leaders are lobbying for reduced taxes and social security contributions for businesses while urging trade unions and workers to accept diminished wages. Proposals to raise the retirement age and increase flexibility in working hours are also on the table, translating to longer workweeks for employees.

The coalition government—a combination of social democrats, liberals, and greens—is acutely aware of the potential for class conflict to erupt. Presently, societal polarization is extreme, and public trust in the institutions of capitalism has been severely eroded. The government is striving to avert necessary budget cuts from the perspective of capital; however, political paralysis could lead to fractures within the coalition prior to the looming general election. Meanwhile, opposition parties do not seem to inspire much confidence among the populace either.

The ruling elite finds no viable solutions to the structural crisis plaguing capitalism, a phenomenon stemming from market anarchy. This crisis is a direct consequence of the fragmentation of the global economy, compounded by the rigid confines of private property and nationalism. Today, the competitive pursuit of profit has ushered in a downward spiral for the entire capitalist framework.

Fight for communism!

In light of the evident weakness and lack of direction from the German capitalist elite and government, it becomes imperative for the working class to adopt an offensive stance. The class struggle is the only avenue through which the burden of the capitalist crisis can be shifted from workers to capitalists. Our rallying cry must be: we will not bear the costs of your crises! We will dismantle your oppressive system!

The Revolutionary Communist Party is calling upon the labor movement to embrace a spirit of offensive action. Engaging in revolutionary struggles around wages within the metals, electrical industries, Volkswagen, and the public sector will underscore the collective power of workers.

Emerging from this crisis necessitates the replacement of capitalism with a socialist planned economy, which entails expropriating banks and corporations, imposing democratic control over production. This shift will empower workers to align economic outputs with societal needs. We have a collective cause to champion!