Made in Germany

Germany, 2000s: a country in crisis, internationally known as the “sick man of Europe.” The economy was stagnating, while unemployment was climbing beyond 10 percent. Amid this situation, the government led by a coalition of Social Democrats (SPD) and Greens formulated a series of policies known as “Agenda 2010” to restore economic “competitiveness.” Seeking to restrict “excessive” aspects of the welfare state, it instituted a series of neoliberal reforms: pension levels were lowered, a large low-wage sector was introduced, and employment rights were restricted. At the same time, a growing export market emerged through the mid-2000s through the expansion of the European Union into Eastern and Southern Europe.

This laid the basis for the low-wage regime that powered German economic growth from the 2000s onward: German companies reduced their production costs by lowering wage costs, with companies leveraging the threat of outsourcing production to Eastern Europe to repeatedly win concessions from unions. They would then dump their cheap commodities on the European internal market, crowding out local producers. The German capitalists were thus not reliant on a domestic market based on the purchasing power of German workers for large parts of their profits, allowing them to immiserate the German working class without immediate consequences. They were able to transfer a significant amount of wealth through wage suppression. This led to the situation that a median German household is less wealthy than a median Italian or French household and that a German worker earned a smaller real wage in 2014 than in 1992.

East Germany: Immiserated, Ignored

Following the annexation of the East to the West in 1990, large parts of the Eastern economy were privatized and sold off cheaply to West German companies. This largely meant simply seizing the assets and shutting down production entirely, laying off the workforce. This has shaped the economy in eastern Germany to this day: as only few larger firms settled in it, it is instead dominated by small companies oriented toward the home market — which itself was very constrained by the lesser wages in eastern Germany as a consequence of the annexation. More than thirty years on, eastern German workers still earn €800 less a month in gross earnings than their western counterparts. This led to the eastern German economy being consolidated at roughly 80 percent of the level of western Germany’s economy, and being far less resilient in a crisis.

Refugees, Economic Wealth, and Crisis

Following the war in Syria, Germany was faced with an ever-growing number of refugees, peaking in 2016 with 745,545 asylum requests. Facing a growing demographic crisis because of declining births, capitalists and the political elite supported accepting a large number of refugees as a means of cheap labor. Chairman of the Board of Management of Daimler AG, Dieter Zetsche, even presented refugees as the “foundation for the next German economic miracle.” Other heads of leading German companies would make similar comments, identifying refugees with the future success of the German economy. A common sense was established, seeing a constant influx of immigration as necessary to maintain the growth of an economy predicated on suppressing wages, which is increasingly dealing with a demographic crisis. This became known as the much-vaunted “Willkommenskultur.” This liberal humanitarianism made refugees be seen mostly as a useful economic resource, not as humans with a right to asylum.

Today, however, the dominant perspective has changed: most political parties, except for the increasingly irrelevant Die Linke, promise to reduce immigration and much of society sees it as a source of crime and not as a source of growth. The current government has both in late 2023 and now in the wake of an Islamist stabbing passed new laws giving increased powers to police, increasing surveillance of refugees, and curtailing the right to asylum. Furthermore, welfare has, through association with the immigrant poor, also been cast in a more negative light: a vast majority now supports lowering benefits for the unemployed and mandating forced labor for those receiving such aid.

This sudden reversal is a consequence of the crisis the current German economic model finds itself in: the Russian invasion of Ukraine in 2022 has led to spiking energy prices that have impacted the German economy significantly, as a large share of its exports were energy-intensive industries. A stagnating global economy has furthermore led to declining demand for German goods internationally while growing protectionism threatens to shut off export markets.

In such a situation the German economy has stagnated, with households facing rising bills but not income growth. The federal government — a liberal-centrist coalition consisting of the SPD, Greens, and the neoliberal-hawk Free Democrats — has responded with a crisis management consisting of economic interventionism on behalf of companies, wage restraint, and the immiseration of the population by refusing to enact price controls in response to growing inflation. The consequence: while large companies recorded major profits, workers’ real wages fell to the level of 2015, wiping out a decade of wage growth. With most people having already for decades not meaningfully benefited from the considerable economic growth rates, society was ripe for major discontent.

However, German society has mostly expressed their discontent in blaming immigrants, as immigrants’ identification with the fate of the economy has shown its dark underside. Much as immigrants were equated with future growth, they are now widely equated with current decline. The previous consensus supported by every party left of AfD has dissolved and a new common sense has been established by the right-wing opposition, consisting of AfD, the Christian Democrats, and the tabloid media, redirecting the brewing discontent: anti-collectivism, austerity, law and order, and racism have been rendered as the new common sense by utilizing divisions within and between classes, crystallizing around the figure of the illegal immigrant. Media and conservative parties constantly present stories of criminal refugees relying on excessive state handouts, who live on the backs of the overtaxed German. This has found a fruitful ground thanks to a low-wage regime that left German workers worse off and gave rise to feelings of competitiveness and jealousy.

Unemployed against the employed, refugees against the natives, deserving against the undeserving, striking workers against the wider public, have all been pitted against each other as means of popularizing an economic agenda for restoring the profitability of the German economy. Raising the retirement age, restricting the right to strike, lowering taxes for the rich, mandating forced labor for the unemployed, and disciplining the immigrant working class by threatening increased repression and deportations have become common opposition proposals, with much public support. By dividing the population, the AfD has been able to insulate the economic model from popular critiques.

Meanwhile it has been able to feed on the discontent produced by the government policies, as small business owners who are negatively affected by a weak domestic market and rising energy bills, professional workers and tradesmen threatened by globalization, and farmers who have relied on Russia as an export market and face an increasing concentration of their industry in a few agricultural conglomerates have swelled the party’s ranks. However it has also made inroads into the wider working class, using racism and other intra-class conflicts as tools to divide it, which has been easy due to the current working-class disorganization.

The governor of crisis — the liberal center — has responded by simply enacting the agenda of the opposition with time delays: the Greens have criticized “excessive” striking as a threat to the economy, the government has walked back any major welfare reforms and has put immigrants under general surveillance for refusing to support Germany’s unconditional support for Israel’s genocidal war in Gaza, while trying to weaken the support for the AfD through a rising authoritarianism. Yet this has only bolstered the veracity of the new right-wing agenda, while confirming the AfD’s self-presentation as the only real opposition party.

This agenda has worked especially successfully in eastern Germany, as a fragile economy dominated by small companies has always been on a weak footing, and the crisis of the current model has been particularly felt there. With considerable poverty and feelings of inadequacy due to persistent inequality between western and eastern Germany, it has been especially easy to pit immigrant and German workers against each other there. Meanwhile, most collective structures have been dissolved through austerity in the wake of the annexation in 1990, allowing the AfD to more easily grow and try to establish itself as a “Volkspartei” (mass party). But one should not fall into the trap that the AfD is only an eastern German problem: in the recent elections for the European Parliament, AfD was the second most popular party in the southern German states of Bavaria and Baden-Württemberg.

Yet this success of the right-wing opposition is just as much a consequence of the failure of Die Linke, notionally the left-wing alternative to this government. Its internal contradictions between factions seeking to be a “responsible” partner, seeking to jettison its anti-NATO stance, and more radical elements, was laid bare following the Russian invasion of Ukraine, making the party simply inoperable. Die Linke failed to express any unifying stance, as popular leaders would constantly contradict themselves if they favored arms shipments to Ukraine, supported negotiations, or something else. As such it simply ceased to be seen as relevant, with the AfD being the only party in fundamental opposition to a rising militarism and a government unable to appease a growing discontent from inflation and a failing economy.

With Bündnis Sahra Wagenknecht, a new opposition force has emerged as a breakaway from Die Linke that criticizes Germany’s rising militarism and military support for Ukraine (and, uniquely, Germany’s support for Israel’s genocidal war against Palestine). But beyond these topics, it has mostly accepted right-wing narratives: it seeks to reduce unemployment benefits, worsen the lives of immigrants, and further entrench a “law-and-order” agenda. If the Left continues to be incapable of mounting a convincing opposition of its own, the rightward shift will only escalate further — with no good end in sight.