23 – Germany’s Wealth, Power – and Their Limits: Economic Miracles, Imperialist Hangovers, and the "End of History"

00:00:00: Welcome to Burl Inside Out, the podcast that takes an expert look at how Germany sees the

00:00:05: world and the world sees Germany.

00:00:07: With me, Benjamin Tallis.

00:00:09: And me, Aaron Gash-Bernett.

00:00:12: Hello, and welcome back to Burl Inside Out, the Foreign Affairs Podcast in association

00:00:20: with the German Council on Foreign Relations that takes an expert look at how Germany sees

00:00:24: the world and the world sees Germany.

00:00:26: I'm Benjamin Tallis, Senior Research Fellow here at the DGAP and head of its Action Group,

00:00:31: Zeit'n Wender.

00:00:32: And I'm here with my friend and co-host, Aaron Gash-Bernett, a journalist and analyst

00:00:36: of German politics.

00:00:37: Aaron, today we're tackling a big question.

00:00:40: Specifically, how did German foreign policy evolve into what it is today?

00:00:44: And we're going to go quite far back in order to do that.

00:00:47: But also to ask how Germany got so rich, how did it actually acquire all that economic power

00:00:52: which has been at the heart of its influence in world politics in the last few years?

00:00:57: Where did it come from?

00:00:58: How has it been deranged and derailed over the years in various ways?

00:01:02: And at what cost has it actually been bought?

00:01:05: And as that's a big task, indeed, it requires a broad scope.

00:01:08: And so we're going to be tracing the historical origins of current German foreign policy mindset

00:01:13: as well as its economic might.

00:01:16: And to do so, we're going to have to go back way before the first German unification of

00:01:19: 1871, so before the Kaiser Reich period into the period where Prussia was one of Europe's

00:01:24: great powers and indeed understanding how it rose to be such.

00:01:29: That's right, Ben.

00:01:30: And the reason we're doing that is that that history is still influencing German foreign

00:01:35: policy, both consciously and through unconscious bias, I would say.

00:01:41: One thing among many that we're looking at is where German imperial thinking comes from.

00:01:46: You mentioned German unification in 1871.

00:01:50: You mentioned Prussia.

00:01:51: All of those periods come into play, not even just the recent German history in the 20th

00:01:59: century and 21st.

00:02:00: So what do I mean by this gaze on imperial thinking?

00:02:05: We've talked on Berlin's side out before, particularly in our series on the Baltics when

00:02:10: we spoke to Professor Ulrike von Hirschhausen about just because Germany renounced imperialism

00:02:17: for itself, it doesn't necessarily mean that today's Germany isn't trapped in imperial

00:02:23: thinking.

00:02:25: And this comes out in its foreign policy.

00:02:28: One example of how that shows up now is in a recent poll, and you can find that poll

00:02:34: in our show notes.

00:02:35: And that poll asked Germans about whether Ukraine should give up Russian occupied territories

00:02:41: if by doing so it would end the war.

00:02:44: Now 40% said yes, 48% said Ukraine should keep fighting, and 12% didn't know.

00:02:51: Now it's not really the fact that these results are the way that they are.

00:02:56: That's the most notable thing about this poll is what I would argue here.

00:03:03: It's that German public broadcasters set they thought it was a perfectly fine question to

00:03:07: ask in that way.

00:03:10: So obviously we would object to framing like that.

00:03:14: For one, it implies that Germany has a say or should indeed have a say over what are

00:03:21: and should be Ukraine's sovereign choices, like whether and when to negotiate with Russia,

00:03:28: which by the way Russia has said it's not interested in any negotiations that don't

00:03:32: end with complete UN legitimation of Russian occupation of the whole of Ukraine.

00:03:38: But what else is coming up here for you when you see a poll like this?

00:03:42: I mean, how might our central and Eastern European allies look at questions that are

00:03:48: in public debate that are framed this way?

00:03:50: Well indeed, it is indicative of that latent imperial gaze that I think still conditions

00:03:55: Germany's view of Europe that the decisions of the great powers are what matters and others

00:04:00: are effectively reduced to pawns in this game.

00:04:02: Now that's a caricature of what current policy is, but it does have an enduring impact.

00:04:08: The notion that somehow countries should have spheres of influence and that those who are

00:04:12: from smaller states must accept simply the will of larger states is not something that

00:04:17: we can endorse, but is none is less something that resonates not only in German foreign policy

00:04:21: thinking but others too.

00:04:23: Of course, however, in central and Eastern Europe, there's a particular historical resonance

00:04:26: here with the notion of the division of spoils or the division of the Tuvish and land of

00:04:30: the countries in between Germany and Russia in particular, formally having been in between

00:04:35: Germany, Russia, Russia and the Austro-Hungarian Empire, the Habsburg Empire.

00:04:41: And of course, everyone knows I think about their famous divisions of Poland, but it was

00:04:45: also the rest of the lands in between those countries that suffered from that kind of

00:04:49: approach.

00:04:50: And of course, that comparison has been made in the way that Germany dealt with Russia

00:04:55: over Nord Stream, for example, going over the heads of central and Eastern Europe very

00:04:59: much about us without us was the mantra in central Eastern Europe in understanding the

00:05:04: implications of that decision.

00:05:06: And of course, they were proved right when Russia launched its full scale of invasion

00:05:10: of Ukraine as if they hadn't been proved right already by the Russian annexation of Crimea

00:05:16: and its consistent policy over the years.

00:05:19: The other thing I think is important to emphasize here is the understanding of how Germany actually

00:05:24: got rich, how it does actually indeed exercise such power and on whose back and whose resources

00:05:30: this initially came.

00:05:31: And so how that might, much like any colonial power built its might on its colonies, so

00:05:36: to do Germany to an extent.

00:05:38: And that's something that's not perhaps sufficiently recognized that intra-European colonial history,

00:05:43: which is something that we talked about on a number of episodes of Berlin's Side Out,

00:05:47: which we explore today in more detail with Albrecht Richel, who is Professor of Economic

00:05:52: History at the London School of Economics, and as you may guess from his name, a German

00:05:56: but relocated to London.

00:05:58: So one who has his very own version of German Side Out, perhaps, Aaron.

00:06:02: Yes, indeed.

00:06:04: So he, as you said, he is a historian at the London School of Economics.

00:06:07: He's also a member of the Action Group site in Wenda, which we're both a part of and

00:06:11: that you head up here at the Council, Ben.

00:06:14: As well as the history, we also get stuck into the present difficulties that Germany's

00:06:18: economic and trade model has caused for it, especially in its relation to geopolitics,

00:06:23: but also on its own basis.

00:06:25: So what are the contradictions in Germany's current model?

00:06:28: How does that relate to its difficulties over energy supply?

00:06:31: And where can it draw historical inspiration from in regaining its competitiveness?

00:06:38: Together with Albrecht Richel, we bust some of the myths that actually conditioned this

00:06:41: debate and understand, as Aaron mentioned earlier, that selective reading of history

00:06:45: is no real guide.

00:06:47: So it's important to get the full view, which is why we turned to Albrecht.

00:06:50: And Ben, since you just mentioned that whole selective reading of history, I'm reminded

00:06:54: of something you mentioned earlier about Germany being historically as being one of

00:07:00: the three imperial powers that partition Poland, for example.

00:07:04: As we've often discussed on Berlin's Side Out before, history is not simply what you

00:07:09: remember but what you don't remember.

00:07:11: And that's, for example, something that is not, I would say, discussed nearly as much

00:07:16: in Germany, exactly the role that Germany played in historical decisions like that one,

00:07:24: the partition of Poland, for example.

00:07:26: That's absolutely right.

00:07:27: And other underappreciated aspects of this history include when talking about the Wirtschaftswunder,

00:07:31: Germany's economic miracle, the role actually of the occupying powers, whether colonial powers,

00:07:36: you can argue that question, the UK and the US in particular, in providing not only a

00:07:40: security shield, but also in forgiving Germany's debt that helped fuel the Wirtschaftswunder,

00:07:46: the economic miracle that saw Germany get back on its feet and restore eventually its

00:07:50: material reputation, which led to a cultural renaissance that enabled it to restore its

00:07:55: moral reputation as well.

00:07:57: So busting through these myths, busting through selective readings is what Berlin's Side Out

00:08:01: is about.

00:08:02: We started by asking him a rather light question about the origins of Germany's economic

00:08:07: model, which of course has been at the center of so many of its foreign policy decisions.

00:08:14: So let's listen in.

00:08:16: So talking in the big sweep of history, in broad brush terms, how did Germany get to

00:08:20: be the kind of economic power it is today?

00:08:23: And is that model in difficulty?

00:08:24: Okay, you give me two hours for the answer.

00:08:28: There are several things to think about here.

00:08:32: One is energy resources, and it's of course not by accident that I put this first.

00:08:39: Historically that was of course coal deposits by some basically historical accidents and

00:08:44: things that had nothing to do with economics.

00:08:49: The Kingdom of Prussia came to be sitting on some of Europe's best coal deposits, which

00:08:57: then provided a more or less straight way shortcut in the industrialization.

00:09:03: It's a bit more difficult than that, but that's one way to start.

00:09:07: A second way to start it is what is sometimes called the big banana, which is a manufacturing

00:09:14: belt that extends from nowadays from Scandinavia all the way into northern Italy, passing

00:09:19: through the British Isles, parts of France, Belgium, Netherlands, eastern France, Switzerland,

00:09:29: also northern Spain and Catalonia are part of it historically.

00:09:33: Questions why we have this manufacturing banana, that seems to have to do with accumulation

00:09:39: of skills.

00:09:41: Already back to the Middle Ages and there some of the most fancy theories of why this

00:09:46: is.

00:09:47: Let's not go into this now.

00:09:49: The important thing is there was a deep knowledge of how to do things combined with easy availability

00:09:57: of rich natural resources and that was like the toxic brew that generated industrialization

00:10:05: and the beginning of climate change.

00:10:08: Right.

00:10:09: I mean Germany was a relative late comer to some of that industrialization, but boy did

00:10:13: then it make up for that.

00:10:15: That's a typical thing that we would probably have to talk about this later in today's

00:10:18: discussion.

00:10:19: Germany is a late comer to almost everything.

00:10:22: The Germans are slow, but once they get the hang of something, they actually do it.

00:10:26: From this rich manufacturing and resource base, which then gets turbocharged in the 19th

00:10:32: century, particularly the second half of the 19th century in the German lands, which then

00:10:37: of course become the Prussian Empire and that unification has a stimulating effect as well.

00:10:43: Absolutely.

00:10:44: Of course, big politics did play a role.

00:10:47: The Prussians used to be a pretty poor country, but they had a small but efficient standing

00:10:51: army, which itself is actually a legacy from the remnants of the 30 years, what we need

00:10:57: to go back into the 17th century to understand Prussian militarism.

00:11:01: They still had the Swedes in the country and the Swedes had the nasty habit of rummaging

00:11:07: and foraging around and doing lots of nice things in the process.

00:11:12: So the Prussians decided not to kick them out, they needed to have a small but highly

00:11:16: efficient army.

00:11:17: And then once they had built up that instrument, they didn't let go of it, I was about to

00:11:21: say up until 1945, if not 1990.

00:11:26: And one thing that led to the acceleration was Bismarck's attempt in mid-century to

00:11:32: accelerate the German unification, do this basic by warfare.

00:11:38: In the course of this, they also occupied the Kingdom of Hannover and for some reason

00:11:43: that I still don't understand until today, the British did not intervene against him.

00:11:48: Prussia had been an old ally from the Seven Years War and the Napoleonic Wars.

00:11:56: So the British decided to swallow this perhaps out of rivalry against France and they were

00:12:01: probably quite happy to see that the old Prussian ally was gaining in power and would be an

00:12:07: effective counterbalancing weight against France.

00:12:11: And if I may say so, that calculation was perhaps quite right, if anything, it was a

00:12:16: bit too successful.

00:12:17: Interesting, I mean the fluctuating waves of British intervention and non-intervention

00:12:21: in the continent, that's something we might consider in another show.

00:12:24: But just to take that model, that description up to date, so after the Second World War,

00:12:30: when what was the Prussian Empire and then the Nazi Reich comes crashing down in the

00:12:35: crushing defeat that was visited upon it by allies, we see Germany build again and we

00:12:39: see it build again through the so-called Wirtschaftswunder, the economic miracle that really set Germany

00:12:45: up for the kind of trading nation it is today.

00:12:48: What are the key features of that model and what state is it in?

00:12:52: First let's demystify the economic miracle of the 1950s a little bit because it was basically

00:13:00: a rebound effect and there was a lot to rebound from.

00:13:04: Let's not forget this, it was first of all the destruction and dislocation from World

00:13:09: War II.

00:13:11: Also the moral dislocation, let's never forget this, the moral dislocation that Nazi rule

00:13:16: had meant and the complete moral defeat that the Germans started to realize in 1945 when

00:13:24: the gates of hell opened and the concentration camps opened.

00:13:27: It was also a rebound from basically 20 years of economic depression and incomplete economic

00:13:34: recovery after World War I.

00:13:36: So it was like an accumulated effect that had dragged Germany and the European economy

00:13:42: down more or less since 1914, which makes for the spectacular economic growth rates

00:13:49: we see in the 1950s.

00:13:51: It is not necessarily miraculous economic policies except that they found a good combination

00:13:57: of a free market approach to economic policy and a relatively modern by the standards of

00:14:06: the time, relative modern approach to welfare policies that was strong enough to create

00:14:15: a sense of fairness among the Germans but not too strong so it didn't suffocate the

00:14:19: economy.

00:14:20: These are things that of course need to be rebalanced and recalibrated in every generation

00:14:24: and they got that mixture right.

00:14:26: Plus tutelage and protection by the Americans.

00:14:30: Right, we'll come back onto that in just a second but indeed, I mean this rebound plus

00:14:35: then in some ways the privilege of relative backwardness as Trotsky would have put it

00:14:39: a long time ago of being able to retool the German economy with the very latest stuff

00:14:43: as was at the time then set Germany up as that massive trading power.

00:14:48: We know that later from the 60s into the 70s there was a moral regeneration and a cultural

00:14:53: regeneration as well.

00:14:55: And all this then comes together in the post-89 period where Germany feels back on its moral

00:15:00: feet is also materially wealthy and starts to set the agenda in the end of history period.

00:15:06: The end of history period, yeah, that was an interesting one indeed.

00:15:09: It's interesting that you would mention 1990 as a watershed.

00:15:13: It is perhaps one watershed is a little bit earlier that's in the 1970s when the German

00:15:19: economy so to speak hits the historical trend again.

00:15:24: So the 1970s are more or less both the level and the slow growth that we would have seen

00:15:31: had economic development more or less continued undisturbed since 1913.

00:15:40: So that's basically when all the disruptions from the war economies and all that had watched

00:15:49: out.

00:15:50: You understand why Germany became this trading power as you call it.

00:15:54: We mustn't look exclusively at like productivity and retooling although all this is of course

00:16:00: undoubtedly true.

00:16:02: Largely that's still within let's say the confines of rebound and recovery.

00:16:10: The quantitatively and qualitatively new element is really the way the German economy

00:16:18: was the best economy was put back on its feet financially with the allies allowing and actually

00:16:28: fostering almost complete cancellation of Germany's old debt which meant that German financial

00:16:38: policy and also German monetary policy became a very easy task in the 1950s and 1960s.

00:16:46: We all used to believe that this was just because of German balanced budget policies

00:16:53: of German austerity plus German ingenuity and all these things in German work ethics

00:17:03: all very true but the task of monetary and fiscal policy in the 1950s and 1960s was just

00:17:11: so much easier than almost anywhere in Europe which in a way explains these very favourable

00:17:18: starting conditions and the very favourable position that Germany still had in 1990.

00:17:22: At which point the Schwabian Hausfrau goes regional and goes Europe wide?

00:17:27: I mean the integration of the European single market then the single currency locks in certain

00:17:32: advantages for Germany at a time when it buys in big time into the neoliberal globalising

00:17:37: model and into things that played to its advantage.

00:17:41: It also logs in certain German preferences does it not for example if we look at the

00:17:45: creation of the Euro and the European Central Bank and you know a very specific inflation

00:17:48: target as a result of German preference no?

00:17:51: Let me cautiously disagree with that.

00:17:53: You could, I might as well say it locks in the French preference for mimicking what they

00:18:01: consider to be German monetary and fiscal success.

00:18:05: Perhaps to some extent it's the thinking of the time you need a strong central bank and

00:18:11: a strong independent central bank and the Germans are providing that model and Trichet's policy

00:18:19: as head of the Bank of France back then is the Francfort which is of course a pun on the

00:18:26: place name of Frankfurt and in a way it's perhaps based on a misunderstanding of Germany's

00:18:34: extremely privileged position after the war which is not having to deal with the war debt,

00:18:38: not having to inflate in order to inflate it away, not having to deal with large interest

00:18:44: burdens on the public budget.

00:18:46: It is misunderstood as German virtues when indeed it is perhaps a privilege to a large

00:18:51: extent given to the Germans by the allied military governments.

00:18:54: The proof of the pudding is to my mind Germany's difficulty sticking to that model after the

00:19:03: big shock that 1990 provides to the German economy.

00:19:08: This is something that interestingly we don't talk very much about anymore and in your question

00:19:12: was also the same thing that you basically went straight on from 1990 to the single currency.

00:19:17: All there was something in between which was a very bad fiscal and political in whatever

00:19:22: shock called the German unification.

00:19:24: Yes and I'd very much like to come back to that in more detail but just to push this through

00:19:28: into the present we then see perhaps the spatial fix that is given to Germany.

00:19:35: As you said it was hitting the limits of some of that model but we get a Eurozone which

00:19:40: locks in favourable conditions for Germany in terms of exchange rates, in terms of borrowing

00:19:45: rates and so on.

00:19:46: Is that and that's a huge advantage for Germany to really build on and cement its position

00:19:50: as the leading exporting nation in Europe?

00:19:53: Yes and no. I have a bit of a difficulty with that because this presupposes intentionality

00:20:02: that perhaps is not there.

00:20:04: The Germans at the time had a big discussion about precisely these issues and there were

00:20:09: two schools of thought.

00:20:11: One that was making more of the appointing, we are cementing in something that is not

00:20:16: going to work because we are basically switching off the exchange rate mechanism as a balancing

00:20:22: instrument and once we switch this off we need something else which is the fiscal policy

00:20:26: which is something we don't want to have because it would basically mean giving up

00:20:31: fiscal sovereignty.

00:20:33: There were clear indications that neither would this be the preference of the German

00:20:37: water nor would the German constitution court allow this easily.

00:20:41: So that was a bit of a barrier and we've seen Germany hit this barrier several times, sometimes

00:20:47: here, sometimes there.

00:20:48: The other school of thought was saying, "Well, yes, it's true we are having this misalignment

00:20:55: of exchange rates potentially an issue but markets will be flexible enough to provide

00:21:01: that adjustment."

00:21:04: The pessimists turned out to be right but also other things happened that nobody had anticipated

00:21:13: and that was the dilute of capital flows from Northern Europe to Southern Europe after the

00:21:18: announcement of the common currency which brought in a new problem that nobody had anticipated.

00:21:24: I've looked at the old papers, nobody's talking about that.

00:21:26: Right, and so exactly that journey from Big Banana to Big Bazooka, to Draghi's famous thing,

00:21:33: brings us to that connection between economics and politics which in a lot of the discussions

00:21:39: we see in Germany tend to be rather falsely divorced, don't they, Aaron?

00:21:42: Yeah, well, I would certainly say so but before we get to there, if we go back to the end

00:21:47: of history period, for example, I sometimes wonder if we in Germany bought a bit too much

00:21:53: into the whole end of history period and argument simply because suddenly we had this huge economy

00:22:00: that still required fuel and still required resources and we were prepared to go just

00:22:04: about anywhere for that especially to the Russians and their gas and that sort of thing.

00:22:12: And now we're reaping the consequences.

00:22:15: How did we get here?

00:22:17: Does it come from buying into the end of history too much?

00:22:20: Is there other things at play here?

00:22:22: I would really, I've never talked to Francis Fukuyama about this but didn't he actually

00:22:27: kind of copy a German concept here when he wrote this book about the end of history?

00:22:32: Oh, yeah, why?

00:22:33: Because Germany's end of history is the ground zero of 1945.

00:22:40: There's no question about this.

00:22:42: And then there's sort of speak, the end to the world to come, so to speak, with the

00:22:47: currency reform of 1948, which is like a rebirth in something akin to paradise.

00:22:53: I always found it so very obvious.

00:22:55: I went to high school equivalent in Germany and we had very intense training in history,

00:23:02: very good stuff.

00:23:03: But what you could see is although we learned every detail, the connection between pre-1945

00:23:11: Germany and post-1940s Germany was never really made.

00:23:15: And in a way I'm not a historian or philosopher really, I'm an economic historian.

00:23:22: But the interesting thing in collective consciousness is that the way we talk in Germany about the

00:23:26: past is highly ritualized.

00:23:28: We have our altars, our temples, where history is being addressed.

00:23:33: But a critical approach that looks at the element of continuity is something that became

00:23:38: influential in academic circles, perhaps only in the past, I would say it's no longer than

00:23:47: 20 or 30 years.

00:23:49: And whether that really has kind of filtered through to the general educated population,

00:23:54: I'm not fully sure.

00:23:55: Which means to my mind Germany's educated classes, what they call the Bildungsbilger

00:24:02: Tomb is still in this kind of elevated slightly lofty status of being disconnected from history.

00:24:11: The final disconnect from history was the end of the Cold War, which in Germany happened

00:24:16: not in 1989.

00:24:18: In Germany it happened in 1971.

00:24:22: During the chancellorship of Willi Brandt, a former anti-Nazi resistance fighter, a social

00:24:29: democrat, he had fled to Norway, survived the war in Sweden, came back and made a big career

00:24:34: in social democracy.

00:24:35: A guy who simply didn't have the Nazi with.

00:24:38: He had full credibility.

00:24:40: And he was the one who went to East Germany.

00:24:42: He was the one who went to Poland, famously taking me in front of the ghetto memorial and

00:24:48: he went to Moscow.

00:24:50: That was in the mind of those Germans who were not old cold warriors with brown wif.

00:25:03: That was the time when the Cold War ended in the mind of the Germans.

00:25:07: And ever since the times of detente in politics, we've had this idea in Germany that you could

00:25:13: do business with the Russians or with the Soviets.

00:25:17: That you could deliver gas pipelines.

00:25:22: Much of this gas stuff was flowing through German-made pipelines.

00:25:27: So that was the implicit deal that was made.

00:25:29: We're coming to terms with the past also on the Eastern Front by recognising the results

00:25:33: of 1945 and by doing business with the Soviets.

00:25:36: This is it.

00:25:37: This is the separation I want to get to.

00:25:39: Because the Cold War does continue in Germany.

00:25:41: The German army and defence spending at that time, we're talking 3.5% of GDP, half a million

00:25:46: people under arms, 5,000 main battle tanks, a ground force that is the envy of NATO and

00:25:51: appropriate to a frontline state, while at the same time engaging in this Aust-Politik,

00:25:56: this rapprochement with the Eastern States.

00:26:00: And it's then after the end of the Cold War, as everyone else sees it, that we go from

00:26:05: Aust-Politik to Aust-Politik.

00:26:07: And you actually have this economic imperative that comes to dominate practically everything

00:26:11: and the denial of politics that goes with it.

00:26:13: Can I challenge you on that?

00:26:14: You can challenge me on that.

00:26:15: I would like to draw a line of continuity from the late 1960s Aust-Politik to the post-1990s

00:26:23: Aust-Politik.

00:26:24: It's many of the same people or it's basically the young people who had previously been their

00:26:28: kind of junior co-workers who then grow into the role and basically continue the same thing.

00:26:35: So like Egon Baal's young men, mostly men, who do the same thing after 1990.

00:26:43: I would even argue, but now I'm really kind of on thin ice here, I would even argue that

00:26:50: in programmatic terms, it is really the continuation of the same policy.

00:26:54: We see the same policy already in the 1920s when the Germans renew their reinsurance policies

00:27:04: that Bismarck had started with respect to the Soviet Union.

00:27:08: Not much happens because of Nazis and all that.

00:27:12: It is so to speak, it is a basal continuo as it would call it, music, a theme that has

00:27:17: always been there and that kind of comes, starts coming to the fore again in the late

00:27:21: 1960s and becomes bigger and bigger and bigger.

00:27:25: But I don't see this continuity in this policy.

00:27:28: I think we are still seeing a little bit of a legacy of Aust-Politik to come back to that

00:27:32: for a quick second, even today.

00:27:34: I mean, we still have social democrats, especially who are very, very attached to Aust-Politik,

00:27:40: both old and new.

00:27:42: We have a not insignificant number of Germans who basically say, "Aust-Politik is the reason

00:27:47: why the wall fell rather than East Germans or other Europeans demanding their freedoms."

00:27:55: Or the military might of NATO forcing costs on a Soviet Union that couldn't bear it.

00:27:59: Or just the economic mess that was the Soviet Union at the time.

00:28:02: But no, it was Aust-Politik that did this.

00:28:05: We're seeing that in terms of, I think, a toxic legacy that goes all the way up to Ukraine.

00:28:09: Is there any influence of Aust-Politik left in Germany today that needs addressing?

00:28:14: I would argue entirely so.

00:28:16: I would think that what you're spelling out is basically the continuation of the point

00:28:21: that I was trying to make.

00:28:22: And that was there before you or I were trying to make the point because it is, to me, glaringly

00:28:29: obvious that, yes, this is one of the structural constants, so to speak, of time invariant constants

00:28:36: of one element of German politics.

00:28:39: To put it that way, we can go much further back.

00:28:42: We can go much further back and can say that the two world wars were actually a dramatic

00:28:48: and highly paradoxical departure from what had been consistent Prussian policy.

00:28:55: What I would push back on would be to say that I think you could see a continuation of a policy,

00:28:59: but in a changed world.

00:29:00: Doing the Aust-Politik economic engagement with a different economic system had the potential

00:29:05: to push change in a positive direction that made a more secure connection and a more secure

00:29:10: Europe.

00:29:11: When it loses its power is when it becomes vandal durch Handel and no pressure for positive

00:29:17: change on the receiving end in Russia and elsewhere is made.

00:29:21: And the change comes in Germany instead.

00:29:22: I see where you're going.

00:29:24: That was a debate that was already raging inside the, inside German social democracy.

00:29:34: Exactly between what in rough terms could be called the Willy Brandt wing of the party

00:29:39: and the Helmut Schmidt wing of the party.

00:29:42: Willy Brandt being a former resistance fighter who was decidedly not interested in German

00:29:48: militarism and Helmut Schmidt being a former Wehrmacht artillery officer who understood

00:29:55: military matters all too well and who shared views on military matters with the military

00:30:02: establishment inside the opposition party.

00:30:06: There was the other guy who did a lot for German, post-war German, re-militarization,

00:30:11: Franz Josef Strauss of the Christian social union, the Bavarian.

00:30:16: Famously said the only thing to the right of me is the wall.

00:30:18: And that was one thing exactly.

00:30:22: And these guys were in a grand coalition together in the late 1960s.

00:30:27: They called plush and plum because they were getting along with each other fine.

00:30:33: So you see there is a bit of intersectionality, but there are also kind of overlapping circles.

00:30:38: And it's never quite right to say there's only one thing.

00:30:41: And that's also how we probably need to understand German politics and policies.

00:30:46: On the one hand there is this...

00:30:49: policy line with Aust-Politik and this pro-Soviet and especially pro-Russian

00:30:55: element, anti-Ukrainian element. Also we come to this perhaps later. And there is a

00:30:59: more pro-Western thing. And Schmidt was clearly the Atlanticist who spoke fluent

00:31:06: English and was completely comfortable touring London, Washington,

00:31:14: DC and to leave a good impression there. Whereas Willy Pond was this kind of

00:31:18: exotic figure there who whose thinking was really like more

00:31:24: within the old internal conflicts of social democracy and the Labour

00:31:29: movement and whether one should go with the majority socialists or the minority

00:31:33: socialists who was more like with the Menchievike and not the Bolshevik.

00:31:37: But his thinking is not Western European. These are policy strengths that kind of

00:31:42: overlap within the same party. It led to splits, it led to reunifications, it led to

00:31:46: splits again. Right, I mean this is always why the challenge of strict

00:31:49: periodization is never going to be fully met. One thing to read is to look up

00:31:54: Helmut Schmidt's speech to the IWS, the Institute of International and

00:31:57: Strategic Studies in London in 1977 on deterrence remains one of the classics

00:32:02: of the genre and there's a link to that in our show notes. But let's take this

00:32:07: to where you, drawing some of your strands together, Albrecht, taking this as a

00:32:13: policy that looked towards the East, that overlooked the Tuvishenländer, the

00:32:17: countries in between and looked straight to Russia, that's what we've heard a lot

00:32:21: of accusations of in the last couple of years. And so this latent German imperial

00:32:26: gaze that looks to Russia and overlooks the lands in between, which then came to

00:32:31: find its expression in the prioritization of economics over politics in the last

00:32:36: years. Well I think, I mean we see this I think certainly with how Nord Stream 2

00:32:42: was handled, for example, all kinds of warnings from Central and Eastern Europe

00:32:47: and also from Ukraine. I mean this is something that President Zelensky

00:32:50: addressed quite pointedly in his speech to the Bundestag. We always warned you

00:32:55: that Nord Stream 2 would be used as a weapon, instead you insisted it was

00:32:57: business, business, business and this sort of pretending that Nord Stream 2

00:33:04: was only a commercial endeavor, something that was said over and over again and

00:33:08: ignoring of course that it has political implications. But how is this even, where

00:33:12: does that come from in German political culture and even among the public this

00:33:17: tendency to just pretend that economic issues are not in fact political ones

00:33:22: or security ones? Now here we probably get to some uncomfortable historical

00:33:27: evidence. Think about the map of Europe in 1914, more precisely about the map of

00:33:35: Eastern Europe. I would be hard-pressed to find more than three states there. One is

00:33:40: Prussia, the second one is the Habsburg monarchy, dominated by ethnic Germans.

00:33:45: No, sorry of course the Austrians are not Germans anymore, which is fine.

00:33:50: But that was the situation. And the third one is Russia. And the third one is

00:33:55: Russia and what do these three powers do? They divided Europe. They divided Eastern

00:34:00: Europe for mutual benefit. So did we basically ditch the imperial mindset

00:34:07: or pretend that we ditched it only for ourselves in Germany? Because it seems

00:34:12: that we still think in a very imperial way, right? And I think this is what Ben

00:34:16: is getting at. Dealing with primarily great powers, looking mainly to Russia or

00:34:20: to the US to take your cue, ignoring those smaller states in between, does seem

00:34:25: again a continuity, Albrecht. Do you think so as well? The Germans looked to

00:34:29: Bismarck in a way that is perhaps even more positive than the way the British

00:34:35: looked towards Israeli and these are two completely different figures. And

00:34:38: Bismarck's policy was essentially to maintain a reactionary business model,

00:34:44: a politics model, that had just been stabilized in the 1848 Revolution with,

00:34:50: let's not forget, a Russian military intervention in Hungary against the

00:34:54: Hungarian uprising that was an entente. It worked fine under Bismarck. His big

00:34:58: difficulty was how can we stabilize that and not entirely antagonize the Western

00:35:03: powers, which under his successors broke down. Then they antagonized everybody

00:35:09: and waged war against everybody until everything had been destroyed. What is

00:35:15: the innovation that comes in after World War II? It's the American backing. It's

00:35:21: an irony of history that Germany felt free to pursue most politics precisely

00:35:26: because the Americans had their back. It is like taking a free ride on later and

00:35:31: on the Americans. At the same time, the Germans knew they had the liberty to do

00:35:35: this. Oh, they were at ease doing this because America in some olden days,

00:35:41: which now seemed to be passed, seemed to see no alternative to supporting this.

00:35:48: From a German viewpoint, if you basically considered the old mindset that the

00:35:55: Polish are accusing us of and the Ukrainians in a slightly more polite

00:35:59: fashion now that Melnik is in Brazil, are accusing us of the old German mindset

00:36:05: is that there is no conflict with the Russians, with the Russians, not the Soviet

00:36:12: Union, with the Russians, because we can always divide and conquer. We don't do

00:36:17: the conquering thing. That has gone out of fashion in Germany a little bit. We

00:36:20: leave this to others. But from a German viewpoint, Ukraine is a Russian matter.

00:36:24: From the traditional German viewpoint, sorry, from the traditional German

00:36:27: viewpoint, Ukraine is a Russian matter. Germany challenged this view twice in the

00:36:33: 20th century, first in 1918 when Ukraine was occupied by German troops. This is

00:36:38: something that has been conveniently forgotten in German historiography. Some

00:36:42: experts still talk about this not too often. Others get invited and it was

00:36:48: challenged again in 1941 with disastrous results. So the German automatic

00:36:54: reaction would always be, we burned our fingers twice, we set Europe aflame in

00:36:59: the process, we emerged from the with destroyed cities, 10 million refugees

00:37:05: and a moral defeat that knows no parallel in history. A country and a culture in

00:37:09: ruins. Yes, exactly. Sorry if I psychoanalyze this a little bit too much here.

00:37:13: I would not be surprised if that is one of the reasons why it is really very

00:37:20: difficult for Germany's political class to come around to the idea that we

00:37:24: should now support Ukraine against Russian imperialism. Challenging Russian

00:37:28: dominion over Ukraine was done twice in the 20th century. It didn't work out

00:37:33: well and most Germans, if you ask them probably have this idea, we don't touch

00:37:38: it. We don't go there anymore. This is still that great power thinking it's

00:37:41: still spheres of influence and exactly entirely. We're tied those who don't

00:37:45: live in a great power. It's still in our mindset even if we're not,

00:37:50: you know, as you say, doing the military conquest thing the same way anymore.

00:37:54: Look at the economic facts and then you will see that German economic

00:37:57: penetration of East Central Europe is higher than it was in 1938 and it's

00:38:02: probably at the level of 1914. One of the reasons why to come back to the

00:38:06: Euro crisis and to come back to the Southern Europeans, why the Southern

00:38:10: Europeans found themselves in a less uncomfortable position after the opening

00:38:14: of the wall was that all these industrial districts of East Central Europe

00:38:18: came back and why did they come back because they have a fantastic location

00:38:23: close to the hub that Germany is in the economic geography of Europe.

00:38:27: Well right, I mean the Czech even Czech economic journalist referred to Bohemia

00:38:31: as the 17th Bundesland in this and again you find that coincidence of resources,

00:38:36: skills, infrastructure and connection and location.

00:38:38: Western Poland is the 18th one. We can add to the list.

00:38:42: Not forgetting Mallorca of course.

00:38:44: And the Liga Nord in Italy can't really claim it would say it openly.

00:38:49: Northern Italy is of course part of Germany's supply chain as well now.

00:38:53: Talking about great power thinking. This is what German industrialists have in mind.

00:38:58: Right and that's why they love doing business with the Russians because they think the same way.

00:39:01: The business with the Russians itself is not the most important thing.

00:39:05: The important thing is to have quiet on the eastern front.

00:39:08: This is extremely cynical I know but the automatic thinking before you start thinking about it more deeply

00:39:13: about in the way of what am I thinking here actually but the automatic thinking would be

00:39:18: we don't need conflict there. What we need is stable business conditions.

00:39:23: Not so much perhaps because of the Russian business itself but simply in order to have

00:39:27: easy market access to the rest of Europe.

00:39:31: I actually do think some of your cynicism is probably well founded.

00:39:35: We have seen rumours in the last couple of days that even in the chancellor right now

00:39:40: and the Schultz chancellor there are officials that are very keen to be the first to re-engage Russia

00:39:45: after the war is all over right.

00:39:48: A big hello to all our listeners in the council.

00:39:50: Yes exactly.

00:39:53: To come to that I think...

00:39:55: The good thing is I don't need to take a position on that because for me the world begins only when the archives open.

00:40:00: It's the day of 25 to 30 years.

00:40:03: It's asked me again in 30 years.

00:40:06: For others it's but the judgement begins now right Aaron.

00:40:09: We have talked on this show about how the German public's attitude might be changing with some of these questions

00:40:14: but we do still see that the political elites are still very much still influenced by old thinking.

00:40:21: Yeah but let me see.

00:40:24: The want to re-engage with Russia this sort of stuff.

00:40:27: I've been working for 16 years.

00:40:30: Why can't Germans particularly elites but perhaps also the public here understand how bad this all looks?

00:40:39: Particularly something like that that you know someone wants to re-engage with Russia again and just go back to business as usual.

00:40:46: Why don't we seem to be able to get that that just looks really really really bad.

00:40:50: Okay I give an honest answer to that which is that great power thinking is not really about what do the other think about us.

00:40:59: That's not really in the set.

00:41:03: That's not really in the set and I don't say this with any matters when I'm talking to my friends in London about 18th and 19th century

00:41:14: when especially England was not just a small Celtic village defending the it's a heroically against the European Union.

00:41:25: Then I can also see there's very very little sensitivity, very little openness towards what did we actually do.

00:41:33: It's not really on the screen.

00:41:35: The Germans have learned to be highly self-critical in one dimension

00:41:39: and that's dealing with the consequence of the of the Shoah of the Holocaust.

00:41:44: And even that is highly ritualized but I don't want to in any way belittle this.

00:41:50: There clearly has been at least publicly turned around.

00:41:54: Memory culture misses the rest of it.

00:41:56: And selective memory culture.

00:41:58: It is selective absolutely but let's not forget that historically Germany is not a small country.

00:42:04: It used to be this myriad of micro territories having a dream of national unity

00:42:09: and it became one of the great powers of Europe then messed it up as completely as possible

00:42:17: and by what is a miracle found itself to be at least economically a great power again.

00:42:23: Nevertheless, again let me take issue with something that you kind of set as an aside

00:42:30: which is that old thinking is still completely influential.

00:42:33: I think we need to give people credit for changing their thinking slowly, perhaps too slowly.

00:42:39: We will perhaps see that it is going to be more persistent, the kind of rebalancing the position,

00:42:46: might be more persistent than we think.

00:42:48: So in case there really are people in leading policy circles

00:42:53: that believe he could go back to business as usual with the Russians.

00:42:56: In case there are such people still think that they would perhaps wake up one day

00:43:00: and have a rude awakening and realize that this is not how German politics is going.

00:43:04: What I'm saying is Zeitengwende is incredibly slow to materialize

00:43:10: and I see many entries on X-Twitter by people from think tanks in Berlin being very impatient.

00:43:18: Nevertheless, if I may say, the big ship, the big LNG tanker called MS Germany is moving

00:43:29: degree by degree by degree. It's very, very slow.

00:43:32: I don't think that's going back anytime soon. I'd be surprised.

00:43:35: Sure, but I mean degree by degree by degree is fine while Ukrainian by Ukrainian by Ukrainian.

00:43:40: Absolutely.

00:43:41: And this is also why there's an impatience.

00:43:43: Not only that, because the imperative for Russia to lose,

00:43:45: which would surely if Germany were to play the contributory role it should in that,

00:43:49: be the end of the kind of thinking you mentioned before,

00:43:52: that would be the sign of the Zeitengwende for Ukraine to win, to be able to assert itself determination.

00:43:57: In a way that some of the lands of the Habsburg Empire in the past were able to do,

00:44:01: and they didn't get that for free. They also got it with American backing from Wilson and others.

00:44:05: We know that, but it's exactly that shift that would surely be a Zeitengwende.

00:44:09: And also I think Germany to very clearly come out and support, for example,

00:44:15: Ukrainian accession to NATO in particular, I mean also to the EU,

00:44:20: but it has already voiced support for this.

00:44:22: I mean that is, I think perhaps one of the first signs that we have changing thinking that says,

00:44:28: "Okay, we don't really consider you a Russian matter."

00:44:31: Exactly. Everything in this regard is going to happen much later than we think,

00:44:35: and much later than would be good. There's absolutely no doubt about this.

00:44:39: As I said, German mentality is a little bit to be a late comer to everything,

00:44:43: and then do things with German thoroughness, which is not always good.

00:44:51: Because Germans then can become in the same way that the certain lack of flexibility

00:44:59: of German thinking, the rigidity that people observe and notice very strongly

00:45:05: when they come to this country, in the way that this immobilisation makes them very slow to perform policy turns.

00:45:15: That rigidity also works the other way around. That's why I'm not so sure that we will really get a reversal

00:45:25: to the previous politics of all. Too much has happened already.

00:45:30: And so I'm hedging my bets a little bit, but that said, of course, it is obvious that other possible paths of German policy

00:45:37: could be imagined and that the consequences of those might be much preferable.

00:45:41: Picking up on what you said before, again, it's never either one thing or the other.

00:45:45: These things are in competition, and this is what the large business of politics actually is,

00:45:49: is those different impulses and actually which one can gain the upper hand in different ways

00:45:53: than when particular turning points emerge. It's the result of long, complex action coming together.

00:45:58: Often, as you said, a strategy without a strategist sometimes.

00:46:02: And then actually taking through and dealing with the legacies of the past still.

00:46:06: I've just been so struck by many of the things you said.

00:46:09: What difference has it made to you to live abroad for 16 years to be able to reflect on Germany?

00:46:14: The question goes very deep. We will have to go all the way back to 1939. That takes too long.

00:46:19: My grandparents told me how here in Berlin they were basically putting a duvet over the radio,

00:46:25: listening to the BBC and not believing in the early days of September that they promised counterattack

00:46:31: and the West would not be forthcoming. These and other tales have deeply influenced my thinking

00:46:35: so that kind of going abroad and looking at Germany from abroad is not entirely coincidental.

00:46:42: There are deeper reasons for that.

00:46:44: Given what we've said about Germany's positioning, how is it set to fare in the changing geopolitical

00:46:48: and geo-economic world we see?

00:46:50: You've probably heard about German angst.

00:46:52: Never ever.

00:46:54: Never ever. Okay. So in Germany we have, in German culture we have this thing of believing that

00:47:00: the end of days is nigh and that it's not going to be pretty and that we might be on the losing side.

00:47:08: I don't know why this is.

00:47:10: Germany has been a net exporter of ideologies usually with the heavy, negativist components

00:47:17: since the times of the Anabaptists and perhaps even earlier.

00:47:21: So I'm not surprised that everybody is super pessimistic.

00:47:24: I'd like to put things into perspective a little bit.

00:47:27: We've had lots of complaints also in this interview implicitly about Germany's export power

00:47:33: and how Germany was basically exporting and producing and if that's an English word, austerity.

00:47:41: I know it's not a word but let me make it up on the fly.

00:47:44: It's neighboring trade partners to the ground.

00:47:48: Now we see for the first time in 18 years that Germany is again being called the Sigmund of Europe.

00:47:56: It's a bit of an exaggeration, not quite.

00:47:59: Germany's engineering schools haven't closed down yet although I do understand they have difficulty recruiting students

00:48:05: and I hear the stories of how everybody wants to be a civil servant or an academic historian or something like that.

00:48:15: If possible, of course, on a safe lifetime position.

00:48:19: Right, the land of civil servants, historians and lawyers which will eat itself.

00:48:23: Exactly. All this is true.

00:48:24: But nevertheless, there are still some export surplus.

00:48:27: It's true that German manufacturing is being challenged technologically.

00:48:30: Let's not forget that there are several technological revolutions that Germany simply has missed.

00:48:35: The digital revolution, no show, consumer electronics.

00:48:38: They used to be very strong on this in the 1960s.

00:48:41: On digitalization, we live here, you don't have to convince us.

00:48:44: So all these things are on issue in Britain.

00:48:46: It's like the other event.

00:48:47: As soon as it's digital, it works.

00:48:49: Nothing else works unless it works with German technology.

00:48:53: So yes, Germany has missed a few things already.

00:48:57: We need to see what happens next.

00:48:59: It is not entirely clear.

00:49:00: It has bounced back in the past.

00:49:02: There is still a fighting chance it will bounce back right now.

00:49:05: But let me kind of pin this down to one thing that everybody is talking about.

00:49:09: And that is again energy supplies.

00:49:11: There is, of course, an issue with the gas, the misrepresentation,

00:49:15: is that Germany used to be built on cheap Russian gas.

00:49:19: And now that this is no longer there, the German business model is finished.

00:49:23: That is simply not quite true.

00:49:25: Very politely put.

00:49:26: That was that influence of 16 years in the UK.

00:49:29: I used to put things in more American terms, so I'm trying to not do it anymore.

00:49:34: The fact is that there is a market for fossil fuels.

00:49:37: If anything, there might be carbon leakage.

00:49:40: We've had a very controversial discussion in Germany recently

00:49:44: about what actually happens to fossil fuel prices internationally.

00:49:48: If Germany continues its attempts to get out of that unilaterally

00:49:53: without international cooperation, all this is there.

00:49:56: But you can't have it both ways.

00:49:58: You cannot at the same time say that there is a big international market

00:50:04: where Germany's effects as a major user of energy

00:50:07: are going to affect on prices.

00:50:08: And at the same time say that Germany is toast because Nord Stream 2 has been blown up.

00:50:14: That's not quite going to work.

00:50:16: So the real issue is that two things are coming together here.

00:50:19: One is we are having this war between Russia and Ukraine,

00:50:23: which is also an economic warfare of Russia against the West,

00:50:28: with the Russians being in a slightly mixed position here.

00:50:31: And the other thing that we have is that Germany is desperately trying to move out of fossil fuels

00:50:37: with mixed chances of success.

00:50:39: Taking those two things together, it does not seem clear to me

00:50:42: that Germany in the future is no longer going to be a location

00:50:46: where you can do energy intensive production.

00:50:48: The problem is not the location, the problem is its politics.

00:50:52: And again, German energy politics, it's a little bit at a crossroads.

00:50:56: They can't have it both ways. They know about it.

00:50:58: If you press them on this, that would lead us far afield,

00:51:02: they say things which seem to be slightly self-contradictory.

00:51:07: So we need to see what happens over time.

00:51:09: What I can see is that the lobbyists and industrial representatives

00:51:12: are presenting things in very bleak colours.

00:51:17: That's understandable, but of course don't forget the interest behind this.

00:51:24: I do think the German economy is going to lift us in another day.

00:51:29: Somewhere between Panglos and Panglum, there is likely to be the future

00:51:33: of the German economy, but it's not just energy.

00:51:36: Germany is dependent in other ways on other parts of the world, particularly on China.

00:51:40: We know this not only for materials and its green transition,

00:51:43: but for large parts of the trade model on which it's relied on,

00:51:46: which has to be honest served the interest of certain German companies

00:51:49: rather than the German people at large.

00:51:51: But there are a lot of people, even in our own institution,

00:51:54: continuing to argue for that neoliberal globalization and trade model

00:51:58: to continue in as much an unaltered way as possible.

00:52:02: Is that viable?

00:52:04: I don't know what the neoliberal trade model is.

00:52:06: Being a neoliberal economist myself by training,

00:52:09: yes, there's something called comparative advantage.

00:52:12: The question is if it applies to China, and actually I have doubts about that.

00:52:15: The reason being that the Chinese have been very good at tweaking their model

00:52:20: to create export surpluses, to create high growth,

00:52:25: that model has produced interesting results in recent years.

00:52:30: You could say that Chinese motor is spluttering,

00:52:34: and my own assessment, not so much from a political side,

00:52:40: but rather from the side of very basic neoclassical economics,

00:52:46: is that to use a German proverb, even in China, trees are not going to grow into heaven.

00:52:53: And we might see a downward adjustment.

00:52:57: You more and more see economists writing about a comparison with Japan in the 1990s.

00:53:06: I've made that comparison in the past.

00:53:08: I remember writing papers about this like five years ago.

00:53:12: The writing was on the wall,

00:53:15: and many of the industrialists who think that the Chinese market is the future

00:53:20: might have to recanibrate their expectations,

00:53:23: but to be very honest, although we can make some pattern predictions,

00:53:26: nobody has a crystal ball, and we simply can't know.

00:53:30: It is very, very difficult to de-globalize, to cut yourself off from the market,

00:53:35: except if you want to do this for military reasons.

00:53:39: So one way of looking at these, at international economic history,

00:53:42: is to say, you basically see two regimes.

00:53:45: One is economic war preparation with autarchy,

00:53:48: and the other one is free trade, or something akin to free trade.

00:53:52: And there is no good economic model for combining

00:53:58: repatriation of supply chains with a free market model.

00:54:05: And the simple economic reason is that prices are not very good measurements for that.

00:54:14: So if you just let things go, the price mechanism is always basically

00:54:19: giving you minimal cost combinations, and that usually is not the political cost

00:54:24: that you would have to see.

00:54:26: And there is no good way of mapping that trade of enterprises,

00:54:29: because you would have to have a lot of knowledge that you don't have.

00:54:33: I see many initiatives also in the European unions and with the Americans

00:54:38: who kind of try to reinvent the wheel and somehow provide this information and do that.

00:54:43: It is not easy to predict that this is going to be very costly,

00:54:47: have only partial success, and that we will have this conversation,

00:54:51: or somebody will have similar conversations in many, many years down the road.

00:54:55: The one thing that gives me hope is that Chinese super-growth is not going to continue.

00:55:01: No, indeed, there's a notion of peak China.

00:55:03: I think the comparison to Japan in the '90s, the last threat from Asia

00:55:06: that was going to get us all is well made.

00:55:08: At the same time, the difficulties firms have had in properly pricing in

00:55:12: geopolitical risk, the externalities, the societal externalities that that brings

00:55:16: does rather put the focus once back more on to government

00:55:19: to help provide those guidelines and guide rails,

00:55:22: not in a way that would replace the price mechanism, but with all the market mechanism,

00:55:26: but that would supplement it.

00:55:28: I don't see how to do this easily.

00:55:30: I know it has been a talking point of many,

00:55:33: but doing this properly would require a huge interventionist machinery

00:55:40: that in the end basically returns to things like

00:55:47: like recommended trade, foreign exchange control, or capital controls.

00:55:54: I'm very skeptical about the current talk that we hear about kind of,

00:56:03: again, having it both ways.

00:56:05: It is not easy.

00:56:06: Like almost everything in economic history is evidence against it.

00:56:10: I wonder if for a minute we're talking about reshoring or friendshoring.

00:56:13: Of course, those things are different.

00:56:15: Reshoring might be, you might find a little bit more of that in the United States

00:56:19: Inflation Reduction Act, for example, the idea of repatriating your supply chains,

00:56:23: as you say, but friendshoring is a little bit different.

00:56:27: How would you view that?

00:56:29: Because it's not really entirely about repatriating your supply chain back to you alone,

00:56:35: but simply also to, it does leave room for other countries

00:56:39: that are perhaps a bit more friendly to you.

00:56:41: It's a lovely idea, but I don't know how it's going to work without a control bureaucracy.

00:56:45: All these are nice ideas that you can put on PowerPoint presentations,

00:56:49: but the new class of economists is telling you what in the end measures this price as a profit.

00:56:54: And if you bring production back on shore,

00:56:58: the question is how much you pay for this.

00:57:00: I was talking to somebody the other day, an expert on batteries,

00:57:05: who explained to me that purifying lithium in China costs what was a 10,000 tonne,

00:57:12: and if you do this in America and in Europe it costs 30,000.

00:57:15: So who's going to pay the difference?

00:57:17: So it's all very nice, and there are now the first voices coming out,

00:57:21: challenging the Inflation Reduction Act in the United States,

00:57:27: saying that really if you look at the effects on the ground, there's very little going on.

00:57:32: So there is much noise and very little signal.

00:57:34: We're going to be hearing more about exactly that from Senator Dwarren, Claudia Schmucker,

00:57:38: shortly for our conversation with them.

00:57:41: But I'll go, so much of this strikes me as the conversation between politicians and economists

00:57:46: that has long gone on about what drives and what ultimately ensures prosperity

00:57:53: versus how to actually weigh that against other considerations and how to distribute those gains.

00:57:58: And this partly also the reaction to what is neoliberal globalization.

00:58:02: Everyone in politics knows what neoliberal globalization is.

00:58:04: No one in economics claims to know what it is at all.

00:58:07: And that's part of that conversation.

00:58:09: Exactly, but the thing is, yeah, that's correct,

00:58:11: but the thing is that politicians can give us no implementation mechanism.

00:58:15: And what economics can say, be very careful with that,

00:58:18: because there is a lot of historical experience with that stuff, with interventions from policies,

00:58:24: going back to mercantilism.

00:58:26: You can of course do it, but at huge social cost, and will you get support in the population,

00:58:34: if you don't even get support for climate change, which is much more important, honestly.

00:58:39: Then how about this?

00:58:42: That's what I'm saying.

00:58:45: Sorry to be the party pooper here, but it's very nice to spell out lovely policy goals that I would share.

00:58:55: It's not that I'm a cold neoliberal, whatever economist who says I don't want it.

00:59:02: All these would be good things.

00:59:03: Climate change is the best example.

00:59:05: It would be wonderful to have.

00:59:06: But show me an implementation mechanism that works, and we need to be very, very skeptical.

00:59:11: I'm sorry to say.

00:59:12: Well, also sorry to say there's a fair amount of evidence from the last 40 years that the other system had its issues as well,

00:59:17: be they social, be they implementation or otherwise.

00:59:20: And indeed, it's that process of working through what have been the problematic elements of neoliberalism,

00:59:25: as some would call it, or the economic arrangements of the last 40 years, as others might describe them,

00:59:30: and working out what are true alternatives to them that is a big part, not only of future economic policy,

00:59:36: but actually of ensuring the prosperity that will underpin our security in the free world going forward.

00:59:41: And getting those things right together, economics and politics together, geopolitics and geoeconomics together,

00:59:47: rather than trying to work them out in isolation and risking the tendency they become contradictory.

00:59:52: That is a big task for liberal democracies going forward and one that Berlin site out and the action group Titan vendor certainly try to support.

01:00:00: Yes, and that's precisely why we were very happy to have Albrecht on with us today,

01:00:06: partly because in order to be able to chart that better future that we talk about for our democracies,

01:00:11: for our liberal democracies, including Germany, we do have to have a better understanding of our past.

01:00:16: And we talk about that a lot on Berlin site out to the role of our collective memory in charting our course forward.

01:00:22: So we definitely hope that our discussion with Albrecht has helped our listeners to understand that.

01:00:30: And listeners of Berlin site out, we have a treat for you in exactly that regard coming up as the academic and expert Chris Miller,

01:00:38: author of the book, the bestselling book, Chip War, will come to talk to us about those historical and contemporary connections

01:00:44: between geopolitics and geoeconomics viewed through the particular and particularly important prism of the semiconductor industry.

01:00:51: And we're definitely looking forward to that as well as the rest of the season where we get further into those aspects that Chris will also be talking about

01:01:01: systemic competition and how that chip war fits into that as well as to the greater context of that competition.

01:01:08: For now, that's all for this episode of Berlin site out. Thank you very much to our guest today, Albrecht Ritzchel,

01:01:15: our project assistant, Julein Stuckler, our technical producer, Henrik Vanna and the DegaPay team from Berlin, Albeda Zain and Tschüss.

01:01:24: .

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01:01:36: (upbeat music)