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Photo: Arno Burgi / picture alliance / dpa
The peak of globalization is easy to quantify.
The international exchange of goods and services reached a historical peak in 2008. World trade has been crumbling ever since, according to figures from the World Bank.
Globalization is on the retreat.
2008 was the year of the great financial crisis.
What followed was the worst international recession to date.
It went on like this, setback followed setback: the euro crisis, the vote on Britain's exit from the EU, the election of the protectionist Donald Trump as US President and the trade war he instigated, and finally the pandemic, including shutdowns around the world, associated with acute delivery bottlenecks.
The cross-border integration of the economy was turned back a little bit more and more.
In 2022 we are now at a point where the worst setback in the past 70 years is beating down on us.
The world splits again into opposing camps.
The West faces a new Far East bloc led by Vladimir Putin's Russia and Xi Jinping's China -- two dictators who reiterated their mutual support over the past week.
Mutual sanctions and embargoes are spreading.
The global economic collateral damage of the attack on Ukraine is only just becoming apparent.
It would be surprising if globalization emerged from the current tipping point unscathed.
(Watch out for the EU summit starting
Thursday
and the G7 summit starting
Sunday
.)
This is the somber background against which
the cream of the German political-economic complex meets on
Tuesday .
For the "Day of German Industry", organized by the umbrella organization BDI, a big parade is announced: Chancellor and Vice-Chancellor, Minister of Finance and Transport, CEOs and heads of associations - they all come to Berlin to underline the importance of the manufacturing economy.
In fact, in hardly any wealthy western country does the production of physical goods still play such an important role.
Germany's added value is still extremely industrial.
Now that could be a problem.
It is possible that the emerging era of post-globalization will bring with it a nagging structural crisis.
Because the industry's business models are based on the certainty that there is a stable international order: open borders, a reasonably reliable legal framework, peaceful conflict resolution.
But this order has been scratched since the financial crisis of 2008.
Now she is finally in danger of getting under the wheels.
What will become of the industry?
Is she facing a long sickness?
The heart of the German economy, that much is certain, has really had a better time.
When casting the nets
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In fact, German industry has shown enormous vitality over the past few decades.
This was also reflected in how flexibly companies reacted to changes in the global economy.
In the 1990s and 2000s, they used the newly opened European single market and the Central Eastern European EU candidates to throw a tightly woven network of value chains across Europe.
Business with North America also grew dynamically.
After the turn of the millennium, they moved to China, a market on which they focused even more intensely when the euro crisis in the 2010s caused demand on this side of the Atlantic to stagnate for years.
The result of this impressive expansion are business structures in which Germany and Europe no longer play the most important roles.
Car, mechanical engineering, chemicals - the classic German industries are extremely strong in exports.
Some medium-sized manufacturing companies export 80 percent of their added value, most of it outside the EU.
China is now by far the most important market for large global corporations such as Volkswagen and Daimler.
Confidence in the stability of globalization seemed boundless.
But so much openness makes you vulnerable.
Is the receipt coming now?
Clogged arteries and bloated prices
In fact, it is amazing how long German industry was able to resist the trend of crumbling globalization.
In the 2010s, production was still increasing, while global trade intensity was already collapsing.
In 2018, the output of the German manufacturing sector (excluding construction) reached a maximum, as the chart shows.
Since then things have been going downhill, most recently at an accelerated pace.
Trump's trade war caused friction around the world.
His successor may strike a conciliatory tone towards America's allies, but little has changed in the essentially protectionist America First course.
Britain's exit from the EU, after all one of Germany's most important partner countries, has created new trade barriers among its neighbors.
China's leadership has been trying to gain control of key industries and technologies for several years.
In addition, there is Beijing's rigid zero-Covid strategy, which not only burdens the citizens there, but also the economy and trade worldwide.
more on the subject
Maersk boss Søren Skou: "The problems are just shifting around the world" An interview by Simon Book
There is also a queue in front of German ports: container ship traffic jams reach the North Sea
Not only the sluggish demand from abroad has been making business difficult for a long time.
In the meantime, delivery bottlenecks and material shortages are causing problems for the industry on the supply side.
Container ships are piling up in front of large ports.
Shanghai has once again become a bottleneck in the global economy.
Now large freighters are also bobbing off Europe's coasts, waiting to call at Rotterdam, Antwerp or Hamburg;
Two percent of global freight capacity is currently stuck in the North Sea, as determined by the Kiel Institute for the World Economy.
Logistics has become difficult: truck drivers are rare, as is freight train capacity.
The clogged arteries of globalization encourage a plague that was thought to have been overcome: inflation.
Intense competition in globally open markets has kept prices low over the past few decades.
This phase is over.
The beginning of the post-globalization era is accompanied by rapid price increases.
Delivery stops, rushing energy prices, beginning distribution struggles - inflation is back, and more massive than the central banks could have dreamed.
Now step on the brakes.
And that is becoming an acute problem for German industry in particular.
Central banks in panic mode
Current forecasts by the economic research institutes in Kiel and Munich still paint an economic panorama in pale pink: restrained growth this year and next.
I think that's an extremely optimistic scenario.
Because energy shortages are becoming a real danger, along with rationing for industry.
Some companies could be forced to shut down production.
It is becoming increasingly unlikely that the central banks will be able to slow the galloping inflation without causing a recession, especially in the USA, where the Fed surprisingly hiked interest rates by three quarters of a percentage point on Wednesday.
The euro zone is facing far more serious problems: rising interest rates bring the risk of the euro crisis flaring up again.
Above all, Italy's interest rates are rising much faster than Germany's.
Due to the extremely high level of debt, the risk of a national bankruptcy is increasing.
The Governing Council of the European Central Bank (ECB) met unexpectedly and unscheduled last Wednesday, which shows how concerned the ECB is about the fragile situation in the euro area.
As in the years 2010 to 2012, the breakup of the euro area is once again on the agenda.
Now that Europe has hardly developed institutionally since the euro crisis is taking its revenge.
The euro bailout fund ESM is not big enough to be able to absorb highly indebted countries like Italy.
So far, there has been no genuine common financial policy.
Reform initiatives from Germany, which has doggedly entrenched itself behind the superficial belief that it doesn’t want “a transfer union”, have been thwarted again and again.
But what then?
How should the euro zone function in the future?
No »transfer union« – but then what?
It has long been clear that Europe is not prepared for the 21st century.
In 2011 and 2012, the euro zone repeatedly came to the brink of failure.
In a chain of state bankruptcies, not only the currency area but also the domestic market could have perished.
more on the subject
Europe's future: We are not ready for the 21st centuryA column by Henrik Müller
But the German economy was only moderately agitated at the time.
They thought they had outgrown Europe economically.
As long as industry did good business outside of the domestic market, some German entrepreneurs had the feeling that they were not dependent on Europe and did not need to take any financial risks for the political cohesion of our continent.
Globalization was Germany's safety net, or so it seemed.
But that era is over.
Post-globalization throws Germany back on its immediate neighbourhood.
Germany is alone without Europe.
Without a common currency and the EU internal market, we have no business model – and we face a grim future.
The most important economic dates of the coming week
Expand areaMonday
Paris –
Balance sheet
– After the second round of the parliamentary elections on Sunday, the reorganization of the French government is on the agenda.
Beijing -
Gloomy mood
- The EU Chamber of Commerce in China publishes its annual mood survey.
Since China has been largely sealed off from the rest of the world for almost two and a half years, the situation for foreign companies on the ground is becoming increasingly difficult.
Berlin -
Prelude
- Prelude to the Day of German Industry, organized by the Federation of German Industries (BDI).
ExpandareaTuesday
Berlin -
Fuge
- "Day of German Industry" - with all sorts of celebrities, including Chancellor Scholz, Vice-Chancellor Habeck, Minister of Finance Lindner, Minister of Transport Wissing, CDU leader Merz and Bavarian Premier Söder, as well as Holland's Minister of Economics Micky Adriaansen and many others.
London -
Money and good jobs
- The employees of the British railways are on strike.
Major restrictions on transportation are expected.
ExpandareaWednesday
Schönefeld -
Take off
- Opening of the International Aerospace Exhibition (ILA).
Expand areaThursday
Brussels -
fateful years
- EU summit (until Friday): There is a lot to talk about - missing gas deliveries, dying in Ukraine, the return of the euro crisis.
ExpandareaFriday
Munich –
shaky mood
– The Ifo Institute publishes the business climate index, the most important leading indicator for the German economy.
Expand areaSunday
Garmisch-Partenkirchen –
The core of the West
– the start of the G7 summit: the heads of government of the USA, France, Great Britain, Japan, Italy, Canada and Germany are meeting under the German presidency in Schloss Elmau (until Tuesday).
