Germany’s Far Right Is Exploiting a Broken Economic Model

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.

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…