Germany’s self-inflicted manufacturing disaster is America’s opportunity

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DIn the early stages of the sovereign debt crisis in 2008, the German government under Angela Merkel resisted bailouts for the eurozone’s peripheral countries, particularly Greece and Italy. At the time, German comments suggested that people in southern Europe were lazy. Ultimately, however, Germany supported the rescue law of the European Central Bank. Why the shift?

Mainly because Germany’s economy is dependent on exports. Berlin wanted to keep its export markets throughout Southern Europe. But she knew that the collapse of the euro would mean the reintroduction of the Deutschmark. The value of the D-Mark would have been significantly higher than the euro. Germany’s exporters would thus have been comparatively disadvantaged.

This story is important because now Germany needs this region to agree to reduce its natural gas consumption. Germany faces a cold winter because of its deeply misguided policy of relying on Russian energy. Germany trusted Russian President Vladimir Putin. Instead of listening to the echoes of Winston Churchill, Germany listened to the dead voice of Neville Chamberlain: cheap energy in our time. Nevertheless, the German economy remains export and production-centric. Manufacturing accounts for 18% of its GDP. In comparison, manufacturing accounts for about 9% of GDP in France and 10% of GDP in the United States.

Germany’s problem: the price of natural gas in northern Europe is 20 times higher than in the USA German manufacturers are already closing energy-intensive formwork plants. German chemical giant BASF is shutting down its ammonia fertilizer operations. It’s only going to get worse this winter. The German production is frozen. In contrast, the US is a low-cost energy producer. Here, natural gas costs about $8.00 per 1,000 cubic feet. As mentioned above, natural gas costs almost $200 per 1,000 cubic feet in Europe. The US has an opportunity to create a manufacturing renaissance built on cheap energy and a preserved faith in capitalism.

It is up to us to either lead the world at the top of manufacturing again, or heed the false promises of the green lobby and liberals that would restructure our economy into a state-managed disaster – one that will ultimately lead to economic weakness and an ongoing struggle for the economy would result in crumbs.

The economic cake would be bigger if we only played to our strengths: inexpensive energy and global manufacturing know-how.

James Rogan is a former foreign service officer who later spent 30 years in finance and law. He writes a daily note on finance and economics, politics, sociology and criminal justice.

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