It seems obvious. Dependence on Russian gas is fueling a debate about whether Germany’s economy is wrong. So: Away with the industry that (currently) still needs the gas of the aggressor Putin! Rely on services that are trendy anyway. But such a course would be frivolous. Deindustrialization causes dramatic damage – to jobs, sustainability and democracy.
In many countries, only every sixth job is in production. In Germany, on the other hand, industry provides every fourth job. And that’s good. Car manufacturers and the chemical industry pay far better wages than many service providers. It’s also down to industry that the Federal Republic has a particularly strong middle class. Industry means more for economic output than the job share of a quarter suggests. It represents a full three-quarters of the investments – and the exports.
Sure, a slow shift to more services is happening everywhere. It is quite another thing to force de-industrialization. British Prime Minister Margaret Thatcher, for example, wanted bankers in suits instead of workers with dirt on their faces. “Let’s throw away the rules that are holding back the financial sector,” she cried in 1986. Britain paid for this with the extensive loss of the auto industry and frustrated workers, who later voted for the disastrous Brexit. The world paid for the excesses of the global financial industry with the 2008 financial crisis, which swept away millions of jobs.
In the previous years there was international pressure on the Federal Republic to break away from industry. Thank God politicians and companies resisted – and therefore came out of the financial crisis better than the bank-heavy USA. Germany proves that an economy is better off on two feet: services and production. It also refutes the thesis that manufacturing is disappearing from high-wage countries anyway. The number of German industrial jobs has grown since 2006 – from nine to more than ten million. If there are high-quality products, production does not have to migrate. All the less so as wages from competitors like China are rising.
What the Federal Republic is doing right can be seen in deindustrialized areas such as northern France or America Rust Belt. There workers ended up on the streets. They found something new, if anything, for less money than couriers or cashiers. It is no coincidence that most of them vote for right-wing populists like Marine Le Pen or Donald Trump, who fear for democracy.
It is also no coincidence that Germans usually earn more in industry than with service providers. The unions are strong in the factories. And wage increases come with increased productivity. This increases when you use more machines. This happens more often with factory workers than with clerks or hairdressers. The economist William Baumol already recognized a “cost illness” of many service jobs a good 50 years ago.
Deindustrialization ignores more than workers’ interests. A modern economy does not rely on industry or services – but on both. That is no justification for the federal government to continue blocking sanctions against Russia. But it means it’s better off agreeing to an oil import ban than an immediate gas embargo that can drive production out of the country.
The industry is not a highly subsidized dinosaur
Strategically, the government should help industry get off not just Putin’s gas, but fossil fuels in general. Why not produce steel with green hydrogen in Germany? That’s better for the climate than a steel mill in China that burns coal. Climate protection can be combined with preserving industry in Germany. However, the conversion also costs government money. However, it is not true that the industry is already a highly subsidized dinosaur. Because it doesn’t have to die out. She still gets a lot of money – but only 18 percent of all subsidies to the economy.