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- Forbes.com Magazine Article Current Events Germany's Dismal Future Paul Johnson, 02.07.05, 12:00 AM ET An object lesson for us all is the present deplorable state of Germany. It shows what happens when a society is encouraged by its leaders to turn its back on freedom and opt for security at any price. A generation ago Germany, thanks to its great postwar leaders Konrad Adenauer and Ludwig Erhard, had an exemplary economy--one of the world's best in quality and performance. It was modeled on America's and put entrepreneurial freedom, hard work and innovation before all other considerations. The Germans turned their backs on their hideous past of violent aggression and became wealthy, proud and self-disciplined global citizens. Today the German economy is a model--especially for the rapidly expanding nations of the Third World, such as China and India--for what not to do. Stagnant production, static or falling productivity and appalling levels of unemployment are the salient factors. Unemployment figures have recently been revised upward to 4.5 million but could be as high as 6 million when the "hidden unemployed" are taken into account. These figures are close to those of 1932, at the depths of the Great Depression and just before Hitler came to power. So many being unemployed was one reason Hitler's bid for power was successful. Three Reasons for Germany's Decline The power wielded by its old-fashioned trade unions. German unions insist on short hours, high wages, immense social security benefits and conditions of work that make productivity increases virtually impossible. Their stranglehold on the economy is akin to that exercised by British unions before Margaret Thatcher smashed them in the early 1980s. The input of the EU bureaucracy in Brussels. The EU imposes endless rules, whose net effect is to stifle enterprise and squelch innovation. The push toward a European superstate has proved an unmitigated disaster for Germany, which, despite its relative economic decline, is still the biggest net contributor to EU funds. Germany thus ends up financing programs such as the Common Agricultural Policy that work against its interests. Germany pays the EU piper, while France calls all the tunes. Indeed, Germany's subservience to France is one of the most astonishing and inexplicable features of today's world. Chancellor Gerhard Schr der seems content to play the poodle to President Jacques Chirac in the most humiliating and grovelling way, following tamely in courses that demonstrably work against Germany both at home and abroad. When Germany looked to U.S. leadership between 1950 and the early 1970s, it prospered. Since Germany submitted to French direction, the country has plunged relentlessly into the pit. Sooner or later the German people are going to grasp this salient truth; when they do, the for consequences Europe will be dramatic. This moment has been delayed, however, by the third factor in the nation's decline. Germany's acute sense of failure and unhappiness. This is a collective psychological depression that effectively prevents Germany from taking action to remedy its ills. The Germans agree they're in a mess, and many see the obvious way out. The country needs to make the kinds of structural changes in its economy that Prime Minister Thatcher carried out in Britain 20 years ago, changes that have completely transformed the performance and expectations of the British people. But though most Germans know this, they lack the will--and, of course, the leadership--to carry it out. They stay inert, supine, transfixed by fear and angst, paralyzed by the thought of painful adjustments in their safety-first society--and thus coast toward a disaster comparable to Hitlerism. Germany's demographic structure reinforces all the weaknesses of its stagnant society and economy. It has one of the world's lowest birthrates, a rapidly aging population and a calamitously expensive social security system, all of which combine to project a dark and dangerous future. Germany faces not merely a net decline in population--from 80 million to 60 million--by midcentury, but a lowering of living standards and the unrest that will surely follow. A New Direction Along with reforming itself, Germany should be leading a campaign to reform the EU. The object should be to cast off the Francophile control executed by Paris and Brussels and give the EU a new direction that corresponds to its expanding membership. One change--both symbolic and substantive--would be to transfer EU headquarters from Brussels, with its 40-year accretions of bureaucratic barnacles, to a city such as Hamburg, with its strong entrepreneurial and trading traditions, or Aachen, once the capital of Charlemagne's Frankish-German empire and from which, in the late 1940s, the original concept of a United Europe drew its inspiration. Certainly the European capital needs to be closer to the Union's center of gravity. But more important, the EU needs a revolution in thinking, away from the regulations and controls that are turning the dream of a prosperous and peaceful Europe into a nightmare of discontent, depression and decline. What Germany needs and Europe awaits is a leader who can break the mold to give both a fresh start. Too much to ask? If so, the alternative will be violence. Paul Johnson, eminent British historian and author; Lee Kuan Yew, minister mentor of Singapore; and Ernesto Zedillo, director, Yale Center for the Study of Globalization, former president of Mexico; in addition to Forbes Chairman Caspar W. Weinberger, rotate in writing this column. To see past Current Events columns, visit our Web site at www.forbes.com/currentevents.

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