Diesel is huge in Europe; over half the new cars are powered by this usually-less-expensive-and-more-energy-efficient fuel. And Germany manufactures the vast majority of diesel-powered passenger cars. The torque from diesel engines makes them powerful, quick off the block and much, much faster than most would suspect. Disclosure: we own a late model German diesel and love it (not in the VW/Audi/Porsche line-up, fortunately). But who doesn’t remember those smoky, dirty diesels of 15-20 years ago. Vile! But the diesel car manufacturers brag about their new “clean” models, and that smoky, dirty flow seemed long gone.
Ah yes, a little scandal at VW (which also handles Porsche and Audi). Someone had rigged the electronics in some of their major diesel lines to report a lower level of emissions than the relevant car was actually releasing into the atmosphere. A lowly engineer leaked the truth, and all hell broke loose at VW. Their stock plunged. Their CEO resigned. But mostly, the overly-cozy relationship between the seemingly environmentally-strong German government and its car manufacturers was telling the world a very different story. Someone pushed German credibility over the cliff. Not hard to understand that an industry this large is a political force to be reckoned with.
“Angela Merkel learned early in her political career that taking on the German car industry carries risks… It was the spring of 1995 and the newly appointed environment minister [Merkel] was trying to convince her cabinet colleagues to back a bold new set of anti-smog rules that included tougher speed limits and summer driving bans.
“But Matthias Wissmann, the transport minister with close ties to industry, was having none of it. He questioned whether Merkel's measures would cut pollution levels at all and vowed to fight any attempt to impose speed limits on the Autobahn… Wissmann's argument won the day, reducing Merkel to tears, according to a 2010 biography by Gerd Langguth. For the ambitious young minister from the communist East it was a lesson about how politics worked in a united Germany.
“Much has changed in the intervening years. Merkel is now in her third term as chancellor. Wissmann heads the Verband der Automobilindustrie (VDA), the influential lobby group for German automakers… But there is one constant: the clout of the auto industry in German politics.” Reuters.com, September 26th.
The German automobile business is disproportionately huge, both in terms of Germany and the entire European Union, perhaps even as a global power. “The automotive industry in Germany is one of the largest employers in the country, with a labour force of over 747,000 (2009) working in the industry… Being home to the modern car, the German automobile industry is regarded as the most competitive and innovative in the world, and has the third highest automobile production in the world, and fourth highest total motor vehicle production. With an annual output close to six million [up significantly today] and a 35.6% share of the European Union (2008), Germany is the absolute leader of auto production in Europe since the 1960s…
“Volkswagen AG (and subsidiaries Audi and Porsche), BMW AG, Daimler AG, Adam Opel AG and Ford-Werke GmbH[are the components of the German car industry]… Alongside the United States, China and Japan, Germany is one of the top 4 automobile manufacturers in the world. The Volkswagen Group is one of the three biggest automotive companies of the world (along with Toyota and General Motors).” Wikipedia.
One in every five cars on earth carries a German brand. “German automobile manufacturers produced almost 13 million vehicles in 2013 – equivalent to more than 17 percent of total global production. Twenty-one of the world’s 100 top automotive suppliers are German companies… The automotive industry is the largest industry sector in Germany. In 2014, the auto sector listed a turnover of EUR 384 billion, around 20 percent of total German industry revenue. Source: VDA 2015.” ZoneHedge.com, September 22nd. “In 2014, the big three carmakers, Volkswagen, Daimler (DAIGn.DE) and BMW (BMWG.DE), hauled in revenues of 413 billion euros, far bigger than the German federal budget, which stood at just under 300 billion.” Reuters.com.
Basically, German politicians have turned a blind eye to their automotive industry, perhaps knowing that it was too big to fight. “There are no indications that German politicians were aware that VW was rigging its diesel emissions tests. Merkel and her leading ministers have expressed surprise and indignation at the revelations, urging VW to clear them up swiftly.
“But authorities in Germany and elsewhere in Europe had known for years about the widening gap between emissions values measured in official laboratory tests and those recorded in a real-world environment… Yet, critics say, Berlin fought hard to shield its carmakers from closer scrutiny and, in a high-profile clash with its European partners two years ago, from tougher emissions targets. Merkel has defended the stance as necessary in order to protect jobs in the sector… Some see the VW scandal as symptomatic of a deeper problem in which German car companies have been allowed to do as they please without oversight or fear of reprisals from Berlin.” Reuters.com.
What the automotive world is to Germany, the financial sector is to the United States. Hedge funds, banks, investment banks, stock brokerage firms, bond firms, credit ratings agencies – generically referred to as “Wall Street” regarding the entire financial sector – have had a carte blanche to do pretty much whatever they want with minimal oversight and maximum tax benefits.
When they fail, the government bails them out, and when they violate the law, none of their senior managers is ever prosecuted. They can destroy the global economy and still be allowed to have their special legal exemptions, growth that has literally generated the greatest income inequality vectors in our nation’s history, the most significant income polarization in the developed world.
But unlike the hard objective emissions measurements that have brought down VW, Wall Street is so good at manipulating numbers that they have convinced a contracting middle class and a decimated working class that we are in a “recovery” from the economic horrors they created. Gee, I wonder what a government that is truly representative of the best interests of the vast majority of its residents would do. And then there’s the impact of what Republican President Dwight Eisenhower warned us about, the “military industrial” complex which sucks down massive tax dollars and feeds a military that seems unable to win wars!
I’m Peter Dekom, and economic bigness and power have created the most destructive political institutions in the developed world.
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