Germany's economic decline and strategic dependence on the US, discussed by economist Max Otte
Glenn Diesen interviews German economist and author Max Otte on Germany's industrial decline, its political subordination to US interests, and the conditions needed for European strategic independence.
Summary
Glenn Diesen speaks with Professor Max Otte — economist, financial analyst, bestselling author, and former German presidential candidate — about Germany's accelerating economic decline and its deep structural dependence on US-directed policy. Otte argues that Germany's core industries, unchanged since the 1890s, are now being dismantled through a combination of US-influenced regulatory changes, energy policy sabotage, and the absence of any genuine strategic thinking among German political leaders. He contends that European leaders are largely selected and elevated by external networks serving US interests rather than their own populations, and that the EU itself has become an instrument of US policy. Otte identifies two preconditions for any European resurgence: a serious US setback — potentially through its own mistakes in Iran or Israel — and the avoidance of full-scale nuclear escalation in Europe.
Key Takeaways
FULL TRANSCRIPT
Germany's economic position in historical context
Glenn Diesen: We have the great privilege today to be joined by Professor Max Otte, an economist, a financial analyst, and a bestselling author who came in second in the 2022 German presidential election. Thank you very much for coming back on.
Max Otte: Thank you, Professor Diesen. It's my privilege also.
Glenn Diesen: We see news around the world, and there tend to always be stories these days about the German economy. This was, I suppose, the European economic miracle — the locomotive pulling all of the EU forward. Often, if you go back fifteen or twenty years, the main criticism was that Germany might be too powerful, that it was outshining the rest of the Europeans. But now some of those problems have been flipped on their head. The German economy is not only de-industrializing, but it seems to be a deeper problem: the world is changing and there seems to be a struggle in Germany to find a new economic model to prosper. This has been Germany's historical role in Europe — to be the economic powerhouse. Now, in the absence of a clear economic model, we see leaders such as Chancellor Merz flirting with the idea of military Keynesianism — just build the biggest army in Europe, and this would be a source of technological and economic development. How do you see the economic challenges of Germany? Where does Germany stand today?
Max Otte: Glenn, you raised a lot of issues. First of all, on Germany being too powerful — that concern was heard in Europe in past decades, and also after reunification in the early nineties. That's actually what I wrote my dissertation on at Princeton University, subsequently published by St. Martin's in New York. The idea that Germany is too powerful I find very condescending and derogatory, because Germany after the Second World War was certainly a model citizen of the world. Even that framing is insulting to me.
The economic challenges right now are humongous. We are racing full speed towards total collapse. Our industries that have carried us through the past 150 years are still the same — the same ones from the time when Germany was a real powerhouse in the 1890s, 1900s, and 1910s, when Germany was poised to overtake Britain by sheer economic and scientific prowess. And of course that's why British diplomacy helped create the First World War. Germany, as an inexperienced player on the world stage, stepped into it. There was a lot of jingoism, almost a self-encouraging cry, but the encirclement was real, and the idea of destroying Germany as a competitor was real. What we saw in the Nazi period and in the post-war period were just resurgences and echoes of that humongous dynamic that developed after 1871.
The industries that kept us afloat were electrical engineering, mechanical engineering, machine tools, chemicals, optics, and automotive — and those are the same basic industries that have kept us afloat for 150 years. Now we have the AI and chip revolution, and all of Europe is lacking there, and Germany is no exception. Germany is just joining the ranks of the rest of the European losers, and that has catastrophic consequences for all of Europe. It's basically like missing the steam engine and the railways in the early nineteenth century, or missing the automotive and chemical revolution in the late nineteenth century. Europe doesn't play a role anymore, and strategies are nowhere to be seen.
The military Keynesianism you allude to saved the US in World War II. There was a big recession around 1938 again after 1929, and military spending saved the rest of the world. We are turning towards war. Strauss and Howe wrote in their book The Fourth Turning that we have such a turning between 2005 and 2025 — they wrote that in 1996, and it's almost eerie to what extent their predictions are coming true. Not only is the US pursuing military Keynesianism — it's more than toying with it, it's a really forceful effort. Germany is doing that, and France and Britain are not far behind. The whole West is moving in that direction.
Missing the technological revolution — lessons from history
Glenn Diesen: That's an interesting point, because often when people look at the challenges today in terms of the world changing, they look at the shifting international distribution of power and ask what Western cohesion is going to look like in a multipolar world where interests become more divergent. What you said about missing the steam engine is significant, because we saw that some large powers — both the Chinese and the Russians — missed out to some extent on the first industrial revolution and paid quite dearly. The Chinese were broken in the Opium Wars, leading to a century of humiliation. Around the same time, the Russians were defeated by the British and French in the Crimean War — a humiliating defeat which compelled them to start some very powerful, if disruptive, reforms. Both experienced the problems of falling behind. What are the alternatives for Germany then? Is it time to throw in the towel? How can Germany reverse all of this?
Max Otte: I would like to show you a dynamic visualization of the world's largest economies. It starts around 1960. The US is at the top, ravaged by war but dominant. Japan catches up quickly — by the seventies they were already significant. Germany enters the picture. Germany and Japan had a race for second and third for a long time — this is the era of the G3, the G5, the Louvre Accord, and all those things. In the eighties Japan is rushing ahead but Germany is also doing well. Europe is still up there — Europe, Japan, and the US.
Then we see China catching up quickly in the nineties. That's really when China becomes a powerhouse. Around 2000, Germany is a solid number three, but China is catching up very quickly. In the 2000s, that's when free trade really takes off. China becomes a member of the WTO. It's undisputed number two. Japan undisputed number three, but Germany still holding up. This is ten years ago. And now it's really China taking over. Germany has really fallen back.
On exports: Germany was first around 1986, then again around 1990, and first for a long time from around 2003 to 2007. Since 2007, after the financial crisis, China has really taken off. China is now exporting twice as much as Germany and more than the US, but the US is clearly number two. Germany is a distant number three. That shows you that Germany is really falling behind.
US influence over EU policy and regulation
Max Otte: What can be done? There is a total dependency of Europe on the US, and the European nations haven't noticed this. The EU became a tool for US policy even in the early 2000s, when a lot of the reforms were basically written by the Americans. Brussels called Washington to ask what to do next.
One example is the change in accounting rules. German accounting rules are very conservative — they favor the creditor, because we had a credit-based financial system with capital markets and stock exchanges in a supplementary role. Since 1976, since the founders' era boom where stock markets went rampant and were then sharply regulated, we relied primarily on credit markets. There were books written about this even around 1900. Around 2000 to 2005, the EU changed the accounting rules in Europe under the pretense of harmonization. We went to an Anglo-Saxon system of fair-value accounting — which is not fair value at all, which creates instability — and we saw that in the 2007–08 financial crisis. US influence is very strong, and the US has been writing a lot of the rules. There have been attempts by the EU to free itself through antitrust rules and legislation, but in the end, lobbying puts US rules into EU law. The French have a big influence too. The whole system is rigged and very deeply rooted by now — in the economy, in society, in politics. It's very difficult to break free of that, and it would need a concerted effort of France and Germany and the rest of the EU, which is more difficult to come about than ever. I don't see any quick solutions. It looks like we're going downhill further.
Europe as a US economic zone or industrial feedstock
Glenn Diesen: I often hear from American colleagues that, given the new distribution of power, Europe for the first time won't be the main priority for the Americans. They have to prioritize because the hegemonic era is over. It makes more sense for them to focus on the Western hemisphere — to make sure there won't be too powerful an intrusion by other great powers into its backyard, which is essentially the revival of the Monroe Doctrine, or "Dunroe Doctrine" as Trump calls it. The second priority would be East Asia, where the main peer competitor is. Many then ask: what is the role for Europe? Some suggest it can be an exclusive economic zone for the US — where the Europeans won't buy Russian energy, won't buy Chinese technology, and commit themselves to American suppliers, even though that would reduce Europe's economic competitiveness. Others suggest it's better just to cannibalize it — have the industries essentially moved back to the home base in the United States. They argue something similar for East Asia: why is Taiwan producing semiconductors there? Move them to America. Why are the South Koreans having industries there? Americans were quite generous in their trade policies after World War II — they built up successful frontline states — but now, given that they don't have this comfortable position anymore, the frontline states are put in a very awkward position. From the Gulf States to East Asia and Europe, the question is not being pro or against America, but how does one best position oneself given that the distribution of power has shifted?
Max Otte: Europe is of course frontline territory. I would even be reluctant to call them states anymore, because most of these countries are ruled by puppets — by functionaries that don't have the interests of their people in mind. Look at Finland. Look at what's happening in Norway. Look at Germany. Look at some of the other countries. There is no European policy. Those people have been put in by ruling networks. They've been promoted, selected, cast. Every once in a while somebody changes — Great Britain is a special case — but Europe is basically a vassal territory. Switzerland is slowly giving way. We have some hints at independent policies in Spain right now, some in Slovakia, but even Slovakia is turning to some extent.
We have to face the reality that we are a totally dependent vassal territory, and that the US is having debates on whether to strengthen us through a free trade zone or to move the industries to the US. What kind of thing is this? This is a debate that can only be had by an absolutely superior power. The US is calling the shots in Europe — indirectly, directly, sometimes more, sometimes less — and it's hurting European interests openly without anybody in power really complaining. Think about Nord Stream.
It would be a long way. What we are doing here is just laying out the cold facts. The US is shifting towards industrial policy pioneered by Alexander Hamilton and Friedrich List — we talked about List briefly last time. This would be the right thing to do for Europe, but it could only be done at a European level, and it entails that all critical strategic industries are located within Europe. But that would require a France that is a bit less petty about German power, and a Germany that is a bit more aware of its own power and puts it to positive uses. This is all far in the future. So we are basically doing elementary education here for these things to happen someday — maybe — but I'm not very optimistic.
How European leaders are selected and managed
Glenn Diesen: I had an interview on this channel with Colonel Lawrence Wilkerson — he was the chief of staff to the US Secretary of State — and he told me that in the White House they set up large whiteboards outlining all the different European leaders in power or in opposition, essentially arguing which ones are serving their cause and should be elevated, and who are opposing the US empire and should be pushed down or removed. He was making the point that people like Jens Stoltenberg were seen as the main advocates for American interests and were elevated, while others who might stand up for national interests — to the extent that conflicted with American interests — had to be pushed out. They do this through partnerships in international organizations, through NGOs, through think tanks, through US-European organizations which can be used to elevate the people they want. When people talk about globalism, this is effectively what they're talking about — instruments to have political leaders serve foreign interests rather than their own.
When it comes to Germany, you mentioned Germany and France — this has always been an important component. If these two countries can work together, you solve a big part of the puzzle. But in German history, the German-Russian relationship has always been important. The economies have tended to be complementary — the Russians having vast energy resources while the Germans have their energy-intensive industries. For the same reason, the British historically made sure that in order to dominate Europe from the periphery, it was important to keep the Germans and the Russians divided. How do you see Germany's relationship with Russia? Because whenever German politicians talk about trading energy with Russia, or general trade access to their market, or finding a common security arrangement — it's always dismissed as being pro-Russian. The irony is that Germany needs a good relationship with Russia in order to prosper. Bismarck allegedly made the point once that the secret of politics is to make a good treaty with Russia. These days that would be denounced as being pro-Russian. How do you see this?
Max Otte: There's a strange phenomenon that in Europe, the further west you go — at least to England and France — you look down upon your eastern neighbors. The French and British looked down in some ways on the Germans, although they also admired them. The Germans look down on the Poles to some extent. The Poles on the Russians. I cannot fully explain this, but the emotional proximity between Russians and Germans is actually quite significant. The Germans helped build Moscow's most famous university two or three hundred years ago. Germans did a lot of good things in Russia.
I've been called a Putin puppet many times. I've been in Russia once — just for a hunt in Kirov for a few days. No secret talks. I was introduced to Putin once in 2009 at the Berlin Adlon when he gave a free trade speech — there were 300 other people there. That is the extent of my contacts with senior Russians.
But of course we need Russia. We need very good relationships, and ideally there would be an axis of France, Germany, and Russia — with Poland also included, ideally. This is of course a very faint vision. Mackinder already talked about the growing together of the heartland, and then George Friedman picked it up about eleven years ago in Serbia, stating that the goal of US foreign policy has been to prevent German industrial might and Russian raw materials from uniting. That is on the record.
I just came across this amazing book by Guido Preparata — Conjuring Hitler — which starts around 1890. It's a wonderful diplomatic history and geostrategic analysis. Preparata is a German-Italian-American, and he thought he would make headlines with this book, but what it did was get him excluded from academia. He holds two PhDs, so it's valid scholarship. I was appalled and surprised at the extent to which British elites and diplomacy went to divide Russia and Germany. Even the Bolshevik revolution — Lenin had his own momentum, but there was heavy British influence in the background. This is usually portrayed as the Germans sending Lenin through in a sealed car to stir up the revolution, but the idea generated somewhere else. There's fascinating historical evidence for that.
Germans had designs for empire back in the nineteenth century, but this was romanticizing and jingoistic and immature — dreams of rebuilding the Holy German Empire and uniting the Germanic people in one state and maybe dominating the east. But the technique of destroying nations, of creating false flag events, of using terrorist attacks, of influencing diplomacy — that technique is hundreds of years old, and I'm appalled at how much it was in effect in the late nineteenth and early twentieth century. And it's been going on ever since.
Spengler, Riencourt, and the trajectory of Western civilization
Max Otte: We talked about Oswald Spengler last time, but there was a French noble, Amaury de Riencourt, who wrote about The Coming Caesars in 1955. The book is about the evolution of the American political system towards Caesarism. Maybe Trump is the first one — we don't know the particular one — but he is certainly relying on pure power politics and pure brute force, without any cloak of hiding it.
De Riencourt wrote about how the UN and the precursors to the EU were basically technical assistance by the US to install a US system, to advise European elites, to put in US production methods, to put in all kinds of things. What surprised me was not how badly Germany is doing now, but how well it held up into the 2000s, even through the financial crisis. It's only in the past fifteen years that the German business culture — a unique central European business culture — has been dismantled. Norway copied some of that in terms of public goods, because there's some affinity in the way Norwegians and Germans see public utilities. The surprising thing is not that it has been dismantled in the past fifteen years, but how well it held up well into the 2000s. This dismantling has been going on since World War II, starting with the failed attempt to steal German patents after 1945. I've read eyewitness accounts — one by a molecular biologist who was sent back to steal patents from Bayer and BASF, but it wouldn't work because the US labor force wasn't as trained and needed much simpler systems.
After 1945, the software was intact and the hardware was broken. Now it's a much more difficult challenge — both domestically, societally, and geopolitically.
Mackinder, Haushofer, and the geopolitics of Eurasian division
Glenn Diesen: I'm glad you mentioned Mackinder, because Halford Mackinder laid the foundation for geopolitics — not just the theory of how the world is to a large extent divided between land powers and maritime powers, but his theories and ideas have been repeated in strategic documents and the strategic thinking of the United Kingdom and the United States in quite a remarkable way. They go directly into national security strategies. The sum of it is quite simple: if you want to dominate Eurasia from the periphery, just make sure that the main Eurasian powers remain divided. On the European continent that always meant Russia and Germany primarily.
One German general I always found fascinating was during World War II — General Karl Haushofer. He essentially promoted the idea of a Eurasian continental block, arguing that an alternative for Germany — because it's stuck a little bit in the middle, does it lean towards the maritime powers and risk becoming merely a frontline state, or does it try to position itself among the Eurasian continental blocks — was to see Germany, Russia, Japan, and possibly China forming this large bridge or block across Eurasia. Obviously that view didn't win through, and it probably had a lot of flaws in it as well. But it's interesting that he charted out the different pathways and different ideas for Germany, because often these days one gets the impression that across all of Western Europe there's only one format. I think that's why there's so much desperation now — there's no political imagination for anything else. The only thing we've had since World War II is the political West, with the Europeans subordinated under US leadership. A benign leadership, one could argue, after World War II, but one that's become much more abusive over the decades. And now it's quite in the open. The idea that this is merely Trump — I think that's wrong. I think it's a symptom, not the cause. Is there any political appetite in Germany to widen the horizon? Because now that we have the rise of a multipolar world, no one would suggest that the Germans should ally with China and Russia against the US, but the mere diversification — not making themselves beholden, not making themselves into a frontline state — putting Germany first as the point of departure, surely that should be the goal. Where is the German strategic interest?
Max Otte: Germans have been systematically educated not to think about strategic interests. I write about this in my dissertation from 1996. German interests always meant NATO and EU — always uttered in one sentence. So there was no discussion of German interests as such.
Even Steven Walt of the University of Chicago is talking about the predatory hegemon in Foreign Affairs — that's the title of one of his latest articles. The US has clearly turned predatory, which for its stage in the economic cycle is quite predictable.
My argument for Germany would be to develop some kind of equidistance, or at least distance, because if there is a war in Europe — which the US is actively fostering the conditions for — nuclear bombs will go off in Europe, maybe near Moscow or in Moscow, but not first in Washington. It's as simple as that when you think about interest.
There's not much appetite, not much discussion in Germany. I also think the EU has to disintegrate further. There has to be some kind of accident with the US — it could trip over Iran, over the Strait of Hormuz. And of course it's marshalling its vessels to step in on Ukraine and rev up the power. The stupid European vassals like Merz and Macron — and Starmer, now that he's there — basically thought it a sign of European emancipation to pick up the US war to weaken Russia. That's so stupid. But I don't see it changing in the current scenario. There has to be some kind of accident, otherwise the US grip on Europe, and on Germany specifically, is very firm.
You can see this in the opposition parties that dare to raise German interests. I'm very close to the leadership of the AfD, and Tino Chrupalla, the co-chair, is very moderately speaking about German interests — what is in German interest, what is not, that Nord Stream must be reopened, that we need good relations with Russia. He has of course been called a Putin puppet. And even within his party, now at 30% the largest party, US influence at the margin is very strong. There are clearly US-influenced lobbyists within the party in the Bundestag.
We've seen the course corrections that Marine Le Pen has done in the past couple of years. We see it in Italy. And we see the totally appalling and disgusting things happening in Hungary. Not that I supported everything that Viktor Orbán did, but he was the best hope within the EU. The civil society organizations and the EU have done their best to dismantle this, and now they dismantle democracy. They basically remove the sitting president, they seize the services of the ruling party Fidesz from all its membership base — it's a totalitarian crackdown by the EU on the last bastion of hope. It's all not looking very nice. I try to give advice on how to stay calm and serene in this situation, because if you look at it, it can make you depressive. You have to find your sources of joy and fulfillment elsewhere, not in worrying about the geopolitical situation. We should be honest with ourselves there.
Romania, Hungary, and the crackdown on European democratic alternatives
Glenn Diesen: I would like to be optimistic but I would rather be realistic, and the situation doesn't look very good. There has to be some huge changes. The crackdown on democracy — from Romania, we could put Moldova in there, to now Hungary — it is quite disgusting, and there's no going back from this. It's quite shocking. And when you ask why — what's the purpose of these authoritarian steps — it's simply to push Europe into a position which is not in its interest. It's quite remarkable that this is being done by our own leaders.
On the topic of Ukraine — we had some rise of common sense, some reasonable positions, but as you said they got snuffed out, from Hungary to Romania. How do you interpret US policy towards Ukraine? I have to be honest: initially I thought the United States wanted to put an end to this war, because in a multipolar world it was simply in Russia's natural interest not to make themselves excessively dependent on China — not going against China, but also branching out to Germany, to the United States, making sure it doesn't become beholden to anyone. But now I've shifted my view based on events of the past year and a half. It looks more now like the US wants to outsource this war to the Europeans and essentially make Ukrainians out of the Europeans as well — that is, to be willing to throw themselves at Russia. It's not a bad deal for the Americans: the Russians get weakened and the Europeans become more dependent on the United States. Are they deliberately sowing more conflict between the Europeans and the Russians?
Max Otte: Now we're into US domestic and policy debates, which is of course a whole other big topic. I am a naturalized US citizen. I lived there for almost ten years. I voted for Donald Trump three times because I thought — yes, I knew he was a real estate promoter, a reality TV star with a big ego, a marketing guy, not a strategist — but he's enormously resilient. The man is almost eighty years old and the workload he's taking on is just mind-blowing. He made a very convincing case that he would end the forever wars, that nuclear war was the biggest risk we're facing — he said that multiple times. He was truly not liked by the establishment. They didn't know how to assess him, which is why they fought him before the first election and then during his first term created the January 6th show. He came back, and I was elated. The man came back. He had big plans. He thought he now knew how Washington worked — he didn't know in the first phase — but they did turn him around, or he turned himself around. He still is not a strategist. He's still reacting from his gut, putting things out, changing them a few hours later or a few weeks later.
We still have the old neocon elites on parts of the shoulder — Marco Rubio, most of them are out of the first line of government but still very influential. I guess it's a process of the US finding its way. They're all in agreement that the US should be dominant, that it should exploit even allies if necessary, that there should be no rivals — and the rest of the strategy is evolving. We see it with the Iran situation, where there's much more competent experts than me, but it's a back and forth, partly due to Trump's personality and partly to the fact that the US is finding its own path.
Right now, yes, it seems like the US has opted to continue the Ukraine-Russia war and to shift it to the Europeans, and to create as much damage in Russia as possible before Russia wins. Let's hope it doesn't escalate to a nuclear level. That seems to be the current line, but that can change.
The collapse of Germany's two strategic pillars — NATO and the EU
Glenn Diesen: My last question builds on what you said earlier — that there's no strategic thinking in Germany, that they essentially reached consensus that the main thing to do to prosper and to have security is to build Germany on two legs: NATO and the European Union. But surely now that people see that NATO is not standing on as solid a ground as one used to think — I mentioned it two years ago and it was argued to be anti-NATO to suggest it wasn't stable, but now we're apparently allowed to talk about the fragility of NATO — and the EU is no longer a solid geoeconomic club able to deliver clear economic benefits to its members, and furthermore we can assume that when the US pulls back from Europe as the pacifier we may see more fragmentation in Europe — how does this affect the German political discourse? Because no matter how much one wants NATO and the EU to remain powerful, if one sees that they are fading away, surely one needs a plan B. What are the possible political pathways? Some political imagination would be needed at this point, when you see this huge shift in world order. Countries that want to survive — it's not being pro this or anti that, it's just adjusting to current realities. The distribution of power is shifting, and with it priorities and interests are shifting. How will Germany respond to the weakening of its two legs?
Max Otte: Glenn, you talk about political discourse, but the level of political discourse is at its lowest in centuries, I would say. We have puppets, we have propaganda media, we have censorship on social media. It's down to very pure emotions. One could argue that the level of political discourse was very low in the Nazi period because it was all propaganda and repression, but at least we had a functioning resistance with a high level of discourse. We have a few people thinking about this. Tino Chrupalla and also Alice Weidel are putting out the idea of German national interest — cautiously but clearly — and they are being denounced. There is no real political discourse.
We've laid out the shifting global conditions that would make this more necessary than ever. I can only say — and these are probably my closing remarks — that there are two preconditions we need to have any chance in Europe.
Precondition number one: through their own mistakes in Iran and also Israel, the US, and then as a consequence NATO and the EU, run into such deep trouble that they start to disintegrate. We'll see if that comes about.
Precondition number two: that we don't have an escalation to an all-out war.
Those are the preconditions for any serious debate to start at all. And these are the preconditions for any chance of resurgence Europe could have. European values are different from US values. Continental values are different from Anglo-Saxon values. I resent the idea of "the West." There is no "the West." There are countries that are closer to each other and countries that are not as close to each other. Those are the two preconditions. I leave the listener to assess how likely those are for anything positive to start.
Glenn Diesen: The way you described the death of political discourse in Germany sounds an awful lot like what we see in Scandinavia as well. So you're not the only one facing this troubling time. I wanted to thank you again for taking the time. I know you're a busy man. Thanks, and I hope you can come back again.
Max Otte: Would be my pleasure. Thank you, Glenn.