De-industrialization of Europe: How the United States achieved their goal


11/08/2023 - 12:28

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The economic fortunes of the EU and the US had already begun to diverge before the conflict in Ukraine for several reasons, not least of which was Europe’s austerity policies.

De-industrialization of Europe: How the United States achieved their goal

The war in Ukraine — or more precisely the West’s response to it — is causing a process of deindustrialization in Europe at a frightening speed. What’s worse, there is ample evidence that, from the American perspective, this was the desired outcome from the start.

The conflict between Russia and Ukraine has profoundly transformed transatlantic relations, leading to a greater degree of “vassalization” by the United States than at any previous point in time.

On the geopolitical front, as has become clear with the current war, Brussels lacks meaningful independence from Washington.

In the economic field, Europe’s relative decline and growing dependence on America — which of course preceded the conflict in Ukraine but were massively exacerbated and accelerated by it — are if possible even more evident.

In 2008, the European Union’s economy was slightly larger than America’s; today, the US economy in 2023 is a third larger than that of the European Union and Great Britain combined, and is 50% larger than that of the European Union without the United Kingdom.

The economic fortunes of the EU and the US had already begun to diverge long before the conflict in Ukraine for several reasons, not the least of which were Europe’s self-destructive austerity policies after 2008.

However, in the last year and a half, this process has accelerated dramatically. Unlike the US, Europe has taken a huge economic hit from the conflict — or more accurately, from the West’s response to it (sanctions/decoupling from Russian gas).
This drastic move led to a "massive and historic energy shock," as the OECD called it, exacerbated by speculations by big energy companies, which hurt both industry and households.

Last year, soaring energy prices and falling demand led dozens of plants in a range of energy-intensive industries — glass, steel, aluminum, zinc, fertilizers, chemicals — to reduce production or shut down, resulting in mass layoffs.

At the time, many experts argued that these effects would be short-lived — that sooner or later energy prices would stabilize and the European economy would recover. Wholesale gas prices have indeed recently stabilized at much lower levels than they did a year ago — but they are still about three times what they were before the crisis started. The same pundits are now beginning to acknowledge that the political decisions of the past 17 months have plunged Europe into a deeper (structural, actually) crisis than they had anticipated.

The most recent data shows that industrial production continues to deteriorate rapidly across Europe due to persistently high energy prices, sluggish domestic (and global) demand, and tight credit conditions.

According to a recent report by the European Central Bank, demand for business loans fell by 42% in the second quarter of this year, after a 38% decrease in the first quarter, reaching an all-time low since the beginning of the survey in 2003.
The extremely tight monetary policy of the ECB — which shows no signs of abating — has certainly been a contributing factor. As a result, the IMF now expects the eurozone to grow by just 0.9% this year — compared to an estimated US growth rate of 1.8%.

But even this seems optimistic when we consider that the country that is suffering the most in Europe is also its largest and most important economy: Germany. According to the IMF, it is the only G7 country that will experience a contraction this year.

As an export-oriented economy centered on energy-intensive manufacturing industries such as automotive and heavily dependent on the cost competitiveness of its goods, Germany has been particularly hard hit by the energy crisis.
But to a large extent, the German establishment has facilitated this crisis. Before the war, Germany received more than 50% of its gas from Russia (via the Nord Stream 1 gas pipeline, which runs from the Russian coast near St. Petersburg to northeastern Germany).

Germany was also intensifying its economic relations with Russia. Before the war, Germany had invested heavily in building a second pipeline parallel to the existing oil pipeline, Nord Stream 2, which would double its annual capacity.
Nord Stream 2 was completed in 2021 and was expected to enter service in 2022. After Russia’s invasion of Ukraine, however, Germany made a 180-degree political turn, announcing that it would completely disengage from Russian gas by 2024.
The opening of the Nord Stream 2 pipeline has been halted. As for Nord Stream 1, it was taken out of service by a bomb attack — probably authorized, if not directly carried out, by Washington.

Germany, like other European countries, has rushed to look for gas elsewhere, for example by buying more natural gas from Norway or the Netherlands, or by expanding its infrastructure to import liquid natural gas from the United States and Qatar.

But the combination of reduced gas flows and higher energy prices — compounded by Germany’s decision to shut down its last remaining nuclear reactors and ECB interest rate hikes — has dealt a huge blow to the industry of the country.
According to The Economist, almost a third of medium-sized German companies are considering moving production and jobs abroad; 1 in 6 are already doing it.
All of this is reflected in the shocking numbers recently reported by the Institut der Deutschen Wirtschaft, a German economic think tank, which shows that foreign investment in Germany has completely collapsed.

As the report notes, these are all clear signs of economic de-industrialization for the entire continent. As already noted, however, German and European leaders are largely responsible for this situation. They have unquestioningly submitted to the US strategy in Ukraine, choosing to decouple from Russian energy and enthusiastically participate in America’s proxy war. This is all the more surprising considering that America’s fortunes have been inversely proportional to Europe’s: in relative terms, America has gotten stronger while Europe has gotten weaker. Not only has the conflict presented an opportunity for Washington to reassert its military hegemony in Europe through NATO, but it has also made Europe more economically dependent on America. There is reason to believe that, from Washington’s point of view, this was the desired outcome from the start.

Creating a rift between Europe (and Germany, in particular) and Russia, thus preventing the rise of a Eurasian geopolitical reality, has long been an American geopolitical imperative.

Before the war, European countries and Berlin in particular brazenly defied that imperative, as symbolized by the Nord Stream gas pipelines, which Washington has always opposed.

An alleged leaked report by the RAND Corporation (which has denied the authenticity of the document) appears to confirm that the European energy crisis was not an accident but was planned by the United States.

Regardless of the actual authenticity of the document, there is no doubt that an economically weakened European continent benefits America in the near term as they pursue a broader policy of deglobalization, which involves not only detaching from China but also rebuilding the manufacturing capacity. of the country and the self-sufficiency of the United States in a number of strategic sectors. In this context, Europe is not a strategic ally but a competitor and a rival, which Washington has every interest in keeping subordinate. In other words, we are witnessing a process of intra-Western economic cannibalization.

Original article published on Italy 2023-08-15 08:15:00. Original title: Deindustrializzare l’Europa: come gli Stati Uniti hanno raggiunto questo obiettivo

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