World-System (1960-2100) Six Futures for Germany

 

In a prior post (here) I presented results from the DEL20 Model that suggested the German Economy may have reached a steady state sometime after the year 2000. I have also argued (here) that the Steady State Economy, although it will solve some environmental problems by stabilizing CO2 emissions, might create other Geopolitical problems by becoming the target of predatory economies focused on World domination (e.g., Germany in the Nineteenth Century) The question for this post is whether some (new?) Geopolitical Alignment might protect Germany from the (possible) fate of stagnant steady-state economics. The answer isn't encouraging.

From the graphic above, you can see that alignment with the European Union (EU) or Business as Usual (BAU, NS, RW) don't shock the German Economy out of the steady state. Alignments with the World System (W) or the United States (US) are even worse. Here are the specific results:

• Random Walk (RW)
• Nation State (NS)
• European Union (EU)
• Business as Usual (BAU)
• World System (W)
• United States (US)
• Russia (RU)

NOTES

Has Germany Become a Steady State Economy?

 

The IMF (here) among other commentators (here) think that the German economy is in trouble. The conclusions are based on the assumption of Unlimited Economic Growth. What if the techno-optimist assumption is wrong? What if growth cannot continue forever and our macro-TechnoSocial systems must become Steady State Economies? Is there any evidence that any economies are already reaching Steady State and what are the implications, good or bad, if they are? HINT: from the graph above, the Deutsch Empire (DE) has been in a steady state since 2010. I'll explain all this in a future post.

If you want to experiment yourself with the DEL20 systems model, you run it on line and experiment with coefficients here. Notice that the two error correcting controllers in the Measurement Matrix are (EF-GDP), the Ecological Footprint compared to aggregate production and (N-CO2), population minus CO2 emissions. In other words, environmental constraints are creating the steady state in Germany not economic policy failures.

You can implement the current Neoliberal policy measures creating unlimited economic growth. Just change one coefficient in the System Matrix from F[1,1] = 0.95349473 to F[1,1] = 1.04, a not unreasonable four percent growth rate. What happens to the Ecological footprint and to CO2 emissions?

Notes

Data taken from the World Development Indicators (WDI). All variables are in standard scores. The methodology used to create forecasts is similar to the one used by the Atlanta Federal Reserves GDPNow app. Prediction intervals are generated using a Bootstrap algorithm in the R programming language.

You can run the DEL20 BAU Model here.

The German Recession from 2000-2005

The conventional wisdom (here, here, here, and here) is that the German economy was in recession from 2000-2005. Results from the DE20 model, however, show that the economy was well above the attractor (dashed lines above) from 1998-2009 when the recession really hit.

Conventional ideas about dating recessions are essentially based on drawing lines on time plots (the heavy red lines above) rather than modeling an attractor for the economy. The attractor analysis tells an entirely different picture of post-reunification German economic history. The conventional wisdom (here) led to neoliberal reforms in the welfare system and the labor market. The high growth rate after the reforms (2005-2008) was attributed to the success of neoliberalism. The supposed success was short-lived as the economy returned to its attractor. The farther the economy overshoots the attractor value, usually the worse the crash afterwards.