By Christian Takushi MA UZH – 19 July 2014 – Switzerland.
Germany is rising as a Global Power. Aided by geopolitical & economic trends it is becoming the most trusted and welcomed Western nation on all continents and conflict regions on the globe. Even more, rising Emerging Nations see it is as model for them and as strategic partner. A successful Western nation having the most compatible system with their cultural-economic setup. From China to Brazil, Germany’s Social Market Economy with a heavy steering role for the state and limited power for big companies is more appealing than America’s “the winner takes it all” model. China’s State Capitalism is closer to the political-economic model of Germany than the USA or Britain. Now, the Football World Cup is laying bear a growing sympathy for Germany across nations and continents.
Our multi-disciplinary approach helps us to learn from very different realms of society (like sports, religion, military etc) in order to improve our Global Geopolitical-Macroeconomic Outlook. Thanks to football’s global reach and competitive nature, it is more than just the most popular sport, so we might be able to learn something from the latest World Cup.
The first thing we learnt from the global coverage of this event: Millions of people from China to India and even Africa are loving German football. It is part of a secular trend of growing acceptance of Germany, long associated only with WW2. And it overlaps with economics and politics. German businesses benefit as German brands ride the wave, but also German political influence on the global stage is growing. As millions join the middle class in emerging economies and dream of owning a German car, the perception of Germany is no longer shaped by Hollywood movies, but increasingly by people’s own experience of German products and services, and increasingly personal contacts. Millions around the world have adopted a German word into their vocabulary,“die Mannschaft” (the team), fascinated by a team spirit, where everyone serves the team, rather than a super star. As players develop several skills, they move positions and replace one another – rotating until they expose the opponent’s weak spot. In fact Germans have redefined the concept of “team”, adding to camaraderie the power to evolve. Something many corporate teams and companies try by endless re-structurings, firings and hiring of “big names”. Coach Joachim Löw did not get the top job, because he had a big name. He had a clear concept and was behind it heart & soul. There is so much businesses can learn from German football.
This year’s World Cup victory may prove to be as important as the Miracle of Bern in 1954 when Germany came to the World Cup in Switzerland, physically and morally scarred. Yet a defeated and ashamed people came out to give themselves back some dignity. They won the World Cup for the 1st time, but it was much more than that. Many historians have said modern Germany was really born in Bern, unleashing the spectacular Wirtschaftswunder (economic miracle). What a crazy destiny for a nation you may say, yet the story ain’t finished yet. The great surge came to a standstill in the 1990’s. Around the year 2000 Germany struggled under reunification, a new model was needed. In 2002 Chancellor Gerhard Schröder started the most sweeping and painful economic reforms since the Marshall Plan. Two years later the German Football Association (DFB for Deutscher Fussball-Bund) started a major renewal in football. Trainer Joachim Löw -an assistant trainer then- was part of that re-birth. Typical of Germans, there was a well-thought change of course in economy as in football, and the nation stood the course despite many setbacks over the initial years. 10 years later the German economy, politics and football are strong and leading the way. In most other countries Coach Löw would have been fired long ago and at least two more re-structurings would have followed. Similarly, German firms don’t announce a sweeping restructuring every 2-3 years. Adjusting & evolving together builds genuine team-spirit, feeding trust and motivation. This contrasts with the mixed experience many have made with “artificial” team-building exercises. People saw this coach along trusted players like Lahm, Klose and Schweinsteiger try and fail before, but staying the course. And people liked it. Coach Löw said after the final match: “In all these years we kept improving ourselves”. The message to us in business? Change and stability are probably overrated extremes, while the “patience & willpower to evolve” is underestimated. Stability without evolution as shown by the teams of Spain, Portugal and Brazil leads nowhere in an increasingly competitive world.
The sweeping success of the German squad in the current Football World Cup in Brazil reflects at least two things: (1) the rise of Germany is being partly reflected in the rise of German football, challenging English and Spanish football’s preeminent global position, (2) more importantly, German attributes like team-spirit, dedication to improvement, quality, long term thinking and modesty in victory have been described as essential in explaining the success of the German side on and off the pitch. Commentators all over the world were amazed at how this team had been able to win the hearts of fans even in nations like Israel. Interestingly some of these attributes are also appreciated by many consumers and political leaders in the emerging World. Despite being the undisputed super-power within Europe, Berlin (Bonn before reunification) has for 45 years now exercised a remarkable self-imposed modesty in leading the continent and internationally. But this cannot be explained simply by two obliterating World Wars and subsequent defeats, as some analysts have suggested. Japan also attacked her neighbors and suffered greatly for it, but remains distrusted by all Asian neighbors. Unlike Japan, Germany faced its atrocities and failures with unrelenting determination and unequivocal repentance. This was probably epitomized by Chancellor’s Willy Brandt kneeling in Warsaw in 1970. And is still echoed in the way all German school children are taught about the historic failures, flaws and responsibility of the nation as a whole. Something probably no other nation has ever done to this extent. As some analysts have pointed out, most school books in Japan, China, USA, Spain, France or Britain contain only limited information about their past collective failures. National pride and glory dwarf any dark chapters. I use the degree of a nation’s true repentance by looking at the degree their victims and victims’ children can trust them. Few people know that Berlin is one of the most preferred city destinations for Israeli emigrants, and that Berlin is becoming the most reliable friend of the Jewish state. An ally that lives up to her historical duty to preserve the state of Israel, but also one that can tell Jewish leaders in Jerusalem “no, we don’t agree”. Sadly still, the same cannot be said about Chinese concerning Japan. Nor about Vietnamese concerning China.
Some say “what is the point in uncovering the truth and repenting about something that happened generations ago?”
Unfortunately it matters and it never really goes away unless, honestly addressed. One cannot comprehend it completely without contemplating the spiritual collective impact on a nation’s soul. Please, allow me to share a personal story to illustrate my case. I was once at a closing dinner of a business conference in Portugal, when a Korean executive came to say good-bye to all guests at my table. As this strong-built man approached me he was very upset and perspiring. He knew I was half-Japanese and could not hide his disgust and anger. Embarrassment and tension was in the air, and considered walking away to avert a fallout. I could easily have told my European and American friends “I did not invade Korea, I wasn’t even born!” or “after all I’m just half Japanese”, or even better “my family actually suffered during and after the war in the West”. But I felt this moment was about something bigger than him or me. I stretched my hands towards him asking him to speak. He could barely speak in his angry condition, but what his body language and few words conveyed touched my heart. Sorry, most Westerners among you would probably not understand how much North-East Asians express with body language. The spoken word simply confirms the body language. He expressed the pain the Japanese caused his family and nation. Although he was barely 50 years old, what happened 101 to 66 years ago was still affecting him. What he was holding back for years came up. With other business people and their wives staring at us in fear of what could unfold now, I stepped closer to him, feeling like standing in the gap for my ancestors. I cleared my throat and in a solemn voice repented of all the atrocities my people have committed to his people. I asked him to forgive the Japanese people. He first struggled, but I said, “please, forgive us”. This strong man had tears in his eyes, he shook and then he hugged me emotionally. The strongest hug I’ve probably ever received. We had both tears in our eyes. Other people surrounded us in quiet support and joy. This event is marked in my memory as a day of liberation. The South Korean executive forgave wholeheartedly the Japanese people, he could open his tight grip and let us go. I can’t put it in words, it is as if something had been lifted off my shoulders in a spiritual realm after standing in the gap and identifying with the collective guilt of a nation. This cannot be explained rationally. But who can rationally explain the hatred and distrust among Oriental nations and peoples?
Since that powerful personal experience with a Korean executive, I personally believe that Germany has been able to steadily grow in acceptance, admiration and trustedness worldwide, because Germany repented of her past failures in an unmistakable way. In a way no other nation has probably done yet. That was the trust-foundation on which everything else could be built upon: reliability, quality, success and influence. Most Western nations have acknowledged past collective mistakes, which can explain the relative peace among Western nations since 1945. Sadly, this cannot be said about most Oriental and Asian nations, where most atrocities and invasions remain as simmering open wounds and the “I owe you’s” go back 500. 1’000, 2’000, 3’000 years back. While managed apologies are acceptable as diplomatic gestures, repenting and asking for forgiveness are almost unthinkable in the Orient. The honor of the nation and the ancestors has primacy. An oriental leader that really means to confess his parents’ generation committed atrocities to a neighboring nation asking for forgiveness as a sign of his repentance, may have to commit suicide right after that. The weight of dishonoring his ancestors’ generation would weigh on him and it would be expected of him, too.
Let’s leave history and geopolitics aside and talk about football, the sport that connects the world like no other. The biggest sports and social event has lots to teach us about the world we are living in, not least, because the players of a national team are players and ambassadors. Coach Joachim Löw had none of the greatest football stars: no Ronaldo, no Neymar, no Messi etc. He had well-trained players with fighting & team spirit, and a long-term vision. But all these attributes alone could not explain the tremendous rise of sympathy for the German side sweeping across the world. As many TV-commentators observed during the coverage of this World Cup, it was the refreshing self-confidence, modesty and compassion the German players displayed at crucial moments that helped them win the hearts of the crowds. One of those crucial moments: When Germany defeated football super-power Brazil 7-1. As the Brazilian team collapsed, German players purposely avoided to humiliate their rivals. Rather than jubilant pride or arrogant display of superiority, key German players sought the proximity of weeping Brazilian players. They touched them, hugged and consoled them. They toned down their jubilation to avoid hurting their opponents until they had recovered somehow from the shock, then they gathered on the side to thank their fans and celebrate one their greatest victories in history and the ticket to the final. The mature and self-contained manner the German team carried itself on that pitch in front of one billion people watching on TV has become a defining moment for how Germany is being seen in the world. Not even a USD 50’000’000’000 ($50bn) marketing campaign to promote Germany as trustworthy would have reached the same effect.
Character in triumph instead of crushing superiority won Germany millions of new fans and sympathizers from the furthest corners of China to the deserts of Northern Africa. The stories of German players seeking to comfort their weeping Brazilian contenders right after their shocking 7-1 victory went around the world.
One photo says it all. Tough mid-fielder Bastian Schweinsteiger hugs crying David Luiz to comfort him. He did the same a match later when he saw world star Lionel Messi overwhelmed by sadness after the Final. Every nation wishes their side would conduct itself the way Mr. Joachim Löw’s team did that night; self-confidently, but not overwhelming in pride nor arrogance. Sounds easy, but for those players it is all or nothing. It is the greatest dream or nightmare.
I’ve once heard a famous bible teacher with long life experience say that the greatest test of a man’s character is not loss nor pain, it is shier success and how he conducts himself through it. In my opinion the German football ambassadors passed the character test.
By the time Germany came to play Argentina for the final, not only were millions of Brazilians behind Germany, crowds in countless nations were sympathizing with them too. Bastian Schweinsteiger was one of the most cheered ones. His toughness on the pitch to the point of bleeding could only be matched by his big heart. Deep into the match (extra time) it was Mario Götze who scored that historic winning goal. By that time the contained joy began to surface.. and 10 minutes later it exploded in joyful celebration. And celebrated did they, as champions do. It was amazing how all kinds of immigrants and specially Turks in Germany celebrated that winning goal. Germany has indeed become a welcoming new home for millions of immigrants, and they felt they had contributed to this victory on and off the pitch. Players with migrant background were indeed great contributors to coach Löw’s squad. This World Cup has made clear to many people in the world – specially the Middle East, that in Germany they can live their dreams.
If winning the 1954 World Cup in Switzerland went into history as “the Miracle of Bern” (das Wunder von Bern), because it became a defining moment for post-war Germany that gave back hope and dignity to a war-scarred nation, the 2014 World Cup victory in Brazil could be an equally important defining moment in German history. When German captain Fritz Walter took the victory trophy in 1954, he humbly bowed and walked quietly to his team without raising the cup – the war was still a fresh memory. Not many people around the world shared in their joy. The only positive emotions were respect and admiration. 60 years later when captain Philipp Lahm took the trophy, he raised it immediately in jubilant joy, jumping like a big kid along all his team members. This time, millions around the world shared in the joy of the German team. 60 years have passed and we have to say Germany has earned the right to leave the past behind and to enjoy a healthy dose of national pride. The way Germans see themselves and are perceived around the world has changed profoundly.
Back to geopolitics
This World Cup 2014 will only accelerate what is unavoidable: The rise of Germany in the World Scene in a way we haven’t seen it yet. The World is no longer singlehandedly dominated by Western powers that have long enjoyed seeing Germany underplay and understate her strength. It is now increasingly shaped by fast growing developing and emerging nations that have no war-history with Germany. These younger and fast growing nations want to see more of Germany in global leadership. We saw that after the triple disaster of Fukushima (Japan): while all world capitals were gripped by consternation in the first few weeks, they all went back to normality and the short-sightedness of their GDP Growth targets for 2011. Except Berlin: German leaders rallied around Mrs Merkel and did the only thing that was responsibly and morally right. They decided to end the era of Nuclear Power in a pragmatic way and to boldly embrace renewable energies – in spite of the huge risks to German competitiveness in the short term. Berlin’s Exit from Nuclear Power (Atomausstieg) is the kind of moral and visionary leadership new emerging powers see in Germany. To be fair to other nations like the USA and Britain, we have to add that the German economic model allows of course Berlin the possibility to plan “long term”. The German economy is not exclusively dictated by profit maximization of corporations, the federal government, the regional governments, unions and corporations (i.e. all key stakeholders) decide together on all issues of strategic magnitude. That allows the nation to undertake multi-year changes with risks evenly shared over all stakeholders. As emerging nations from Latin America and Africa to Asia have observed, the Anglo-Saxon model has mainly benefitted large corporations at the expense of the work force, weakening the political cohesion and governability of these nations. An increasingly multipolar World needs Germany more than ever in order to pragmatically address the many structural problems and regional conflicts. With the USA, Russia, China, Japan and Britain enjoying less and less trust by a dwindling number of nations, Germany’s role and weight is only going to grow.
Most trusted nation: A large scale BBC poll in 2013 with more than 26,000 people in 22 countries found that Germany is viewed more positively than any other country tracked. Another poll by The Economist in 2013 also found that even in Europe, Germany was the most trusted nation. An impressive result despite the widespread campaigns in European media to blame Germany for the economic pains in Southern European states. As we have said before, those states are in pain, because they were not fit to join the EU in first place and because they implemented austerity measures while resisting the reforms needed to address structural issues. Austerity without reforms leads nowhere.
Today’s new generation of Germans is really different from the World War II movie stereo-types still so prominent in Hollywood. You may think I’m talking like a football fan. Yes I’m, but I’m leading you to Geopolitics, because these recent events simply accelerate a geo-strategic shift that had been advancing since Konrad Adenauer and Willy Brandt led Germany to turn around and embrace the future anew. Hard working people all over the world now strive to afford German quality products like Mercedes, BMW and Audi cars. Top leaders and bureaucrats in Beijing have contacts with German counterparts in a frequency and depth unparalleled by any other nation. China is not alone, most rising emerging powers are developing close relationships with German leaders and German firms. As these nations’ share of World Output surpasses 50% and the Developed World shrinks in relevance, Germany’s role in the world will only rise.
Emerging Powers including BRICS putting their weight behind Germany
Starting with Japan in the 1880’s, Asia’s miracle economies have embraced a German-compatible government-centered economic model, aimed at boosting Trade Surplus, Income per capita and Net Foreign Assets per capita. While many proud about the level and growth of their GDP, it is the GDP per capita that should be worried about. America has Income Growth, but is bleeding in Net Assets. Germany is growing both Income per capita and Assets per capita.
No random result: Growth of Income per capita in Germany was twice as high as in the USA in the past decade. Every year Berlin oversees the salary-setting summits between employers and unions, making sure no excess takes place. while the economic rent has to benefit all stakeholders, the federal government allows corporations to accumulate wealth, knowhow and assets overseas. One of the most important reasons Emerging Powers are so interested in Germany and her Economic Model is this: Germany has accumulated USD 1’450 billion in NET FOREIGN ASSETS, compared with negative U.S. NET FOREIGN ASSETS of USD – 4’200 billion (US is a major net debtor). All Emerging Powers realize they are closing the income gap, but the US Military Power remains unattainable and out of reach. Therefore they are geo-strategically interested in projecting power and influence through all possible other means: cyberspace, news media, trade, manufacturing base, supply dependence, labor, research, music, religion, technology, sports, marketing … and last but not least the accumulation of net foreign assets. Massive Net Foreign Assets are the ultimate quiet geopolitical-economic weapon that projects influence and generates income in foreign currency. And no one has mastered that game better than Germany and Japan. If you take the two largest export nations in the World and think China has already topped Germany, you may want to think twice. Germany’s Total Balance of Payments per capita is 16 times bigger than China’s. Thus, you can see who follows whom. Emerging Nations are following Germany’s model and trying to accumulate Net Foreign Assets as a means to economic growth and more influence. And Germany has every interest in seeing these nations gaining in strength and influence, too. They love German technology & products, and they foster economic models where Free Markets are reigned in.
I wished so much, the country of my ancestors, Japan, could emulate Germany and break out of the past. Japan would have so much to give to the world and could indeed contribute more if it was more trusted.
Struggle between USA and Russia, benefitting further rise of Germany
Since 2003 Germany is gradually stepping forward, accepting her wider role in the international scene. With an impressive “economic machinery”, rising acceptance among emerging economies and – according to McKinsey – the most connected economy in the world a further increase of its influence is expected. Even more so after the growing animosity between the USA and Russia. Japan is trying to do the same, but many scholars and most Asian neighbors perceive that Japan never truly apologized nor seriously regretted the war crimes committed during 1931-1945, visible in Japan’s reluctance to teach children at school about it. In a world where ever fewer nations are openly trusting the US, Russia, China, Japan and Britain not only because of history but also their vulnerable overblown financial systems and polarized electorates, Germany is the steady trustworthy alternative.
Football also sheds light on shifting realities in Latin America
At this 2014 World Cup traditional football powers Brazil and Argentina failed to convince, while Colombia, Mexico and other Latin American teams won much appraise. Football seems to be confirming the rise of a new engine of growth and change in Latin America, the Pacific Alliance (Chile, Colombia, Mexico and Peru) and the relative decline of Brazil and Argentina, both members of the Mercosur. Brazil faces daunting domestic challenges. Yet, Brazil’s biggest challenge might be her Pacific neighbors: Chile-Peru-Colombia are joining forces with Mexico and establishing a united market that is equal in size to Brazil’s, but more competitive and better integrated into the global economy, exporting twice as much actually. Pacific Alliance nations were not much smarter than Brazil, they simply did not have the critical size to rely on domestic growth alone and FDI appeal. They had to become competitive and dock to global trade. Brazil has relied on its size, protectionism and focused her trade on Mercosur. As so many EU nations did. But Brazil’s main trading partners in Mercosur are struggling economically and even more ferociously committed to Latin America’s Revolutionary Socialist course. Mercosur’s nations are facing great macroeconomic challenges, hyperinflation (over 30% last year) and even the risk of default. The performance of the Brazilian football team at this World Cup does conspicuously reflect the state of the political-economic reality of the nation.
Christian Takushi, Macro Economist, 19 July 2014 – Switzerland
Disclaimer and Warning: The opinions expressed here reflect the personal view of Christian Takushi and the current stage of his Global Macroeconomic & Geopolitical Research. His analysis and views are completely independent. The views of the independent experts in Christian’s global panel and network were also taken into consideration. Readers should be aware that global macroeconomic and global geopolitical research are highly complex and subject to sudden changes and shocks. His assessment may change following an important event or data release in the future.