Germany's Conversion To Planned Economy, War With Russia As Driver

 by Thomas Kolbe

The president of the Kiel Institute for the World Economy, Moritz Schularick, makes no secret in an interview with the Neue Osnabrücker Zeitung that the signs are pointing toward a war economy. It is bizarre to witness how economists succumb to the intellectual mediocrity of central planning.

Professor Moritz Schularick, president of the Kiel Institute for the World Economy (IfW), seems to have found the ultimate solution to Germany’s economic problems. In conversation with the Neue Osnabrücker Zeitung (NOZ), the economist complained about a leadership vacuum in German arms policy. He sees it as central to an active industrial policy that could lead Germany out of its economic woes. Schularick expects that arms production will act as a, in his own words, “job booster.”

He said literally: “If we want Europe to truly stand on its own in defense soon and not remain dependent on the MAGA-USA, then Defense Minister Boris Pistorius must be given the order to work with European partners to eventually replace the USA and its capabilities.”

Fatal War Rhetoric 

“Order to march,” military self-sufficiency — the vocabulary is both revealing and dangerous. It seems politics and state-adjacent economic research are converging on a common path regarding military policy and increasingly centrally planned industrial management. A return to market principles seems like a fairy tale in circles of German economists—no one believes anymore in the curative power of freedom from climate diktats, overregulation, and fiscal burdens.

According to Schularick, politics should implement a top-level arms coordinator to manage investment funds in response to the Russian threat. Perhaps he envisions himself in this role? After all, over €500 billion in defense investments are planned by the end of the decade to reduce security dependence on the U.S.

Production Capacity Shortfalls 

Schularick criticized the extremely slow pace of ramping up arms production. Since the war began four years ago, nothing has been done to significantly increase production capacity.

“How many Taurus missiles are finished per month? Not even a handful,” he laments. A clear industrial policy deficit, he concludes.

Here, the new spirit of German economic “academia” emerges: everything revolves around the much-praised global steering, an active industrial policy now pursued by Brussels and Berlin, dangerously fed by state-aligned research.

What was long predicted with three-quarter conviction now seems to be happening. Central planners, including Schularick, apparently assume they can repurpose idle German industrial capacity for the defense sector. Civil car production, in their view, can easily be converted into tank production. Besides producing goods private households do not demand, this creates yet another subsidy-dependent industry, consuming resources from civilian production and artificially raising civilian costs.

Germany’s “Rediscovered” Work Ethic in War Mode 

Schularick grows euphoric about the promising future of the war economy, astonishingly rediscovering a work ethic long absent in Germany. He notes production is still mostly single-shift, five days a week. Implicitly, we learn, these are the jobs of Germany’s economic future.

No one seems to think about what should be produced in the coming years to avoid empty shelves after just three weeks in a potential conflict. It’s not just about armored vehicles but also future technologies like autonomous systems, satellites, AI, or robotics, Schularick adds. Everywhere, German industry has fallen behind.

Where does this competitive disadvantage come from, the central planner wonders? Perhaps from German policy and the Brussels bureaucratic apparatus acting as internal antagonists?

The interview highlights the widening gap between economic reality and the hermetically sealed ivory tower of politics, state-backed research, and sympathetic media, which promote this massive economic mismanagement while failing to critically assess Russia’s actual military strength, which is not capable of a continental invasion.

We’ve seen this playbook during the COVID era: once set in motion, the state-affiliated media machine drives narratives across newspapers, radio, and social media bot armies, suppressing open discourse. Stories of Russian occupation are defended in apocalyptic tones, wearing the public down.

The Central Planners’ Dreamworld 

How do technocrats like Schularick, Merz, or von der Leyen envision converting production lines to military goods in practice? Beyond financing, there’s the question of knowledge transfer. Do blueprints come from the Internet or Boris Pistorius’ ministry?

The knowledge transfer required to build a centrally planned war economy from civilian industry is immense and time-consuming. Even after decades of bitter experience with green transformation—which only drove capital out of Germany—political learning curves remain negative.

Was this the goal? Ironically: to push industry into a corner with climate policies until it falters, then fill freed capacities with arms production?

Beyond the failed climate subsidy business emerges a new extraction pillar: the European defense sector. Whether this experiment can withstand real-world economic conditions—falling productivity, rising debt—is doubtful. Central planners like Schularick will surely have an explanation: they were blocked by forces opposed to European integration, joint war economy, and Brussels debt accumulation.

The Illusion of Central Planning 

No deep economic expertise is needed to see that militarization is doomed to fail. A brief glance at 20th-century history is enough. Beyond massive resource mismanagement, there are issues of national sovereignty, divergent EU geopolitical interests, and a divided Union—especially an Eastern bloc wary of conflict with Russia.

That even economists like Schularick succumb to the lure of powerful central planning shows they are not immune to personal vanity. Surely, they hope their institutes benefit—perhaps with a ministerial-level position as arms coordinator. Who knows which job descriptions are already circulating in Berlin and Brussels.

It is tragic, yet the motto everywhere seems to be: “After us, the flood.”

https://www.zerohedge.com/geopolitical/germanys-conversion-planned-economy-war-russia-driver