Unwitting Architect
German Primacy and the Origins of Neoliberalism
Julian Germann



GERMAN PRIMACY IN EUROPE—four words that once conjured up a continent’s dark past now seem to presage its future. The European fallout from the global financial meltdown of 2008 cast the Federal Republic into an unrivaled position of regional influence at the same time that it threw the European Union (EU) into existential crisis.1 The divergence in fortunes since the devastation wreaked by this so-called “eurocrisis” is astounding. Most of the eurozone has suffered from economic stagnation, rising debt, and financial instability over the past decade. At the start of the 2020s, it faces an even deeper depression, brought on by the coronavirus outbreak. The German economy, by contrast, has been set on a record-beating path of high growth, low unemployment, and sound finances, and is expected to rebound more quickly from the virus-induced slump (Fleming and Khan 2020). Since 2014, the German state has run budget surpluses and significantly reduced its debt (FAZ 2017). Since 2016, it has been able in principle to borrow at negative yields—meaning that investors are paying the German government to borrow from them. And in 2019, Germany posted the world’s largest current-account surplus for the fourth year in a row (Wagner 2020), while its exports in goods alone accounted for a staggering 38.6 percent of its gross domestic product (GDP).2 These indicators of economic strength are mirrored in the political ascendancy of Germany in the EU. As the EU’s largest creditor and leading contributor to the European Stability Mechanism (ESM) (Sinn 2016), the German state quickly established itself as the principal manager of the eurocrisis (for example, Bulmer and Paterson 2013: 1392). With its payments into and hold over the next seven-year budget of the EU (2021–2027) set to increase after Brexit, the German government is likely to play an equally prominent role in defining the EU’s economic response to the virus. And with France in domestic turmoil, Britain on its way out of the EU, and the US incapacitated by the Trump presidency, Germany finds itself in an unprecedented position to shape the European project after the pandemic.

Judging by how it handled the eurocrisis, however, the German state is unlikely to use this growing weight to address the deep divisions that continue to threaten the EU. It long hesitated to offer support for its financially distressed partners, refused to boost domestic demand to provide a market for their exports, and blocked several proposals to contain the crisis by spreading the risk and sharing the costs more evenly. Instead, it demanded painful reforms involving deep budget cuts, the fire sale of public assets, and the restructuring of labor markets in exchange for financial assistance (for example, Lapavitsas and Flassbeck 2015). The German insistence on a program of crushing austerity for European debtors during the eurocrisis does not bode well for the future, and it has baffled sympathetic observers and infuriated its critics ever since.3 Many have asked why a country they took to be fully committed to the European idea has failed to provide enlightened leadership at such a crucial juncture (for example, Maull 2013). Others point out that its response has exacerbated rather than contained the centrifugal forces that endanger the EU (such as Wolf 2016). And some, in fact, go so far as to see in Germany’s imperious imposition of fiscal retrenchment and structural reforms on its Southern partners the ugly image of a zero-sum politics that is bound to return in the face of the pandemic (for example, Kundnani 2011: 40; Kluth 2020). In short, while few can imagine the EU surviving without a strong Germany at its center,4 others ponder whether “German domination [is] compatible with further European integration or [whether it] will . . . prove a fracturing force” (Cohen 2015).

Given the importance of this new German question for the region’s destiny and the future of the world economy, it is surprising to see that the historical horizon that informs this debate has been remarkably limited. References to Germany’s imperial or fascist past or, more favorably, to the peculiar legacy of its postwar development, are aplenty in today’s political commentary and scholarly analysis. Overall, however, there is hardly any sustained inquiry into the sources of Germany’s newfound power and purpose that reaches back further than the 1990s.5 In the overwhelming majority of accounts, Germany’s reunification after the Cold War and its reformed position within Europe’s new Economic and Monetary Union (EMU) are taken as the unquestioned parameters that supposedly explain its predominance today.

This book argues that outside of this limited field of vision lies an earlier strategic turning point that profoundly shaped Germany’s political economy, the European project it presides over, and the broader global context in which its attempts to manage the eurocrisis and its aftermath converge and conflict with those of others. This turning point is the turbulent crisis decade of the 1970s, when monetary turmoil, rampant inflation, rising unemployment, and a generalized recession conspired to tear the “embedded” liberal international economic order (Ruggie 1982) asunder. Marked by macroeconomic imbalances and financial instabilities, the end of the long postwar boom raised questions about the responsibilities of surplus countries and deficit countries that closely resemble those today. More fundamentally, it confronted German and other North Atlantic policymakers with the problem of how to sustain social peace, economic growth, and a liberal international order. The search for ways out of the crisis was marked by significant domestic tensions, painful trade-offs, and transatlantic frictions. And the “solution” that Anglo-American elites ultimately hit upon—to attack the organized power, institutionalized protection, and guaranteed rights of labor in favor of capital and to dismantle welfare state regulation in favor of market forces and individualized self-help—inaugurated a new global era infamously known as “neoliberalism.”6

The global rise of neoliberalism is widely seen as a dynamic originating in the United States and the United Kingdom at the end of the 1970s and sweeping across the world in the decades that followed. From this Anglocentric perspective, Germany’s emergence at the center of neoliberal restructuring in contemporary Europe seems perplexing. The consensus since the 1980s holds that Germany has been reluctant to embrace Anglo-American “free market” capitalism and presents—in practice or at least in principle—a more coordinated and socially balanced alternative.7 But how then could this supposed stalwart of a social market economy turn into the vanguard of neoliberal reform in Europe? The only available answer is to emphasize the erosion of the German model under the pressures of neoliberal globalization since the 1990s. But this reading assumes that Germany’s lead role in the neoliberal restructuring of the eurozone results from the same forces conventionally associated with the Anglo-American pioneer.

This book challenges this ruling narrative empirically and conceptually. Drawing on original archival research, it argues that Germany emerged as the unwitting architect of neoliberal globalization in the 1970s. It was an architect because it contributed to the grand shift from embedded to neoliberal capitalism in crucial respects. The German decision to float the deutsche mark (DM) for the sake of domestic price stability destabilized the Bretton Woods regime, and the regional currency bloc it organized in its stead tied participants to its restrictive monetary policy. Together with their US counterparts, German policymakers used their financial muscle to counter eurocommunism in Italy and the Bennite Labour left in the United Kingdom, and to support the French technocratic Barre government against the left alliance led by Mitterrand. The German government also frustrated efforts of the Group of Seven (G7) countries to coordinate a Keynesian reflation of the world economy, and, finally, it used the DM as leverage to steer the United States toward a radical course of deflation that broke the capital-labor compromise. In short, Germany’s anti-inflationary policies and monetary power unsettled the embedded liberal world order, prevented its partners’ attempts to restore or progressively transcend it, and narrowed down the options so that an attack on organized labor—the font of the neoliberal revolution—won out as the only path out of the crisis.

This contribution to the global rise of neoliberalism has gone unnoticed in part because it was unwitting. German officials did not intend to set the world on a neoliberal path. On the contrary, they sought above all to sustain the domestic compact between capital and labor. But because its embedded liberal compromise had been built on Germany’s success in global markets, it was exposed to the crisis responses of others. German officials thus actively opposed the interventionist and expansionary remedies discussed and pursued in Europe and the United States—not because they favored a neoliberal solution, but because they feared that protectionism and imported inflation would erode the basis of Germany’s export success and social peace. Though not guided by neoliberal ideas or interests, Germany’s actions had unintended neoliberal consequences. Its attempts to maintain open markets and stable prices—while aimed at preserving embedded liberalism at home—precluded left-wing and centrist Keynesian alternatives and provided the external impetus that launched the neoliberal counteroffensive in the United States and the United Kingdom.

Revealing German policymakers as proactive, if peculiar, agents of neoliberalism from the very beginning furnishes the coordinates we need to locate Germany’s place in a crisis-ridden and virus-hit Europe today. For, although initially successful in safeguarding the embedded liberal class compromise, Germany’s attempts to commit Europe and the United States to monetary and fiscal discipline ultimately turned out to be self-defeating. In triggering a neoliberal response, German officials helped create a socially regressive but internationally competitive form of capitalism that has put significant pressures on the German model since the 1980s. The painful “Hartz IV” labor market and social security reforms introduced in the early 2000s marked the culmination of a decade-long process of adjustment to this new Anglo-American variety.8 And yet the longer-run perspective taken in this study reveals that, far from a story of convergence on an Anglo-American model, the German state still seeks to preserve a shrinking core of its social market economy, now critically dependent on global demand and European supply chains. From this vantage point, the book illuminates the very different rationale behind the painful reforms German state managers have demanded of their indebted eurozone partners. In the context of a regional manufacturing network centered on Germany and extending across the old and new members of the EU, German policymakers see neoliberal austerity as a way to create an attractive low-cost environment for German capital. In as far as their ability to regionalize production, supply, and investment allows German manufacturers to compete in global markets and rewards skilled workers in the major exporting industries, removing what remains of the burdensome postwar settlement across Europe serves to sustain what is left of the embedded liberal compromise in Germany. German policymakers, in short, promote neoliberalism abroad so as not to practice it at home. By tracing the origins of German crisis management back to the 1970s, this book provides a fuller picture than is currently available of the wider vision of the EU as a subordinate supply zone that guides them, and the potentially broader appeal of their actions to some European intermediate producers.

The book argues that the role played by Germany makes it an outlier from existing theory: it diverges dramatically from what we think we know about the origins of neoliberalism. Therefore, it both calls for a different approach and produces new theoretical insights. The prevailing accounts of neoliberal globalization center on the United States and the United Kingdom, and derive from their experience a general model of neoliberal change. The relative strength or weakness of similar attributes in other societies determines the weight they are given in the overall story: countries in which neoliberally minded elites or free market ideas are strong are said to have played an active role; countries in which these are weak are relegated to the sidelines. The German state, however, was guided by neither neoliberal ideology or social forces, nor was it pushed against its will by states that were. Because Germany does not fit this model and yet played a demonstrably central role in the rise of neoliberalism, this book calls for a break with the established Anglocentric perspective. To do so, it draws on insights from the alternative framework of uneven and combined development (U&CD). Rather than generalize from the dominant actor in the system, this approach holds that world order change is driven by the interaction of multiple states and the developmental differences between them. The book argues that we can use this wider lens to reintegrate seemingly deviant cases such as Germany into our explanation of neoliberal globalization. It traces how Germany’s postwar capitalism combined a new social compromise pioneered in the US with its traditional world market orientation. It examines how this distinctive version of embedded liberalism, dependent on competitive prices and open borders for its exports, led Germany’s policymakers in the 1970s to prioritize low inflation and free trade. And it argues that this crisis response restructured the international environment to deny others the chance to democratize capitalism or revive growth by Keynesian means, thus creating the conditions in which a specifically neoliberal solution—the confrontation with organized labor under Reagan and Thatcher—was devised and successfully tried.

Because the German case defies the Anglocentric master story, it also points toward a more nuanced appreciation of neoliberalism as a world-historic phenomenon: rather than an Anglo-American project rolled out across the globe, it is better approached as a cross-national and open-ended process driven by a plenitude of actors whose interests and ideas appear to be idiosyncratic but become intelligible when located in a wider international context. This expanded view also changes how we think about the future of neoliberalism. Existing predictions of what will come “after” neoliberalism are bound to be misleading because they rest on a false analogy with how neoliberalism emerged in the 1970s. The German experience demonstrates that neoliberalism was never a singular movement that, once fully formulated, conquered the world in one fell swoop. Instead, the making of neoliberalism depended from the start on the contingent and interdependent decisions of multiple actors, many of whom were guided by economic ideas, social interests, and international constraints that diverged significantly from those attributed to the US and the UK. It is the same sensitivity that this book argues needs to be brought to bear on the current conjuncture. Seeing neoliberalism as a uniform project has made us search in vain for some comprehensive equivalent that might replace it, only to find, in the absence of such an alternative, confirmation that neoliberalism is here to stay. This book argues that neoliberalism is better understood as a new era of capitalism that has shattered the central political question of the postwar West—how to organize mass consent—into a myriad of practices that seek to reverse and remold the rights that working people had won in this process of reconstruction. Leaving behind the notion of neoliberalism as a full-fledged market program frees us to attend to the pragmatic and counterintuitive choices of agents neither fully wedded nor fundamentally opposed to it who—as the Janus-faced character of Germany’s eurocrisis management demonstrates—may be more likely to shape the future of the European and global political economy.

Structure of the Argument

The presentation of the argument in this book is as follows. Taking up the preceding discussion, Chapter 1 reviews the three most prominent explanations of the global rise of neoliberalism provided within the International Relations (IR) subfield of International Political Economy (IPE) and its critical tradition, which the chapter argues contrasts favorably with conventional liberal and realist approaches. The first account argues that neoliberalism arose primarily from the geopolitics of an ailing US hegemon that, in the turbulent 1970s, invented and imposed free market capitalism on its core allies and developing countries in order to stave off its decline. A second account argues that neoliberalism was the political project of business elites, who sought to reassert their power by attacking the welfare state gains and political representation of the labor movement. A third account presents the return of free market capitalism since the 1970s as a change of economic paradigms, brought about by a network of intellectuals that successfully injected neoliberal ideas into policy discourse. The chapter argues that these state-centered, class-based, and ideational approaches differ in emphasis but suffer from the same weakness: they generalize from the dominant state in the system. Other actors do not enter the story, unless and until they can be shown to be subject to ideas, societal pressures, or hegemonic interests similar to those of the United States. Because they pivot unduly on the Anglo-American world, these accounts are unable to capture the peculiar German contribution to the origins of neoliberalism. And as a result, they misread the rise of Germany to the apex of a neoliberal Europe as a belated repetition of the same global movement spearheaded by the US and the UK.

To overcome this debilitating Anglocentrism, Chapter 2 outlines a conceptual framework through which the role of Germany in the making of neoliberal globalization can be brought into focus. The solution, the chapter argues, is to eschew a comparative approach and interrogate the German political economy as not only different from but entwined with other national political economies in fundamental ways. The lens of uneven and combined development sheds light on this interconnectedness: it emphasizes the coevolution of national capitalisms, the systemic pressures that arise from their coexistence, and the interactive context of foreign economic decision making. Rather than viewing the neoliberal shift as an endogenous Anglo-American development that was subsequently globalized, I argue that this heuristic allows us to approach the “disembedding” of the liberal world economy as a cross-national and, in important respects, “conflict-driven” sequence of policy action and reaction. Not only does this broaden the inquiry into the origins of neoliberalism beyond the putative Anglo-American pioneer, but by focusing on the specific configurations of social and international forces that act upon policymakers, we are able to appreciate the potentially counterintuitive interests and idiosyncratic ideas that guide their actions.

Chapter 3 traces the long-term development of German capitalism across the liberal world orders of the late nineteenth and early twentieth centuries. It argues that Germany’s postwar social market economy was built upon an externally oriented developmental model inherited from its belated but accelerated insertion into the world market and used to enroll capital and labor in a global export offensive. The influence of “ordoliberalism”—Germany’s variant of free market ideology—in the making of this German model has been exaggerated.9 Its proponents were opposed to many of the social reforms necessary to establish this distinctive version of the embedded liberal compromise, and had little to say about its critical international supports: an undervalued DM held in place by the fixed-exchange-rate regime of Bretton Woods, and continuous trade surpluses facilitated by comparative price stability, which policy elites saw not as an ordoliberally prescribed end in itself but as a benchmark of social peace and international success. The underlying vision of Germany as the workshop of an advanced industrial and newly industrializing world coincided with the postwar plans of the United States for an open, multilateral global economy. And yet the prevailing image of Germany as a liberal “trading state” (Handelsstaat) that had traded power for wealth as its prime objective fails to capture the novel ways in which the German state, from the crisis of the 1970s onward, has come to exert its influence internationally to sustain this export-led growth model.10

Moving on to the end of the postwar boom, Chapter 4 challenges the prevailing view that Bretton Woods died at the hands of a declining hegemon. Instead, it argues that the demise of the monetary architecture of embedded liberalism was driven in large part by the actions of the United States’s allies: while French attempts to push the US toward monetary reform destroyed the golden anchor of Bretton Woods as early as March 1968, German efforts to protect themselves from the abuse of dollar seigniorage “floated the system” five years later (Gray 2007). Zooming in on the German decision to float the DM and adopt monetarism after the collapse of the fixed-exchange-rate regime, the chapter argues that the prevailing state-centered, ideational, and class-based models of neoliberal change cannot help explain the German policy shift. Rather than submit to US pressures, German policymakers chose to float in order to shield their own economy from the inflationary consequences of American fiscal and monetary indiscipline. Rather than being guided by free market beliefs, the German government and central bank sought to more effectively intervene in the distributive struggle between capital and labor. And last, I argue that floating enabled the German state to reorganize its relationship with the dominant export bloc and pursue a monetarist policy that recommitted both social partners to reciprocal, and mutually beneficial, wage and price restraint—a constellation of interests very different from the multinational corporations and banks that are said to have promoted floating in the United States. Uniquely among the industrialized countries, the chapter concludes, Germany’s fight against inflation stabilized the embedded liberal compromise domestically, even as the breakdown of the fixed-exchange-rate regime unsettled it elsewhere in the advanced capitalist world.

Having argued that German policymakers had found a way to cope with the 1970s crisis domestically, in Chapter 5 I examine the international extension of German “stability politics.” Because their efforts to stabilize the domestic consensus depended on the continued price advantage and world market access of its exports, Germany’s state elites sought to defeat the twin threats of protectionism and imported inflation. To keep the world economy open and to shore up their competitive position, German policymakers mobilized their monetary and financial power in order to contain the interventionist and expansionary responses of the European left in particular. Although seriously considered at the highest echelons of German policymaking, proposals for a global Keynesianism that could have aligned the redistributive demands of the Global South with a recovery of the industrialized countries were discarded in favor of a self-interested anti-inflationary path. The strategic decisions that have come to define the German approach to the eurocrisis—eschewing responsibility for macroeconomic rebalancing and imposing adjustment costs onto its partners—were made at this earlier juncture. Although far from seeking to impose neoliberal change directly at that time, Germany’s anti-inflationary bias undermined alternative resolutions of the 1970s crisis and tilted the balance in favor of the neoliberal counteroffensive of Thatcher and Reagan at the turn of the decade.

Chapter 6 argues that in order to protect its export model from the dangers of imported inflation, Germany strove above all to commit the United States to monetary and fiscal rigor. To this end, German state managers blocked the attempts of the Carter administration to organize a global Keynesian expansion, and scaled back their foreign exchange interventions in support of a weakening dollar. Both actions helped push the US into the Volcker interest rate shock that radically disinflated the world economy and launched the attack on the organized power of labor. The chapter concludes that the neoliberal experiment in the United States, paralleled and reinforced by similar attempts in the UK, was late and lucky. Rather than the outcome of a decade-long domestic shift—seamless and sealed off from the world outside the Anglo-American heartland—the making of neoliberalism was driven in part by the external impetus of German crisis management. In a similar way, it was then sustained by a bout of global investment, primarily from Japan. Drawn in by a peculiar mix of monetary restraint and fiscal latitude, this investment helped finance Reagan’s massive tax cuts and military expenditures, and thus shored up the political, economic, and especially financial success of neoliberalism after the global recession of the early 1980s.

Chapter 7, finally, draws out the empirical and theoretical payoff of this investigation and applies these insights to the conundrum of German primacy in contemporary Europe. The first part investigates the social and geographical recomposition of the German political economy and the corresponding reorientation of its governmental and corporate elites under the neoliberalizing pressures of the past three decades. Rather than attribute a neoliberal outlook to Germany’s state managers on the assumption that their society has undergone a transformation similar to those of the US and the UK before it, the chapter casts the erosion of the German model as a governance problem that builds on the distinctive experiences and practices of Germany’s crisis managers in the 1970s. Concerned with preserving a crumbling class compromise and attracted by the massive demand for German exports in emerging markets, managers of both the German state and businesses see the neoliberal transformation of the EU into a subordinate production and supply zone as an opportunity to shore up the economic success and social stability of the German model. Despite this nascent grand strategy and its elite support, however, German officials are vulnerable to a rise in US interest rates, to which they fell victim during the Volcker Shock and which has led them to push austerity beyond what German business (or other social groups) could hope to gain from these reforms. This combination of long-term vision and short-term necessity resolves the paradox of German power, which has endangered the very existence of the EU while taking the process of European integration into unprecedented directions.

The Conclusion places Germany’s current position in the EU within a global context and draws out the wider implications of this study. It advances a conception of neoliberalism as a multifaceted process in which actors draw upon, and contribute to, an ever-wider array of available techniques to deconstruct or reconfigure the social, economic, and political gains working people had wrought from capital and invested in the postwar welfare state. While in this respect neoliberalism is the indispensable marker for a new era of capitalism, it is too amorphous a term to serve as a guide to the emerging frontiers and faultlines of the global political economy.

A Note on the Archival Method

This book is based on primary research conducted at the Archive of Social Democracy of the Friedrich Ebert Foundation, the Federal Archives (Bundesarchiv) in Koblenz, and the Historical Archives of the German Federal Bank. The research was supplemented by a visit to the Gerald R. Ford Presidential Library in Ann Arbor, Michigan, and draws extensively on the government records published online and made available through the Foreign Relations of the United States series.11

Much of this evidentiary basis is drawn from archival sources that have only recently become declassified and accessible. This book is not the first to unearth this material, but it approaches it with a set of questions and concerns that are rarely brought to the government record. Diplomatic and international historians tend to take the wider processes of international and societal change that concern this book as the unquestioned backdrop to the events and personalities they focus on. Scholars interested in the structural transformations of global capitalism, by contrast, do not usually consult the national archives themselves. With the passing of the thirty-year embargo in Germany and other advanced industrialized countries, however, we are now in a unique position to test our theoretical knowledge about the global rise of neoliberalism since the 1970s against this new material. Adding an archival method of investigation to the repertoire of critical IPE is thus an enormously fruitful exercise, as long as a number of potential problems are recognized and addressed.

The first limitation is that the archival evidence is almost certainly incomplete. Some documents are irretrievable or still classified, and some sensitive information may never have been committed to the record in the first place. By itself, then, this material cannot tell the full story. But when read against three decades of scholarship on the origins of neoliberal globalization, it can offer valuable insights that confirm, clarify, complicate, or confound what we thought we knew.

The public records of the chancellery, the obvious starting point for this research, illustrate these limitations and the ways in which they can be addressed. The Federal Archives publish the minutes of the weekly cabinet meetings in book form and online.12 With very few exceptions, however, this edition only contains an official log of the cabinet meetings rather than a detailed or verbatim record of the conversations. This means that we do not know what was said when policymakers made their final decisions. But by consulting the internal briefs and memoranda of the chancellor’s office, as well as the top-level communications with the major ministries and the central bank, we can still go some of the distance—enough, at any rate, to offer a fuller sense of the policy debate than has previously been available. In this respect, the archival method offers an important advantage over accounts that simply “read back from ultimate policy outputs to hypotheses about policy goals” (Gowan 1999: x). This technique of “backward mapping” is unavoidable where access to the executive decision-making process is restricted. The obvious shortcoming is that it can only shed light on those decisions that were ultimately taken. Because the policy outcome is the point of departure and the aim is to infer the factors that produced it, backward mapping is bound to miss out on, and indeed tends to underestimate, the plurality of policy options under discussion. In light of the new documentary evidence, it is now possible to distinguish alternatives that were seriously considered from those that were ruled out a priori. To do so is to explore what may be “crucial ‘nondecisions’ . . . often neglected in histories of the globalization process” (Helleiner 1995: 325; see also Strange 1986: 26).

A second caveat is raised by Barry Eichengreen’s (2004: 1543) review of an archive-based book in international monetary history: Can we take the realist language in many of these government documents at face value? To put it bluntly, what may read like cunning maneuvers on the geopolitical chessboard may be little more than the impotent great power fancies of mid-level bureaucrats. To correct for such a bias, the memoranda from the foreign office or embassies that routinely use the language of realpolitik in their situational analyses have been treated with particular caution. The principal focal point of this study is instead on actionable information produced and discussed by the German chancellor’s office, the finance and economics ministries, and the central bank—the neuralgic center of foreign economic policy and the strategic site where Germany’s power has been rethought and deployed.

The ministerial bureaucracies have produced an overabundance of material that has yet to be fully categorized. As a result, the most valuable sources of documentation have been the personal files of chancellor Helmut Schmidt and his key economic advisor, Horst Schulmann (involved in the construction of the European Monetary System [EMS] and the preparation of the G7 meetings), placed at the Archives of Social Democracy, as well as the correspondence and collections of the central bank governors Karl Klasen, Otmar Emminger, and Karl Otto Pöhl located at the Historical Archives of the Bundesbank. Another major source of information are the bimonthly meetings of the Central Bank Council (Zentralbankrat). This supreme body of the Bundesbank, consisting of the presidents of the central banks of the Länder (federal states), is a key forum of macroeconomic deliberation and monetary decision making that is regularly attended by government representatives from the chancellor’s office and the economics and finance ministers. The meeting protocols and verbatim records of these discussions, located at the Historical Archives of the Bundesbank in Frankfurt, have been comprehensively reviewed for this study.

This method is also open to the charge that it simply trades the statism of realist IPE for that of diplomatic history. The former is theoretically preordained. States are posited as the most important actors in the international political economy. The latter, by contrast, is empirically induced. It emerges from a self-imposed restriction to the public record. The effect, however, is the same. The state, embodied by its officials whose every decision is so amply documented, appears outsized in relation to societal actors whose power and influence seem elusive to the point of mere conjecture.

To counter this potential objection, the book gears its archival research to the question of how social forces act upon decision-making elites. Particular attention has therefore been given to the interactions of the core executive and major private-sector interests. The written correspondence of leading state personnel with private economic actors, as well as the informal and institutionalized contacts between them, has been closely studied. Chief among these are the meetings of the Foreign Trade Advisory Council (renamed Foreign Economic Advisory Council in mid-1974) hosted by the Ministry of Economics, which brings together key government officials with representatives of the export industry, private banks, and affiliated trade unions. The composition of the council aims at a regional and sectoral balance, but in practice large exporters and their financiers predominated for most of the postwar period and throughout the 1970s. With over forty council members, the Advisory Council was rather large and unwieldy. Only some members participated regularly and contributed to the work of the council and its ad hoc committees, however. In practice, therefore, the affairs of the Advisory Council were steered by a handful of influential personalities over long stretches of time. The track record of the Advisory Council is mixed. Sometimes it simply duplicated the lobbying activities of the peak business associations; at other times, it effectively mediated between the articulation of interests and the making of economic policy. Members were called upon not to represent individual firms or sectors but to offer independent, expert advice to the ministry. In principle, therefore, and sometimes in practice, this is the committee tasked with coordinating the general interest of Germany’s export industry with the policy objectives of the state bureaucracy.

Last, some may object that to present these findings in terms of German “crisis managers” or “policy elites” is to give a false sense of uniformity across the German state and government. This homogeneity clearly dissolves at a closer level of inspection, where various ministries and departments with different ideas and interests come into play. Given that the archival research of this book opens up the proverbial “black box” of national interest formation, why use a language that closes it up again?

To an extent, such shorthand is unavoidable for a study that investigates the changing contours of German foreign economic policy across several governments and ministerial reorganizations, as well as the state transformations engendered by German reunification and European integration. But this narrative choice is also theoretically guided. Because the book aims to situate key German policy decisions within a wider international context of capitalist crisis and transformation, it often highlights Germany’s external relations rather than its internal politics. Indeed, my archival research reveals a surprising level of policy conflict between states supposedly bound by US hegemony. Because this loosens the traditional US-dominated view, it carries more theoretical weight for my argument than the divisions within the German state that undoubtedly existed. Similarly, because one important explanation of the global rise of neoliberalism stresses the lead role of think tanks and business groups, my archival research focuses on the nexus of public policy and private interests rather than bureaucratic rivalries. Here again, the resilience of the postwar social consensus as the basis for German foreign economic policy is more important for my book to explore than the different preferences of particular government agencies. Of course, wherever they do carry theoretical significance, internal policy divisions are scrutinized in detail: for instance regarding the “two-level game” supposedly played by the Schmidt government at the G7 Bonn summit to outflank domestic opposition to a Keynesian stimulus, or the putative role of the German central bank as the carrier of ordoliberal ideas, set over and against the preferences of successive governments from Schmidt to Merkel (Chapters 4 and 6).

In sum, this book uses the new evidence from the government records in tandem with, rather than in place of, the methods and insights of critical IPE scholarship. This window into the official mind of the German state offers new insights into the economic and political determinants of German foreign economic policy during the pivotal crisis of the 1970s; it yields a richer understanding of the origins of neoliberal globalization; and it brings us one crucial step closer to unlocking the puzzle of German primacy in Europe today.


1. For ease of reading, this book uses “Germany” synonymously with the Federal Republic of Germany (FRG) even though another Germany—the German Democratic Republic—existed to its east for much of the time period under consideration.

2. The data series “Exports: Value Goods for Germany” is provided by the Organization for Economic Co-Operation and Development (OECD) and was retrieved from the Federal Reserve Bank of St. Louis (Federal Reserve Economic Data). (accessed 6 May 2020).

3. The list of politicians and pundits that have called for benevolent German leadership includes contemporaries as far apart as business magnate and philanthropist George Soros, the former IMF director Christine Lagarde, Greece’s former renegade finance minister Yanis Varoufakis, and the emeritus director of Germany’s prestigious Max Planck Institute for the Study of Societies, Wolfgang Streeck.

4. In the words of Harvard historian Charles Maier (2012), “Germany is today the country on whose farsightedness the European project hinges.”

5. For some notable exceptions, see Streeck (2014; 2017) and Kundnani (2014).

6. The academic literature on “neoliberalism” is enormous. For an accessible primer, see Harvey (2005). For fascinating intellectual histories that approach neoliberalism as a belief-system centered on “the market,” see Mirowski and Plehwe (2009); Jones (2012); and Burgin (2012). For accounts that rethink this focus, see, among others, Bruff (2016); Slobodian (2018); and Knafo et al. (2019). For studies that have shaped my view of neoliberalism as a new phase of capitalist globalization, see especially Gill (1992; 1995); Gowan (1999); Duménil and Lévy (2004); and Panitch and Gindin (2012). For perspectives on neoliberalism from the Global South that seek to overcome not just the Anglo-American but the wider Eurocentric bias of much of the academic scholarship (my own work included), see Prashad (2012); and Connell and Dados (2014). My quest to understand the role of the German state in the global rise of neoliberalism leads me to adopt a historically situated, labor-centered definition of “neoliberalism,” understood as a range of regressive and innovative policy measures and techniques devised from the late 1970s onward which reversed the social, political, and economic rights that working people—principally, though not exclusively, in the wealthy, industrialized economies of the West (Helleiner 2003)—had wrought from capitalist property owners after 1945 (Panitch and Gindin 2012: 15). The advantage of this working definition is that it fully historicizes neoliberalism so that it no longer simply describes a generic belief in free markets. For while such market fundamentalism infused the political projects of Reagan and Thatcher, it does not exhaust the phenomenon. Its substantive focus, as opposed to the rhetoric or beliefs of some of its proponents, is not to “de-regulate” markets but to contain democracy—the limited forms which actually exist(ed) and the bolder visions which have yet to be realized. Although this book does not pursue this line of inquiry, this approach to neoliberalism can be used to broaden the view from the waged majority in the Global North to the world’s majority in the Global South, whose struggles for self-determination, national development, and global justice were defeated at the same time (Prashad 2012; Slobodian 2018; Getachew 2019).

7. Indicative of this scholarly consensus over the past three decades are Paterson and Smith (1981); Zysman (1984); Gourevetich (1986); Albert (1993); Crouch and Streeck (1997); Coates (2000); Hall and Soskice (2001); Streeck and Yamamura (2001); and Schmidt (2002). For much of the 1990s and 2000s, however, the prevailing story has been one of progressive decline, dominated by the question of how much of the German social market economy has been lost or might persist (for example, Streeck 2009). Those who have stressed continuity over convergence on an Anglo-American free market model point to the recent revival of Germany’s economic power, which they attribute to the persistence of many of its distinctive institutions (for example, Reisenbichler and Morgan 2012; Rinne and Zimmermann 2012; Hassel 2014).

8. For an in-depth analysis of the Hartz IV (or Agenda 2010) labor market and social security reforms introduced by the Red-Green coalition government in the 2000s, see Hassel and Schiller (2010).

9. The literature on ordoliberalism is fast expanding. For recent edited volumes that canvas a range of perspectives, see Beck and Kotz (2017); Biebricher and Vogelmann (2017); and Hien and Joerges (2018). For a nuanced assessment, see Dyson (2017); for important critiques, see Jacoby (2014); Young (2014; 2017); and Cafruny and Talani (2019).

10. For a comparative political economy perspective on Germany’s export-led growth model in the context of the eurocrisis, see, for example, Stockhammer (2016). For a longer view of Germany’s postwar recovery and export orientation, see especially Beck (2015).

11. The series is available at (accessed 22 February 2019).

12. The cabinet minutes are available at (accessed 7 August 2017).