Short read: Why Germany is rich but Germans are poor and angry

Income and wealth inequalities have been ascribed to the ill effects of capitalism. But it has reared its ugly head in the unlikeliest of places – Germany.

“For much of its postwar history, Germany was a beacon of prosperity and political stability. Now its economy is stagnating, and social harmony has given way to acrimony and division.

Germany’s grossly unequal distribution of wealth is an underappreciated cause of this malaise: The top 10% of households have at least €725,000 ($793,000) of net assets and control more than half of the country’s wealth, while the bottom 40% of households have at most €44,000 of net assets, according to a Bundesbank survey in 2021.

Together with a pervasive sense that Germany is coming unstuck — think creaking infrastructure, inflation and the loss of cheap Russian gas — economic precarity makes Germans susceptible to fringe arguments that their living standards are threatened and the government is out of touch. In the long term, Europe’s biggest economy must reform its labor-penalizing tax system and promote a broader distribution of capital.”

Whilst Germans do enjoy state sponsored public services in education and healthcare, they are unhappy:

“…fewer than half of households own a home and hence haven’t benefited from soaring property prices — the median wealth of German tenant households is just €16,000, according to the Bundesbank.

Meanwhile, only around one in six Germans invest in the stock market. In 2019, German Chancellor Olaf Scholz, who was then finance minister, revealed he kept all his money in a low-yielding bank account. Although his admission may have won the sympathy of Germany’s cautious savers, it spoke volumes about the country’s self-defeating attitude toward investing.

Much of Germany’s wealth is held by private, family-owned small and medium-sized companies known as the Mittelstand. These are an engine of job creation, but their thrift underpins the current account surpluses Germany is often criticized for, contributing to inequality andsuppressing domestic consumption, according to the International Monetary Fund.”

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