The Western world, namely North America (excluding Mexico), Western Europe (the EU, the UK, and Switzerland), Israel, Australia, New Zealand, and Japan, is in economic, cultural, social, and military decline. This is the view of many authors who dissent with mainstream narratives about our societies. Interestingly, most of them come from the academic establishment and have had a moment of realisation that something is wrong with the West. Among them are Colin Crouch, Sheldon Wolin, John Mearsheimer, Joel Kotkin, Fadi Lama, and Emmanuel Todd. Though their views are very heterogeneous, they share a common theme: the decline of political representation and participation in Western societies is being accomplished by the inexorable erosion of the US-American hegemony over the West.
Colin Crouch summarised this state of affairs using the term post-democracy, which he coined in 2004. He described a state of Western republics in which the political participation has eroded to an extent that has usurped the democratic institutions. According to him, they only serve as a facade to obtain the consent of the population, but the political will formation is carried out in an opaque manner by private associations or institutions representing tiny minorities which do not act in the interest of the citizens. These groups exert a significant control over the legislative, executive, and judicial branches of the state, and they own the main traditional and social media, which enables them to shape public opinion.
Crouch’s theory has been thoroughly confirmed and illustrated over the last twenty years, but the accumulating evidence became denser over the last decade. In Germany, where we recently had elections of the Lower House (Bundestag) which is the main legislative chamber and elects the government, the new parliament is supposed to have its constitutive session on 25 March. Its main functions are the voting of the executive branch and legislation at the federal level, though 70 to 80 percent of that merely implements directives of the EU, a non-elected transnational institution with little (highly indirect) democratic legitimation.
The New Constitutional Crisis in Germany
These elections have led to an undeclared constitutional crisis in Germany. Let’s understand what is going on.
The February elections voted out the old parliament and the old government, which consisted of a coalition of the SPD (roughly like the UK’s Labour), a formerly socially-oriented party like Old Labour, the Greens, a formerly ecologically-oriented party now mainly engaged with the deindustrialisation of Germany and the destruction of its natural habitats by huge wind-turbines and solar parks, and the FDP (similar to the UK’s Liberal Democrats), a formerly liberal party. Since then, negotiations between CDU (roughly like the Tories) and the SPD are ongoing. Both parties intend to continue the policy of the old government, with decarbonisation and deindustrialisation as the main political goals. These are pursued in combination with an aggressive policy towards Russia that is to be opposed by a massive increase in military spending. To achieve these goals without destabilising the short-term economic situation, the future coalition wants to issue €900 billion of new debt (treasury bonds) over the next ten years. The pretext for this gigantic deficit spending program is the Ukraine war and the ostensive threat posed by the Russians.
However, since 2009, the German constitution has a debt ceiling, formulated in article 115, which tightly limits the level of new structural debt to 0.35% of GDP per year. This article needs to be changed in order to issue the massive amount of new debt. In the old parliament, the CDU, SPD, and Green parties possessed a qualified majority of more than two thirds (66.66%) of the seats which they lost in the February election. In the new parliament, the two opposition parties, AfD, roughly like the French Rassemblement National, and the Marxist party (Die Linke) have more than one third of the seats together, which is a blocking minority for changes to the constitution. Therefore, CDU and SPD had the idea to assemble the old parliament last week and this week in order to use the voted-out MPs to change the constitution to enable the massive update of additional debt.
Germany’s supreme court is the highest institution of the judiciary arm of government and is tasked with preventing legislative and executive decisions that violate the constitution. Its judges are appointed by politicians, not elected by the people. This type of institution is not found in all republics since it reduces the weight of the other branches of government and therefore the influence of the electorate; it is part of a system to reduce the degree of participation of the masses and increase the influence of the elites, which Manin describes in The Principles of Representative Government (1997).
This court ruled last week that the changes to the constitution by the old parliament before the assembly of the new one are formally legal, but did not comment whether they are in correspondence with the ethos of the constitution. They are certainly not, since an important proportion of the electorate (at least one third) voted out the old parliament to prevent a removal of the debt ceiling which the Greens and the SPD had demanded for a long time and over which the last coalition dissolved in November 2024, leading to the necessity of new parliamentary elections. Since the constitutional change would not have been possible with the new parliament, the usage of the old parliament to get this through the legislative process against the will of at least one third of the voters of the new parliament is certainly a violation of the principle of democratic participation (‘no taxation without representation’). The supreme court could have prevented this; it has enough latitude for such interpretations of the constitution.
Furthermore, the upper house, the representative parliament of the German Länder (states, the successors of the feudal principalities which were in existence until 1919), which must confirm the change to the constitution on Friday, 21 March, will certainly comply despite some resistance by certain states like Bavaria, which has now subsided by mechanisms not visible to the public. This means that Germany is in a constitutional crisis, since the legislative branch is abusing a gap in the procedural setup of the constitution and the rules of assembling the new parliament after the elections in order to change the constitution against the will of the new parliament, while the supreme court, which is supposed to protect not only the formal procedures of the constitution, but also its ethos, has not fulfilled its role. But the media do not describe the situation as such; they rather praise the change and speculate about how the additional money should be spent.
What’s in the New Package
Let’s take a look at the substance of the change. The constitution is changed in the following manner:
- The government is allowed to issue €500 billion of debt spread over the coming 10 years for not yet defined infrastructure investments, €100 billion of which will be spent by the states (to guarantee their buy-in in the upcoming vote of the upper house). Another €100 billion of them will be spent on so-called carbon dioxide neutrality (also called ‘net zero’), which means that each kilogram of man-made emission of this gas must be offset by sequestration or consumption (plants).
- Net zero will also become a constitutional goal, which opens the possibility of appeals to the supreme courts by NGOs and other interested parties whenever they believe that legislative or executive activities of the state are in violation of achieving this goal. Taking aside the question whether climate change mitigation makes any sense — it probably does not since there is no compelling evidence that the very mild climate alterations we see are induced by human activities — it is obvious that carbon dioxide neutrality is not compatible with a modern society. Since carbon dioxide release is necessary for the entire agricultural and industrial production, the heating of buildings and transportation, every government action affecting these fields (i.e. related to human life) will be open to constitutional court appeals.
- The third change enables the arbitrary debt issuing for defence purposes and was used as the official argument for the entire project of changing the constitution. It removes the debt ceiling for defence spending altogether. It is estimated that an additional €400 billion of defence spending will be enabled over the next years. The likely new chancellor Friedrich Merz argued that the €500 billion of infrastructure spending is necessary to create a favourable macroeconomic climate for the surge in defence production.
The Consequences of the Constitutional Crisis
The constitutional crisis in Germany has two important implications of a political and an economic nature. We start with the latter.
The German federal state and the states will issue additional government bonds totalling at least €900 billion more than the planned constitutional debt increment (which was €15 billion in 2024 under the old version of the constitution) over the next ten years, but potentially more given that there is no ceiling for defence spending anymore. This means that assuming an equal distribution over ten years and at current prices, the additional debt will be at least six times higher than under the old rules. The total debt level will rise from roughly €2.5 trillion to at least €3.5 trillion. This will reduce the credit rating of the German state, leading to higher bond yields (more interest payments on the bonds) since market participants will see the holding of German debt as riskier. To pay these interests (the federal government alone paid over €30 billion in interest in 2024), the state needs to cut consumption spending or increase the tax revenue. In any case, the general population will have less net income. This effect will be intensified by inflation, which will rise with more government spending, since the demand for goods and services will increase faster than their production. In the longer term, the decline of the German credit rating will lead to a failure to turn over the debt (issue new bonds when existing bonds mature) and finally in sovereign default. This will take down the Eurosystem, of which Germany is the main guarantor. The immediate consequence of this will be a breakdown of the pension systems, the worst situation that can occur to a country next to total war or a real epidemic (such as the plague in the 1620s).
Who benefits from this Keynesian deficit spending? Those who produce the goods that will be in demand: the defence industry, the decarbonisation industry, and infrastructure companies building railroads, bridges, roads, or digital infrastructure components. But there will be crowding out of private investment, since the state as an investor will compete with the private sectors for limited capacities. There will also be a further decline of the investment environment (more taxation and inflation will be expected, driving down investments). Therefore, the overall stimulus effect on the economy will be low or even negative, especially since a significant amount of budget will be spent on deindustrialisation (net zero), thus eroding the tax and wealth base of the country. This means that the spending program has the effect of transferring public income to private companies while increasing inflation and reducing the overall growth potential. It will make the masses poorer and benefit a tiny minority owning shares in the above-mentioned industries. It also benefits the banking sector tasked with transferring the government bonds to the markets, generating fees from this activity. In the end, the banking system needs a constant increase of debt since interest payments on fiat money created ex nihilo are what it thrives on. Western states guarantee that public fundraising via taxation and debt issuing (which is future taxation) and public spending is done in accordance with the interests of the bank and large corporation owners, a tiny minority of less than 1 permille of the population.
What about the political consequences? We have had a series of major events eroding trust in our post-democratic state. The first was the bailout of the banks in 2008 during the credit crisis. The second was the bailout of the banks holding defaulting euro-denominated government debt from 2010 onwards (‘saving of the euro’), a process that has now become chronic via an array of instruments which guarantee the constant flow of funds from trade-balance-surplus countries to deficit countries in the eurozone. The next one was the total opening of the borders in 2015, which led to a massive increase in migration that is still ongoing and destabilising Germany. Then came the Covid period, during which basic human rights were suspended to take futile measures against a virus with an infection fatality rate comparable to the rhinovirus, one of the viruses causing the common cold. Then came the massive investment into the Ukraine war, which would not have occurred without Western financing and the buildup of an army threatening Russia at its Western border. This war, which has killed well over one million Europeans, is still raging on, and is used as a pretext to declare an emergency that necessitates the latest spending package.
All these events over the last 15 years led to an increase of debt from €1.5 trillion in 2007 to at least €3.4 trillion expected after the removal of the debt ceiling. The result is a decline of trust into the government. Governments which cannot obtain trust and spontaneous legitimacy tend to become more authoritarian. We have seen this evolution since the beginning of the migration crisis, and it is going to intensify in Germany and elsewhere in the West.
