Why Germany Is Rich but Germans Are Poor and Angry

DW the German national brodcaster has an amazing free high-quality docs channel on youtube. I watch every new one when it comes out (occasionally they're German-centric). They've done a lot on wealth and inequality and I found them to be extremely interesting:

General topic: https://www.youtube.com/@DWDocumentary/search?query=wealth

Rich and poor - The growing wealth gap in Germany: https://www.youtube.com/watch?v=RgZfrYcaG4k

New York City rich and poor - The inequality crisis: https://www.youtube.com/watch?v=TfXbzbJQHuw

Germany: The discreet lives of the super rich: https://www.youtube.com/watch?v=NXaVLXSZdEw

Money, happiness and eternal life (3 part, long but great): https://www.youtube.com/watch?v=PudZNM276CY

Germans aren't poor. Source: living in Germany for 10+ years, and in its poorer parts. There is a quite surprising economic inequality from top to bottom, but that doesn't make people living here poor, just the top filthy rich. Poor people in Germany still have health care, still can go to good schools, still can study at a university for basically free, and can get money to study if they don't have enough. Jobs are not difficult to find and there's a safety net. There are even things like money for housing if you have a job, but it's not paying that well and e.g. you have a big family. Etc. etc.

Germans are however angry all the time, but this is true of pretty much every country in the world, especially the developed world. But the angry parts are not the ones that are poor, it's been in my experience that the more they have the more they bitch and complain. Could be that fearing losing what you have is a lot worse than not having it.

What the article fails to mention:

> The median wealth of a household in eastern Germany stood at €43,400 in 2021, compared to €127,900 in western Germany.

Even almost 25 years after the reunification, there are large differences between East and West, even though large sums of money were transferred into East Germany. For many charts (income, stocks, ...) one can clear see the difference between East and West Germany. That's one of the unsolved problems...

The median German household wealth may be comparatively low but they have 6th highest “Median equivalised disposable income” in 2022:

https://ec.europa.eu/eurostat/web/products-eurostat-news/w/d...

I was in Germany a couple months ago. My experiences are entirely anecdotal but I’ve never seen so much anger before. I kept seeing fights and hearing angry yelling everywhere I went in Berlin.

This is a useless article that only looks at wealth of households, not at income. Germans own traditionally less real estate than the average Italian. But average income is a lot higher, easily €500K over a lifetime.

I wonder what is the more general solution to fixing the wealth distribution problem? This is not a unique problem and it is playing out in most western countries to varying degrees. Cost of housing has skyrocketed, social mobility is down, a large portion of the population is bifurcated into “haves” and “have nots” which due to more limited social mobility is perpetuated across generations.

One thing that I notice in my country is that there are very strong social programs to ensure that home owners do not lose their house. For example there was a moratorium on mortgage payments during covid, the government runs a mortgage insurance corporation to bail out defaulted mortgages, home owners get many tax breaks. What this does is it syphons money from public funds to protect home owners - which makes up the majority of people’s net worth — further ossifying the social classes. If you can scrounge enough money or have rich parents you can make that jump to property ownership and then the government will do everything in it’s power to stop you from losing that asset even if you are way over-leveraged, or the economy fails, or the house is a lemon.

I think this is part of what makes the USA so wealthy is that they are willing to accept more pain during economic busts which efficiently allocates resources to where they are more efficiently used for the next boom.

Doesn't "X is rich but people from X are poor and angry" apply to other countries, like the US for example?

But more importantly the lede to this article is "Germany’s grossly unequal distribution of wealth is contributing to the country’s malaise." but Bloomberg is a journal that aggressively argues for and supports this exact situation in the US?

That's some awe inspiring hypocrisy.

Instead in Italy we say that the government is poor but its citizens are rich [0]. A country of shopkeeper and small business owners never too keen to pay duties to government and always looking for some scheme to game welfare/subsidies.

Italian median / mean wealth by person: 107,315 / 221,370 euro

Germany median / mean wealth by person: 66,735 / 256,179 euro

Italy by capita has 48k euro of public debt vs 30k by capita of Germany

[]: https://en.wikipedia.org/wiki/List_of_countries_by_wealth_pe...

[0]: https://www.bancaditalia.it/pubblicazioni/indagine-famiglie/...

As a student here in Germany, I was talking to my German flatmate, who practically never experienced anyone else besides Merkel as chancellor. He mentioned something that struck me as rather interesting - the "Traffic Light" coalition, as a new entity in power of the federal government is increasingly scapegoated for the damage caused by decades of policy crafted by the CDU.

The blame is being put on the new government which has the monumental job of fixing several years of policy which caused rising inequality. IMO, with populist journalism from Axel Springer's subsidiaries and Spiegel, people are blaming the current government for things which it has nothing do with and some are even calling for the return of CDU.

Strange times

This whole "article" sidesteps the problems at the core of the issue: housing, income, and taxes on income.

There's only so much you can do with a welfare state and Germany hasn't even exhausted that, take neighboring Denmark as an example in housing where home ownership is much higher due to the govt backing that mortgages have.

The article also discusses giving young people money but not taking it from the rich -- where then does it come from?!

The tax problem isn't unique to Germany, it's a common theme in Western Europe: if you make minimum wage and barely scrape by you're still taxed too much, and god forbid you actually have a high paying job well into the 6 figures you'll get disincentivized to earn more by the progressive tax system..

The "progressive" tax system all dissolves at certain 7-8 figures of income or net worth where you can just hire an army of tax consultants and pay the least amount possible.

You get hit the hardest as a middle class and upper middle class citizen, which in a developed nation is quite a large percentage of the productive workforce.

> I’m also in favor of a citizen’s inheritance — a cash distribution of, say, €20,000 to every young adult that could be reserved for specific expenses like acquiring property or paying for education.

Yea sure. Wait.. where does the money come from? Yea let's take it from the rich.

> Broadening wealth need not mean taking it from the rich.

Hmm.. I don't know but I think the essay needs some rethinking..

Thanks for the link.

It's interesting to me that the income inequality statistics don't seem that bad. It's my US bias showing I suppose. The chart about Ultra High Net worth shows 109 UHNW per million Germans, compared to 374 UHNW per million Americans.

Not sure about the numbers in the article, but in general the comparisons of household wealth between countries are a bit tricky. One item that is often not counted for Germany is the pension, which is mandatory for regular employees.

Another issue is using household here instead of a per person value, this will be distorted by differences in typical household sizes across countries.

This article raises a few good points but I think it falls short on answering the question posed in the headline. That is unsurprising, though, because the topic is so complex, it would probably take a book rather than a website article to really go to depth.

Wow... that percentile plot is terrible. Is that common practice in economics or what? I understand percentiles and cumulative curves and all that but reading and understanding this plot took a lot of brain bending.

IMHO:

* switch x & y axes

* make it a line plot with markers

I know Cyprus Malta Luxembourg are tax havens.

Are Ireland, Belgium, and the Netherlands also tax havens? Or have they become wealthy organically?

I agree that growing equality is a problem but the farmers are far from poor. In fact they had rising profits for the last decade or so.

There is some interesting data here - by the way data from 8025 yearly reports by farmers, so I think we can assume this is accurate: https://www.situationsbericht.de/5/52-buchfuehrungsergebniss...

See this graphic especially: https://magazin.diemayrei.de/storage/media/situ/46722.jpeg

The only ones who had sinking profits are the winegrowers. Wheat producers increased 27%, cattle too, all the while help by the state fell by 10%.

So I’m pretty much over the poor farmers protesting in Germany - of course the growing inequality __overall__ is a huge problem.

The problem is more corrupt politicians, a more and more unhinged “free market” and just the dystopian hellscape that capitalism is becoming. Of course cutting social services and benefits for 30 years+ straight will have some effect on the general population. Thank Schröder and the SPD for starting this and Merkel and the CDU for decades of inaction until it was too late and there was no more room for action. Now we will have a far right government next election cycle and the best plan they can come up with is to peddle the same lies that the AFD is spouting: that immigration is to blame for growing problems - when in reality immigration is the one thing that props up this failing system.

> 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 2021.1

I'm sure the USA can beat these numbers.

Not a single hit for Ukraine

The EU lets in goods, especially food, from Ukraine unregulated ('we must help them!') and Germany, and no one else in the EU, can do the same. It destroys the market > hence the farmers protesting.

Maybe some of these extremely wealthy people could voluntarily surrender some of their wealth for the health of society.

Consider the measures we took for covid. Surely poverty is an equal if not greater threat.

It turns out that unrestrained capitalism leads to the end result that a very few hold almost all the resources. That's because the more money you have, the options you have and can make, and thus every transaction rich do make more money.

The rest of us don't have those choices, so our money ends up going TO the rich.

Housing is going up because the last 20 years, housing was the big thing to capitalize (aka: price all but the rich out of the market). And then, housing doesnt make money by itself, so they then rent out to the humans whom they deprived access to begin with.

But in this housing endgame, rich people have options to remove options from the average people, in which the result is "Rich people profit on the backs of the normal people".

And also, this is not a "Germany-only" phenomenon. We're seeing this happen across all the "Western Nations", wherever unrestrained capitalism has reared its ugly head. Even Adam Smith wrote the last 80% of his book about how unrestrained capitalism would do this.. but no economist ever appears to read or heed his words.

Also, this isn't some "socialism and/or communism" is the answer post. Neither of them can handle the fact that most of what we create isn't physical matter, but instead knowledge and content. No economic system as of yet can handle the fact that something costs $x million to create, but $0 to copy. But whatever we do *must* be able to handle that respectably to all participants. And alongside that, maximums of what people can own - extreme income inequality is massive scourge to any government and people.

Why would the "No farmer no future" sign be written in English?

I'd think this is a purely internal German matter.

(Sorry if the story answers this later on; I don't have access to the full text.)