The German economy rests on foundations that have been consolidated over the course of a century and a half. Since the proclamation of the Empire in 1871, the country has experienced accelerated industrialization, transforming it into Europe’s leading manufacturing power. Chemicals, machinery, steel, electricity, and then the automobile industry were the driving forces behind a growth that, even before the First World War, had led Germany to surpass France and the United Kingdom in several fields.

Industrial concentration, the intertwining of large banks and large companies, the scientific research applied to production built that “organized capitalism” that has remained a distinctive feature to this day.

An organised urban proletariat arose alongside the development of Germany’s productive forces with the expansion of the wage-system, and the movement for social democracy eventually became the great worker’s party. The Weimar Republic inherited an urbanized country marked by profound regional inequalities and a serious economic crisis.

The Hitler regime abolished civil and trade union liberties and tried to incorporate the workers in the “popular community” subordinating them to the company and the State. After the catastrophe of wartime destruction, the two Germanies that emerged were forced to follow different paths: in the West, a coordinated capitalism with welfare, codetermination, and a rising middle class; in the East, a planned economy that guaranteed employment and favored workers and peasants.

The Federal Republic is a state divided into sixteen Länder, with a parliamentary system that combines direct representation and the powers of the regional governments. The Bundestag and the Bundesrat embody this dual level, while the Federal Chancellor concentrates executive functions, and the President performs guarantor duties. To prevent the proliferation of political parties that characterized the Weimar Republic, the 1949 Constitution, by setting the electoral threshold at 5%, favored the formation of coalition governments.

West Germany saw its production system relaunched, the “miracle economy" of the 50s and 60s. The basis of that success was the same: a strong sector in manufacturing, a high-quality workforce, networks of specialized small and medium-sized businesses, and connections to foreign markets. Even today, despite globalization and digitalization having transformed landscapes and supply chains, the Mittelstand constitutes the backbone of the German model: hundreds of thousands of small and medium-sized companies, often family-run, producing high-tech components and machinery for the global market.

From the Bismarckian model of welfare and social insurance to the modern system Germany’s dual school-worker system has created a mechanism that trains generations of skilled workers and integrates their training directly into production processes. This system has guaranteed capital a disciplined and trained workforce, which translates into high profits and strong business competitiveness.

The reunification of 1990 involved the absorption of the German Democratic Republic (DDR) was forced into the Western economic system, with privatizations, factory closures, and massive migration to the West. This left social and political scars that are still visible: higher unemployment rates, lower wages.

Germany has always been a strongly export-oriented economy: first with Weltpolitik and German colonialism at the end of the nineteenth century, then with commercial expansion in the post-war period, up to the current interdependence with China and with the markets in Asia. About half of Germany’s GDP depends on exports. This means that every international crisis, drop in foreign demand, or geopolitical shock has repercussions on the productive system. Recent examples—the 2008 financial crisis, the disruptions to value chains during the pandemic, the surge in energy prices following Russia’s invasion of Ukraine and the resulting disruption of energy supplies from Russia—show just how vulnerable German growth is.

Today, the automotive sector, a symbol of "Made in Germany", is undergoing a momentous transformation: the transition to electric vehicles and competition from Chinese manufacturers like BYD threaten its supremacy and employment. German capital is suffering from declining profitability in mature sectors and is struggling to find new outlets for an accelerated cycle of accumulation.

Social discipline, made of hierarchy and collaboration, has allowed decades of stability, thanks in part to codetermination and union bargaining. But the utopian bourgeois ideologies and structures that ensured social peace and continuity have turned into rigidity when it comes to rapid innovation, investment in new technologies, or reorienting the energy system. This dialectic between strength and fragility constitutes one of today’s most powerful contradictions.

For decades two major parties have polarised political life: the CDU/CSU of center-right and the Social Democratic SPD, with the liberals of the FDP holding the balance. Over the last twenty years, however, this balance has weakened. The SPD has gradually lost building consensus among industrial workers and urban pensioners; the CDU/CSU.

It maintains its lead but without a solid majority; the Greens have won over the young, and educated electorate of the cities; Die Linke, heir to the PDS in the East, represents weaker groups and militant sectors but has remained a minority.

In the February 2025 elections, the nationalist AfD, Alternative for Germany, jumped to 152 seats, becoming the second largest party. The CDU/CSU represents the conservative middle classes and rural businesses; the SPD represents a remnant of the working-class and public sector; the Greens represent the urban and cosmopolitan middle classes; Die Linke represents the working-class segments of the East; the AfD young men from the outskirts, small business owners and insecure workers, with a strong anti-immigration demagogy. The electoral bases of the parties are increasingly less identifiable with classes and increasingly with inter-class alliances between segments of different classes. The traditional terrain of political representation of labor has shattered, leaving room for both right and left wing populisms and growing abstentionism.

Today, the working class is seeing its wages and stability eroded by digitalization and offshoring. The lower middle class is still numerous but shrinking. Marginalized groups, the unemployed, poor pensioners, immigrants, and ethnic minorities struggle to access education and stable employment. Since the 1990s, and explosively in 2015 with the refugee crisis, Germany has welcomed millions of people. This has helped slow the aging process of the population and fill jobs, but it has also generated tensions over competition for housing, services, and wages. Incidents of far-right violence have increased along with its political representation. A distinctive element of the German model was the role of trade unions and co-determination. Since the post-war period, workers have been able to elect factory councils and having representatives on the supervisory boards of companies with a certain number of employees, especially in strategic sectors such as the steel industry, has ensured decades of social peace, relatively high wages, ongoing training, and quality production. "Participation" has not eliminated class conflict, but has institutionalized it, under the illusion of making it compatible with capitalist accumulation.

Today, the fragmentation of work, the increase in precarious employment, and the decline in traditional industrial employment are reducing bargaining power. In the new technological and service sectors, unionization rates are much lower and employment relationships are more individualized. Traditional worker representation is in crisis. Traditional parties and unions are no longer able to represent the lower classes or address the economic crisis. Capitalists are looking to rearmament as a solution. The Rheinmetall Group, one of the most important arms manufacturers, continues to grow. In the first nine months of 2025, its turnover increased by 20%, reaching 7.5 billion euros (in 2024 it was 6.6 billion); growth in the military sector alone was 28%. This does not only concern Germany though, but all of advanced capitalism in the world. Germany is therefore a crucial laboratory for understanding the present and future of class struggles.