Volkswagen's State Capture of Germany

Chancellor Merkel and ex-VW honcho Martin Winterkorn in happier times.

The Financial Times has a very interesting article on the extent of German automakers' influence on the German state. You would think that the Germans of all people are not as prone to the pitfalls of excessively close state-firm ties, but the Volkswagen emissions scandal raised all sorts of pointed questions about the matter. Just recently, the giant automaker set aside $18 billion to cover costs associated with its emissions-cheating violations. As it turns out, Chancellor Merkel has been lobbying on behalf of Germany's automakers all these years for less stringent emissions regulations throughout the world:

The ties between Ms Merkel’s government and big carmakers have come under increasing scrutiny since September, when US regulators revealed that Volkswagen’s diesel vehicles were fitted with special software enabling them to cheat in emissions tests. The scandal, the worst in VW’s history, has tarnished Germany’s reputation for quality in manufacturing and left many wondering whether the German authorities’ closeness to VW, Mercedes-Benz and BMW blinded them to the potential for wrongdoing in the industry.

“When you know that you have a very large part of the political class in your pocket — and that was clearly the case with VW — then you feel safe,” says Philippe Lamberts, the Belgian co-chair of the Green group in the European Parliament. “That inevitably leads to complacency; that whatever you do, you have the German government fully lined up behind you.”

It has happened too at the EU level:

The closeness between Germany’s car industry and its government has been reflected in a number of ways since Ms Merkel became chancellor in 2005.

Officials intervened in Brussels to water down curbs on pollutants, abandoned stringent independent tests of car emissions and ignored repeated warnings from research groups about suspicious readings from tests on diesel cars. Now Ms Merkel’s government stands accused of wrapping its own inquiry into the VW scandal in a shroud of secrecy, which even seasoned MPs are finding hard to penetrate. 

To grasp her actions, consider the importance of the activity for Germany:

Yet Ms Merkel’s lobbying efforts are in many ways understandable. Carmaking is Germany’s largest industry, employing 792,500 people and recording turnover of €404bn in 2015 — a fifth of the country’s industrial revenue. The jobs of one in 20 Germans depend on the motor sector.

Ms Merkel has suggested that the carmakers are synonymous with Germany. Addressing VW employees in 2008, she called the company a “great piece of Germany”, and a “symbol of [our] development from the second world war until today”. VW’s history exemplified the reconstruction of the postwar years. “The German government stands by VW,” she said.

It's too bad that "state capture" is now part of Germany's industrial lexicon as well. You would never have expected it of the Germans, no?