Germany’s focus on manufacturing rather than Anglo-American “financial engineering” is often seen as “the world’s most grown-up” form of capitalism, says John Lanchester in the London Review of Books. But in the last decade, “colossal” fraud cases have been discovered at two of the nation’s biggest companies. Volkswagen was found to have been cheating environmental tests by installing “defeat devices” in its diesel cars. These reduced the amount of harmful nitrogen oxide gas the vehicles emitted when being run on a laboratory test track. Eleven million cars had been fitted with the devices, and VW was hit with fines totalling $34.7bn by 2020.
The other scandal was at the online payments firm Wirecard. When the FT began investigating dodgy accounting at the company in 2014, it hit back hard, accusing the newspaper of market manipulation. Astoundingly, Germany’s financial regulator BaFin followed suit. But the weight of evidence eventually grew too much, and Wirecard went bankrupt in 2020. In most countries, capitalism’s biggest flaw is cynicism; in Germany, it’s complacency. “Volkswagen didn’t need to pay any attention to what regulators thought, because it knew better.” When clear evidence of Wirecard’s fraud was produced, BaFin ignored it. “Why? Because the critical voices were coming from outside the magic circle of German capitalism, where processes are followed and rules are obeyed.” The moral of the story: complacent capitalism can give cynical capitalism “a good run for its stolen money”.