Tackling Iraq or Abandoning Nuclear Energy? U.S. and German Adventurism Compared

In August 2002, during a truly somber chapter in German-American relations, then-Chancellor of Germany Gerhard Schroeder called the Bush Administration’s decision to invade Iraq an “adventure.” That remark, even though it has proven correct in hindsight, did not sit well with the U.S. government of the day. Bilateral relations were strained as a result.

Owing to the disarmingly charming logic of global history, and the thought-provoking coincidences it creates, one cannot escape noticing that, at the very time when the United States is finally closing the door on its Iraq engagement, the German government is embarking on its own act of “adventurism.”

With her government’s radical decision to phase out nuclear energy in the wake of Japan’s Fukushima disaster, Germany’s current chancellor, Angela Merkel — who was recently awarded the U.S. Presidential Medal of Freedom — has embarked on a course that is described in newspapers as “one of the biggest gambles ever made.”

Germany, after all, is a major exporter of industrial goods, the production of which requires the consumption of lots of energy. Its export industry’s costs are thus bound to go up as the transition to a non-nuclear-energy world gets underway. A total of 23% of Germany’s power supply will need to be replaced — and replaced fast.

The challenge resulting from the recent announcement to sunset the nuclear industry in Germany is thus tremendous, but worth taking.

Consider the following ten points:

1. Which “adventure” is more worth having for an advanced industrialized country: invading Iraq or abandoning nuclear power?

2. Which of these two undertakings promotes pivotal global public goods, whether “democracy” or sustainable energy, more effectively? Which is a better way to spend large amounts of money (in the case of Iraq, trillions of dollars)?

3. What’s wrong with this picture: Germany as the one going for the equivalent of the moonshot, while the United States acts overly cautious, even timidly, on matters of alternative energy? Technology, optimism and can-do spirit in Germany, instead of America? That’s a different world. Can anyone still say German culture is antithetical to risk-taking?

4. Germany and its warmaking: Finally, it has declared war on something (nuclear energy) that the entire rest of the world can eventually rally around.

5. German industry, especially in the chemical sector, has historically been known for its innovative, highly integrated approach to utilizing resources, technologies and production facilities in creating value (“Verbundwirtschaft”).

Whatever the past successes in creating and managing this complexity, getting the rebalancing of the economy right — in the sense of shifting reliably to alternative energy and supporting the energy needs of a complex industrial economy on a nationwide basis — makes previous efforts look like child’s play.

6. How about global rebalancing? Yes, we can do that too, says Berlin, but in a manner quite different from that envisaged by the U.S. Treasury Department. German industry, households and government will undoubtedly carry an extra load by making the necessary investments and down payments in the rapid development of alternative energy resources. That may not change the “current account” balance, but if the strategy succeeds, it will eventually improve the prospects for the earth’s climate.

7. Note that the recent decision to make the shift was proposed by the German government’s Ethics Commission, headed by the former Environment Minister and UNEP head Klaus Toepfer. Integrating ethics so closely into key economic issues of our time? Now, here is a novel idea worth pursuing as the world embarks on the path of a true “NET” — new economic thinking.

8. Remember the eternal American complaint about the German (and pretty much all other European) defense budgets being too small? It’s time to rethink that proposition as well. The Germans, and others, actually spend a lot on defense — planetary defense, that is. Is there anything more worth fighting for and defending?

9. Despite all the talk of a Franco-German schism over this issue, think about it more appropriately as a perfectly hedged bet: Germany focusing on non-nuclear energy and France on nuclear. What’s there to complain about? Europe’s got it covered.

10. And finally, consider the “axis powers”: with Germany and Italy opting out of nuclear power almost simultaneously, can Japan be far behind?

Despite all these points showing the value of rethinking the conventional wisdom, the remaining risks are undoubtedly huge. They are a moonshot. If the transition doesn’t work out as intended, the German economy — on the household and industry levels — may be in for a rough ride.

Energy costs may explode. Hoped-for technological innovations may not materialize in time. The investment burdens are tremendous, and that at a time of constrained public budgets.

That is all true, but it is also the case that the incentives, and implied penalties, are all aligned in the most rational fashion. Take industry. With energy prices likely going up — possibly significantly — what better reason for energy-consuming industries to double down on further efforts to promote energy conservation and smarter production methods?

And, on the energy producer side, caution about making a big investment in the new technologies is natural. But it is worth reconsidering this hesitation — and pronto: With a first-mover advantage, the payoff from breakthrough investments could be tremendous.

But let them relish the challenge. If it succeeds, the world will benefit. If it fails, Germany and the rest of the world can learn from it. Either way, it’s a win-win situation.

In other words, Germany’s model of a socially conscious market economy is set to work its magic.