#1. Hello from Berlin. And 43 Years of German Failure

Everyone in Germany wants to cut bureaucracy, and no one manages to do it. Now the Merz government is trying again. But first: some introductory remarks on this new Substack.

Hello from Berlin, the capital of Germany.

This channel, “Berlin calling”, is intended to inform an English-speaking audience abroad about Germany — its politics and its economy. I hope to offer readers occasional insights they might otherwise miss. I’ll also be reporting on curiosities and seemingly minor details that point to larger truths and help explain Germany better.

And I’ll be sharing commentaries and other texts here, some of which will be adapted and translated versions of pieces that were first published on welt.de and in the newspapers WELT and WELT am Sonntag.

My name is Olaf Gersemann. I studied economics (in Cologne and Dublin), worked for six years as a U.S. correspondent (in Washington, for Wirtschaftswoche), and later spent 15 years as head of the business desk at the WELT Group in Berlin. Since June 2025, I’ve been deputy editor-in-chief responsible for implementing AI projects at WELT.

For a long time, I’ve been warning about the structural weaknesses of the German economic system — and about Germany’s tendency toward hybris. In 2003, I wrote a book on the subject called Amerikanische Verhältnisse, which was published in expanded form and in English a year later by the Cato Institute in Washington, D.C., under the title: Cowboy Capitalism. European Myths, American Reality. In 2014 came Die Deutschland-Blase (“The Germany Bubble”), which argued: it’s clear that Germany is heading for difficult times — and that was before the energy and migration crises dramatically worsened the underlying problems.

As committed as I am to capitalism and classical liberalism, I also nurture my contrarian impulses. Yes, politics, the economy, and society in Germany are currently in a deep and dangerous crisis — and in economic terms, much of what I’ve been warning about for years is now obvious to everyone.

But when everyone is lamenting how bad things are, I tend to go looking for green shoots.

At least where that’s still possible. One area where it clearly isn’t: the latest attempt to reduce Germany’s bureaucracy — now seen by businesses as the single biggest obstacle to growth and investment.

I wrote an editorial about this for WELT am Sonntag, which was also published digitally on welt.de.

Here is the English version. Enjoy the read. I’d be grateful for your comments and for spreading the word.

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43 Years of German Failure

“We want to return the state to its original and proper tasks, while also ensuring that it can reliably fulfill them,” says the Chancellor in his very first government statement. Therefore, the new coalition will first investigate how that might be done — through the new “Independent Commission for Legal and Administrative Simplification of the Federal Government.”

That was back in October 1982, when Helmut Kohl and his black-and-yellow cabinet took the helm of the Federal Republic.

Forty-three years later, under the black-red coalition of Friedrich Merz, rhetoric and approach are so identical that it seems as though almost nothing has happened in the meantime. And that’s for a reason: in fact, nothing has happened — or at least not much, when political ambition is compared with regulatory reality.

Over those 43 years, successive governments have made new attempts to cut back bureaucracy in Germany. The catalog of 80 measures with which the current cabinet aims to advance deregulation may sound ambitious at first glance, but in historical comparison, it is almost modest. In 1998, for example, the Federal Interior Ministry compiled ten times as many “modernization projects of the federal administration” under the heading “Lean State.”

Hardly any other political challenge has been pursued so persistently — and so unsuccessfully — by federal policymakers as the reduction of bureaucracy. The motivation is obvious: those who like to strike a reformist pose but lack a willingness to engage in conflict find bureaucracy reduction just right. No one takes to the streets against cutting red tape; indeed, there aren’t even any petitions against it for Katja Riemann, Luisa Neubauer, or others to sign.

Why every attempt to trim bureaucracy in Germany has failed beyond isolated and temporary successes is a question that is almost never asked — and that is precisely the problem. There are reasons why bureaucracy arose in the first place, reasons that have little to do with incompetence or malice on the part of those involved. And there are also reasons why bureaucracy grows back like pulled weeds once trimmed.

The most important of these reasons is the rather banal fact that the producers of bureaucracy — bureaucrats themselves — are not selfless saints but people who pursue their own interests, guided by the incentives placed before them. And those incentives, as the American economist William Niskanen showed in 1971 in his Peculiar Economics of Bureaucracy, drive bureaucrats to continuously expand the scope of state action.

“Lean-state” commissions come and go, as do the politicians who promote them; but the bureaucrat remains — producing bureaucracy anew and continuously, unless actively prevented from doing so.

The brutal answer to this phenomenon came earlier this year in the United States. Behind the budget cuts and mass layoffs carried out by Elon Musk and his “Doge” disciples lay, amid all the frenzy, a larger and in its own way rational calculation: as Marx described and Lenin demonstrated, the goal was to crush the existing bureaucracy so thoroughly that it could not simply persist should the revolutionaries lose power again. The supposed “deep state” was to be fatally wounded.

In Germany, of course, no one indulges in such fantasies of destruction. But German politics exhibits the opposite extreme — one that completely ignores the bureaucrat’s own self-interest in decision-making, an extreme that — whether out of naivety or cynicism — fails to consider the sustainability of its own actions.

Yet there are indeed approaches that could help turn civil servants from brake-men into promoters of bureaucracy reduction. William Niskanen, for example, proposed putting agencies into competition with one another instead of merging them — or tying salaries inversely to the size of the budgets they administer.

Without such accompanying reforms, however daring they may seem, the latest effort to cut bureaucracy will once again be what all its predecessors over the past 43 years have been: “eine Rechnung ohne den Wirt”, as we say in German: a plan that forgets to include the innkeeper in the bill.

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