Challenges Facing German Manufacturing: Risks of Deindustrialization

Germany's industrial powerhouse has long been the backbone of Europe’s economy. But after years of steady growth, manufacturing activity has been on a downward trajectory since 2018. Could this decline suddenly accelerate due to "cluster effects" and local economies of scale unraveling?

In this episode, we dive into the forces shaping Germany’s industrial slowdown and explore whether policy interventions could halt or even reverse the trend. We ask how insights from economic theory help us make sense of these cascading risks.

Join us as we discuss these pressing questions, drawing also on the academic work by David Baqaee, whose paper "Cascading Failures in Production Networks" (Econometrica, 2018) sheds light on how production networks can amplify economic shocks.