Once upon a time Germany was famous for its Wirtschaftswunder, or economic miracle. Today there’s little to brag about. If you want to witness the tragedy of economic illiteracy in real-time, step into the German parliament during a pension debate.
Watch as politicians thrash about at the podium, warning working citizens that putting retirement savings into global equity markets is “casino gambling.” Watch as opposition voices desperately fight to defend a 19th-century pay-as-you-go model designed by Otto von Bismarck when the average life expectancy was under 50 (though the Iron Chancellor himself made it to 83).
Germany has begun to recognize the problem. Chancellor Friedrich Merz, who heads a grand coalition government of the Christian Democrats and Social Democrats, is pushing for the enactment of a reform package that was submitted this past June by a Pension Security Committee. The government’s new private pension account scheme (Altersvorsorgedepot) opens subsidized retirement saving to stocks and ETFs, while an early-start pension initiative (Frühstartrente) would introduce younger citizens to capital accumulation. These are cautious, overdue moves toward giving ordinary citizens a genuine ownership stake in productive capital.
All of which makes the current hullaballoo over these baby steps seem somewhat detached from reality. If modest efforts to let workers build financial assets are denounced as “casino gambling,” one has to ask: whose side are the critics actually on? Are they on the side of working citizens who should be allowed to build wealth over a lifetime? Or are they defending a status quo that taxes young workers to the bone while building zero capital for their own futures?
Then look at Australia.
While German critics debate whether compounding capital is safe for ordinary citizens, Australia—a nation of just 27 million people—holds over A$4 trillion (€2.5+ trillion) in retirement assets. Australia’s combination of home ownership and compulsory retirement saving has made its households extraordinarily asset-rich: according to the latest UBS Global Wealth Report, Australia ranks third globally in median wealth per adult at roughly US$211,000, leaving Germany far behind.
Australia didn’t achieve this through black magic. In 1992, they simply stopped lying to their citizens. They introduced compulsory superannuation, requiring employers to pay a fixed percentage of wages (currently 12%) into private, worker-owned accounts invested directly into global stocks, real estate, and technology.
They turned retirement policy into mass asset ownership. The average Australian couple retiring today steps into their golden years backed by a dedicated, compounding asset portfolio sitting safely on top of home equity and a state safety net.
German workers, by contrast, pay nearly a fifth of their gross wages into a statutory system that creates no personal asset base for the individual. It is a pay-as-you-go transfer model buckling under demographic reality—requiring over €127 billion in annual federal budget support to sustain it.
And what is the populist response to changing this trajectory?
The far-right Alternative for Germany (AfD) party, the most popular one in Germany, claims to champion lower taxes and fiscal discipline, yet its pension platform savors of economic delusion. It wants to copy the high-payout Austrian model, targeting pensions worth at least 70% of final net income. It wants more federal tax money poured into the pension system—but says that taxes should not rise to pay for it. And it simultaneously demands lower levies and strict adherence to Germany’s constitutional debt brake, a measure that has hampered growth at the cost of an obsession with the dangers of debt.
Everyone gets more. Nobody pays more. Nobody borrows more. It is the fiscal equivalent of eating seven cheeseburgers a day, skipping the gym, and expecting to look like Gisele Bündchen in a bikini.
The arithmetic is less than persuasive: independent estimates put the additional cost at more than €100 billion a year. Somebody has to pay, and ultimately that somebody is Germany’s shrinking population of workers.
Worse still is the chimerical geopolitical nature of the AFD’s broader economic vision. While Germany is finally trying to turn more ordinary workers into capital owners, AfD politicians fly to the St. Petersburg Economic Forum to meet Gazprom executives, demand the reopening of Nord Stream, and beg for Russian energy. To the AfD, owning a piece of global corporate productivity is an “unacceptable gamble,” but tethering Germany’s economic future to an aggressive foreign adversary committing physical sabotage on European soil and conducting the largest war in Europe since 1945 is hardlysound strategy. It is a dangerous fantasy.
What isn’t fantasy is that Australian pension funds are flying into Europe to buy German energy grids, digital networks, ports, and data centers. This means that Australia’s retirees are collecting dividend checks off physical European infrastructure while Germany’s pension system failed to build anything resembling the same worker-owned capital at home.
Compounding global productivity isn’t a gamble; it is how modern wealth is built. It is time for Berlin to stop treating its workers as a tax base, bury Bismarck’s ghost, and finally give Germans a country where they own a piece of the world’s wealth.
