A political earthquake is happening in the industrial Ruhr area: Investors Cevian and Elliott seem to have an appetite for destroying the legacy that is ThyssenKrupp, of which they are both minority shareholders. The pair have been locked in a boardroom battle over splitting up the conglomerate, and they’ve come a lot closer to their goal in the past few weeks. CEO Heinrich Hiesinger stepped down at the beginning of July, followed shortly by board chair Ulrich Lehner. The two, who were not in favor of breaking up the firm, were classic examples of responsible businessmen of the social market economy and guarantors of a continuation of ThyssenKrupp’s legacy.
Even aside from the hedge funds’ fiddling, change is afoot at ThyssenKrupp with the steel division’s merger with Tata. But if the company was overall in good shape, these two investors and their allies would have no reason to destroy it, or it would at least be much harder. So blaming the hedge funds for ThyssenKrupp’s instability is too simple.
Nationalism and protectionism
But there’s still reason to worry about the apparent plans to tear up ThyssenKrupp. Considering the growing proportion of people distancing themselves from the ideals of liberal democracy, one can only hope that those in charge of Cevian and the Krupp Foundation realize the responsibility they bear. The defeat of the Democrats and victory of Donald Trump in the US show if you lose the workers of the Rust Belt, the hipsters of California can’t help you. New forms of nationalism and protectionism are threatening our successful global economy.
I hope the decision makers at these firms do not believe these threats to democracy have nothing to do with them. Given the evident fragility of our modern democratic society, these global financial players cannot play dumb, leaving politics to the politicians. Business and politics share a great responsibility.
New nationalism and protectionism are on the rise not least as a last-ditch self-defense against casino capitalism. God knows we can’t call every investor a locust — though Elliott surely is one, and Cevian has to prove it is not. Locusts like Elliott gobble up the seedlings of our economic and social successes: the stability and capabilities of our society, the continuous balancing of pursuit of profit with the common good.
Article 14, Paragraph 2, of the German Constitution says, “Property entails obligations. Its use shall also serve the public good.” It doesn’t say, “Property obliges you to pursue the highest possible profit.” Anyone who sows the seeds of class struggle from above reaps class struggle from below.
The social market economy vs populism
The good news is that there’s another way. We call it the social market economy, and it’s been tied to our democracies to tame capitalism for decades. The preservation of the social market economy is one of the greatest successes of our time. Containing capitalism at the national level must continue at the international level, and Europe must lead the way.
ThyssenKrupp is one of the oldest companies in Germany, with roots that reach back 200 years. It is an example of a firm aware of its social responsibility since the industrial revolution. Resilient wage contracts, good pensions and codetermination were as self-evident as fair dealings with the workforce. These achievements of the social market economy get laughs from Wall Street.
But while German companies will be distracted for the foreseeable future by US tariffs, activist investors have nothing to worry about in Europe. This part of the private equity business enjoys few regulations and no punitive tariffs.
If Cevian and Elliott join forces to attack ThyssenKrupp, they could well make more money by breaking up the company than by preserving it. And they probably don’t care what happens after that. But doing so would make them enemies of our democracy. Worries about lack of responsibility in the dealings of the Krupp Foundation, the company’s owners, are creating new uncertainty in the industrial Ruhr area. Thousands of jobs will be threatened in cities such as Duisburg and Bochum, where unemployment is already high. That’s a threat to our democracy, and in Germany, democracy and the social market economy are two sides of the same coin.
Politicians must take sides
When industrial jobs disappear, whether in Germany, the US or France, the replacements are often less secure and paid worse. People expect democratic parties to fight for their interests and secure their chances of a good future. The Alternative for Germany (AfD) is especially strong in the regions hardest hit by deindustrialization. It’s not just a German trend: The same is true for Mr. Trump and France’s National Front. Brexit never would have happened if workers had felt safe as part of Europe.
So what do we do now? Politicians must take sides in the question of ThyssenKrupp. They must support the workers, and they must hold the investors responsible for the common good or put them in their place.
The Krupp Foundation knows it has a responsibility to the men and women who work for the company. It’s not just about a piece of industrial history but the preservation of our social market economy. And that’s why decision makers in the spheres of politics and business must push for the preservation of the company. If we do not succeed, it will be another setback in the fight to preserve our democracy.
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