Germany: Myths and Realities

by Larry Hatheway | February 24, 2025

In his classic The Great War and Modern Memory, the author Paul Fussell wrote about how the calamity of World War I created the need for myths that allowed combatants, civilians, and especially future generations to reconcile the grotesque realities of modern warfare with our human sensibilities.

But Fussell’s message ran deeper. In our collective national psyche, we create myths that, while grounded in fact, also make it possible for us to endure, soften, and even look past our communal imperfections, especially our predecessors’ worst misdeeds—those that haunt all histories in all places. 

National myths sooth the soul, in part by rationalizing the irrational, the distasteful, and the repulsive acts that are inescapable parts of national identity. The myth of ‘American exceptionalism’ reflects both the reality of unprecedented human achievements in democracy and nation-building, as well as convenient white-washes of slavery and the near extermination of indigenous peoples. 

Myths embed duality. They evoke justifiable pride in nation and community, yet simultaneously veil that which we prefer to forget.

Hence, myths, which by design divert attention, enslave us to caricatures of our past. 

Germany, which yesterday held national elections, is no different. The myths of postwar Germany are equal parts resolve, determination, and accomplishment (e.g., Germany’s Wirtschaftswunder or ‘economic miracle’) and attempts to reconcile the most troubling past of any country in human history.

Yet there are times when myths must be confronted, questioned, and remade. Those times arrive for different reasons but share an imperative to remove the shackles of convenient lessons about the past to force society to confront changing realities about the present and the future.

That time has arrived for Germany.

Germany’s 20th century past is dominated by the most profoundly disturbing memory known to man—the atrocities of World War II culminating in the Holocaust. The enormity of shame and guilt, individual and collective, staggers human comprehension. It cannot be veiled. 

In their attempts to reconcile their Nazi past and its inhumanity, Germans and Germany have adopted mechanisms with which to cope, but also from which modern Germany has drawn lessons. Lessons which are now in need of retrospection.

Among those mechanisms is a myth, based on historic fact, that the sources of National Socialism are found in the trenches of World War I, in the social and financial ruin of hyperinflation of 1923, and in the failure of democracy to prevent Hitler’s lawful election in 1933.

That myth, as correct as its elements are, is incomplete. It masks centuries of antisemitism and xenophobia, a millennium of European fratricide, countless disputes about national borders, virulent nationalism and imperialism of the 19th and early 20th centuries, and historical grievance. Those facts, too, germinated the horrors of 1933-1945.

But for our understanding of what 21st century Germany has become, what matters most are the lessons from the primary myth about what made Hitler possible. Those are the lessons drawn from the belief that if only Hitler had not been radicalized in the trenches of the Great War, if only he had not been propelled forward by the ruinous impacts of hyperinflation, and if only he had not been freely elected in 1933, calamity would have been averted.

The corresponding lessons were drawn in postwar Germany. German identity became subordinated to regional identity (i.e., I am a Bavarian or a Swabian before I am a German), as well as to a European identity. Germany’s national defense was subordinated to the common defense structure of NATO, in contrast to, say, Gaullist France. 

But most importantly, Germany subordinated democracy to rules. Germany’s Grundgesetz (Basic Law), while colloquially referred to as a constitution (Verfassung), is as much a set of rules to live by as it is an expression of fundamental human freedoms. German Basic Law circumscribes forms of expression, not in the ambiguity expressed against hate speech found in western liberal tradition, but via specific prohibitions. And, with time, Germany also adopted rules against policies that both in economic theory and history have led to currency debasement and hyperinflation, most recently via a ‘debt brake’ (Schuldenbremse) against excessive government deficits and debts.

Those rules were drawn from lessons, which themselves are based in myth. Those rules reflect postwar Germany’s efforts to build firewalls against a return to fascism.

Germany’s history is not that of liberal England (the UK) or the United States. Understandably, the ambiguities of common law, legal precedent, and constitutional interpretation are found wanting in a country with Germany’s short and fractured liberal history. It is easy to understand Germany’s need for rules that establish guardrails for democracy.

But history does not stand still. Edifices once seen as bulwarks to float the ship of democracy in its desired direction can become obstacles of obsolescence when currents shift.

Around Germany today, the currents are shifting. Rules-based democracy is being challenged abroad by a revanchist Russia intent on restoring Tsarist territorial ambition. Germany’s subordination of national defense to NATO and de facto to the United States is being undermined by the peculiar and frightening Trumpian advent of American transactional indifference to global peace and prosperity. And rules-based democracy is being challenged domestically by Germans, for whom the postwar history is not that of West Germany, and who favor a nativist and authoritarian German future. 

Confronted by these dynamics, Germany cannot afford a myth for which the primary lesson is to constrain the will of the people to determine their future. The myth Germany adopted after 1945 was that rules must supersede democracy. That democracy itself cannot be trusted because Hitler used democracy against itself to come to power.

Germany’s postwar lesson is that enduring democracy requires an Odysseus-like lashing of free will to masts of propriety, which includes prohibitions on free expression or rules against government indebtedness. It is a lesson grounded in an implicit mistrust of free will.

That lesson served Germany well for 75 years. But in large part it worked because Germany could subordinate national responsibility. Free expression in its basest form became taboo in West Germany. Security was assured by the United States. Access to global markets was also assured by the United States. And, until 1989, the illiberal milieu of East Germany was conveniently separated by a wall.

But the world changed. The United States is no longer a trusted or trustworthy ally. Germany, and Europe, must secure their futures by themselves. Germans formerly behind the Wall, and those who find illiberal ideology comforting in a time of social and economic displacement, form a fifth of the electorate. They can no longer have their voices dimmed simply because the symbols they may use are reprehensible reminders of the past.

Germany must defend itself, internally and externally. That requires Germany to revisit its myths, question their lessons, and critically assess national taboos. 

Can Germany stand up for itself? Can it lead on the European and global stages? Can it defend itself, including, if necessary, by becoming a nuclear power? Can it demand an equal voice for Europe at the table that sets the rules governing international free trade and capital flows at a time when globalization is under attack everywhere? Are Germans free to choose a transfer of the financial burdens of investments today in security, infrastructure, education, climate change, economic opportunity, and social cohesion to the beneficiaries of tomorrow by reforming the Schuldenbremse?

The time has arrived for Germany to address its myths. And its taboos. And its realities. Germany must decide whether it can take responsibility for both its history and its future.

About the Author

Larry Hatheway has over 25 years’ experience as an economist and multi-asset investment professional. He is co-founder, with Alexander Friedman, of Jackson Hole Economics, a non-profit offering commentary and analysis on the global economy, matters of public policy, and capital markets. Larry is also the founder of HarborAdvisors, LLC, an investment advisory firm catering to family offices and institutional clients worldwide.

Previously, Larry worked at GAM Investments from 2015-2019 as Group Chief Economist and Global Head of Investment Solutions, where he was responsible for a team of 50 investment professionals managing over $10bn in assets. While at GAM, Larry authored numerous articles on the world economy, policy-making, and multi-asset investment strategy.

From 1992 until 2015 Larry worked at UBS Investment Bank as Chief Economist (2005-2015), Head of Global Asset Allocation (2001-2012), Global Head of Fixed Income and Currency Strategy (1998-2001), Chief Economist, Asia (1995-1998) and Senior International Economist (1992-1995). Larry is widely recognized for his appearances on Bloomberg TV, CNBC, the BBC, CNN, and other media outlets. He frequently publishes articles and opinion pieces for Bloomberg, Barron’s, and Project Syndicate, among others.

Larry holds a PhD in Economics from the University of Texas, an MA in International Studies from the Johns Hopkins University, and a BA in History and German from Whitman College. Larry is married with four grown children and resides with his wife in Redding, CT, alongside their dog, chickens, bees, and a few ‘loaner’ sheep and goats.

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