‘Hidden champions’ power Germany’s economic machine

Plus: Record income taxes, a factory renaissance and more. Bloomberg This is Bloomberg Opinion Today, a machine that bends Bloomberg Opinion’s opinions into a desired shape. [Sign up here](. Today’s Agenda - Germany has a secret to [surviving](. - France wants [a seat]( at the table. - The US has record [income taxes](. - China faces a [factory showdown](. Legends of the Hidden Tunneling Company In college I met someone whose father was a professional book indexer. I remember thinking … wait, that’s a career? And of course it is: Indexes are integral to any type of textbook, cookbook or coffee table book. We just never pay mind to the person behind it. A character in Kurt Vonnegut’s “Cat’s Cradle” [memorably said](, “indexing was a thing that only the most amateurish author undertook to do for his own book.” All around us, there are “hidden” careers like book indexing. They range from serious to silly: There are nature-trail [builders](. Snake [milkers](. Dog-food [tasters](. Face [feelers](. Line [standers](. Color [analysts](. Panda [fluffers](. Strawberry Shortcake even has [an assistant](! These wonderful humans are the ghostwriters of the economy, silently keeping society humming along. Now, most of these odd jobs are not big enough to belong to any sort of corporation. But when reading Adrian Wooldridge’s column today, I couldn’t help but smile when I realized that Germany prides itself on a similar type of “hidden champion.” You might think that the German economy would be driven by giants like Mercedes or BMW. But no, [the real engine of Deutschland is the “Mittelstand,”]( which is made up of obscure, middle-sized companies that you probably didn’t know existed. “Beneath the deliberately mundane surface of [the Mittelstand](, a hidden revolution is taking place,” Adrian writes. One such revolution is occurring at Herrenknecht AG, one of the world’s biggest tunneling companies. Yes, tunneling. Adrian visited the campus, which has all sorts of delightful features that make Elon Musk’s Boring Company look like child’s play: An in-house tunneling academy. A factory containing 90,000 moving parts. There’s even a giant drill bit on display that chewed through [57 kilometers]( of the Swiss Alps: Source: Herrenknecht AG Adrian visited two other companies, one of which he says focused on a “mind-boggling niche: producing the machines that bend wire and pipes or chains into the desired shapes.” Hyper-specialized companies like these are the crown jewels of Germany, which has fewer than 30 companies in the Fortune 500, compared to China and the US, which both have around 130. The Mittelstand provides the nation with an economic cushion even as China throws less and less cash at Europe: Despite that retrenchment, China is still the top trading partner for the EU. If the US were to ditch China completely and force Europe to take a side, [some companies would struggle to survive](, Lionel Laurent argues. Germany’s Mittelstand is a model that neighboring countries like France would be wise to adopt. Even if globalization falters, smaller, hyper-specific businesses might be able to weather economic storms better than well-known behemoths. Plus, “[Europeans are vastly stronger joined together](, and collectively rival China in terms of GDP and defense spending,” James Stavridis adds. With a little bit of nudging, perhaps the secret of Europe — and not just Germany — can lie “somewhere in the nowhere,” as professor Winfried Weber poetically told Adrian. Read [the whole thing](. Telltale Charts [Americans faced the highest income tax rates]( *ever* last year. Justin Fox says some of that increase is due to the phenomenon of “[bracket creep](,” where “inflation pushes people into higher tax brackets even as their real (inflation-adjusted) incomes stagnate or fall.” Frustratingly, 15 states don’t bother to adjust their income tax brackets for inflation, which kinda makes me want to melt into the earth and turn into one of those [Wojak]( [doomer]( memes. Luckily, Justin says tax percentages are already falling back down, so there’s really no need for me to become a colorless, two-dimensional chain smoker wearing a beanie. Yet. China and the US are caught in the middle of multibillion dollar game I like to call “Who Can Factory Better.” It’s a high-stakes showdown that’s leading to a factory renaissance of epic proportions. Anjani Trivedi and Brooke Sutherland say [the dueling infrastructure investments]( might end up squeezing mom-and-pop manufacturers that aren’t used to providing large-scale services to multiple regions. It “begs the stubborn question of supply: Where will the components, raw materials and workers come from to support this building boom?” Just take one look at the hiring gap in the US, and the picture starts to get murky: Further Reading The Biden administration is fighting [the abortion pill ban](, but it should prepare for the worst. — Bloomberg’s editorial board Companies that are struggling to hire should rethink their [time-consuming interview]( process. — Sarah Green Carmichael Walmart is [cooling its Chicago presence]( not because of crime, but because of costs. — Leticia Miranda While all the lawmakers argue, [the Colorado River]( is running dry. — Mark Gongloff Core [CPI is still kinda high-ish](, which means that a rate hike may be on the horizon. — Jonathan Levin New [tailpipe emissions rules]( mean that Big Auto is in for a bumpy ride. — Liam Denning How [Elon Musk’s “troll heaven”]( turned into an advertiser’s worst nightmare. — Dave Lee Thailand’s superstar [economic status]( could end up dimming. — Daniel Moss Nintendo’s [Super Mario Bros.]( Movie is a smash hit.  — Gearoid Reidy ICYMI NPR [quit]( Twitter. A new Covid variant: [Arcturus](. Rupert Murdoch has [drama](. Putin knew about [the arrested reporter](. Kickers AI is coming to [college](. (h/t Bobby Ghosh) A bagel that’s [a tax loophole](. [Bali locals]( hate the tourists. [Magic mushrooms]( take a hike. Notes:  Please send tax-free bagels and feedback to Jessica Karl at jkarl9@bloomberg.net. [Sign up here]( and follow us on [Instagram](, [TikTok](, [Twitter]( and [Facebook](. Follow Us You received this message because you are subscribed to Bloomberg's Bloomberg Opinion Today newsletter. If a friend forwarded you this message, [sign up here]( to get it in your inbox. [Unsubscribe]( [Bloomberg.com]( [Contact Us]( Bloomberg L.P. 731 Lexington Avenue, New York, NY 10022 [Ads Powered By Liveintent]( [Ad Choices](