Newsletter: No majority for the economic turnaround - Why Americans voted for Trump - Forum symposium in re-live

Dear friends and colleagues,

A lot is at stake today:  It’s about the question of what the Germans think of the idea of a (market-liberal) economic turnaround; and why Americans voted for Trump again. Both were the subject of our major symposium this week.

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A look at the state of modern research confirms that a return to old market-liberal recipes no longer fits the times (see our newsletter of 8 November). A major survey, the first results of which we presented this week and which was published in DIE ZEIT, shows that it no longer resonates with people in Germany either – unlike in the days of the Agenda 2010.

According to the survey, more than 70 percent disagree with the former market-liberal motto that it is best for society if everyone thinks of themselves first. Almost 80 percent agree that the gap between rich and poor is no longer in proportion to people’s merit. There are even large majorities in various forms among the German population in favor of an active industrial policy.

Perhaps this is the reason why promising more market does not really seem to bear fruit in election polls; and why the FDP is not experiencing an upswing despite its economic turnaround paper. Perhaps precisely because of a paper whose spirit no longer matches the problems and concerns of the time. See above.

More on the survey in the first evaluation and in the re-live of the talk here.

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The economy is growing, unemployment is at a record low and even inflation seems to have stopped. So why did more than half of Americans vote for Donald Trump? Finding out will make little difference to what comes next. But it could decide how quickly the spook comes to an end – and whether it is still possible to prevent similar disruptions occurring elsewhere, for example in Germany.

What just happened calls a lot of things into question – including the certainty of conventional economics, according to which (almost) all problems are solved when there is growth, jobs and no (more) inflation. According to conventional analysis, this is the best (almost) of all worlds. What good is that if people feel differently about this economic situation – and out of deep resentment elect an angry president who, in the worst case scenario, dismantles democracy? Great economy, dead democracy. That will not be without consequences for the economy. Which raises the question of whether economists should not include such seemingly non-economic factors in their models if they want to remain relevant. The same applies to climate change and social divide. All of this ultimately has an impact on the economy.

At our symposium on the economic consequences of Trump II, Isabella Weber impressively demonstrated that there is more at stake. “If the new paradigm is only about upstream technocratic projects and fixing some things deep down in the machinery of the economy, it will be extremely difficult to win back the people.” If inflation has such dramatic consequences, much more should be done to prevent it from occurring in the first place – for example, through price brakes or price controls. After all, in Germany, the beginning of the recent rise of the AfD coincides with the inflation shock of 2022.

What can help? At the symposium, Robert Gold presented initial estimates as to whether the US Democrats at least performed less badly in those regions in which massive investments were made via the Inflation Reduction Act (IRA), for example. According to the populism researcher from Kiel and Forum Fellow, not all the data is available yet. But the assumption seems to be confirmed that the IRA certainly had an influence locally, albeit strongly dependent on how high the respective regional inflation was.

If the correlation is confirmed with better data, this could hold an enormously important lesson for the future: That it helps to proactively invest in regions to counter resentment and populist temptations. Just as is being attempted in Germany – for example with a transformation fund in Saarland. The difficulty, however, is that it takes time to take effect (too late for Kamala Harris) – and threatens to be overshadowed by other things. Which raises the question of what else is effective. And what it means hat many people also feel a loss of control because cultural ties have been lost in times of (not just economic) individualism.

Joe Kaeser, Simon Jäger, Cathryn Clüver Ashbrook and Anke Hassel discussed what Trump’s re-election means for us in Europe at the symposium – Watch the re-live of the panel here.

Lot’s going on. A lot to look at. There’s a lot at stake.

Have a good start to the week,

Thomas Fricke

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