Against a Climate of Renunciation and Growth Scepticism
From our newsletter series.
PUBLISHED12. JANUARY 2024
READING TIME4 MIN
Everyone is cutting, saving, complaining and protesting. If there is a direction in the country, it seems to be backwards – or downwards. This is in no small part due to the recent shift in fiscal policy to adhere to the debt brake at all costs – which diminishes any ambition to invest massively in the transition to a climate-neutral economy or a better infrastructure for future generations. But it is also due to a still widespread understanding of what this transformation means: sacrifice, sacrifice and sacrifice.
Curiously, the more orthodox economic thinkers also come to the same conclusion, interpreting the transition to climate neutrality as something that per se costs money – and therefore also reduces growth potential: because it is expensive to build new plants. And because this only replaces old ones, some of which – like the ones in the car industry – generate far more added value than the new ones (electric cars).
In a study published this week for the Forum New Economy, Tom Krebs comes to the opposite conclusion. According to the study, the majority of investments in renewable energy, other climate-neutral economic activities and general infrastructure have the effect of increasing productivity in the country – and therefore economic growth in the long term: Tom Krebs estimates that by 2033 alone, this will be amount to one percentage point per year. In addition, there would be direct positive effects on demand and the economy, estimated at up to 1.5 percentage points. All in all, an investment offensive could accelerate economic growth in Germany from the miserable 0.6 per cent estimated by the (orthodox) researchers at the leading economic institutes to up to 3 per cent – a real boom and anything but gloomy. All that is needed is the money to finance such an investment package. Keyword: debt brake. See above.
Another cause for concern at the moment is how all kinds of discontent is currently threatening to lead to new waves of support for populists – also and above all ahead of the upcoming elections in the US in November. We will be holding our next major half-yearly meeting on this topic in the spring, which Harvard economist Dani Rodrik has already agreed to attend – more on this shortly.