Forum newsletter: What Was Still Positive About 2025 – A Look Back and Ahead – On Forum Studies and Events of the Year

Dear friends and colleagues,

What a different kind of turning point! Just one year ago, the United States still had a government that was trying to pursue a new economic policy in line with the state of academic research — testing a new climate-policy path, for example through massive support for renewables; or pushing back against the imbalance of power in labour markets that Nobel laureates and others have criticised for a long time. One year ago, despite all the turmoil within Germany’s traffic-light coalition, work was also still under way in Germany on designing a modern industrial policy that was meant to help counter the loss of trust in democracy.

Seemingly over: 2025 saw Donald Trump roll back many of these attempts, instead threatening tariffs — and halting the transition to climate neutrality. Meanwhile, Germany embarked on a curious journey back to a long-outdated understanding of economics from the 1990s and the Agenda-2010 era — where surprisingly old ideas are suddenly circulating again, such as the notion that economic dynamism will emerge simply if people work more or spend less. What an illusion this is is demonstrated by the repeatedly downward-revised growth forecasts in 2025 and by disastrous survey results.

Perhaps this reflexive return to old kitchen-table economics is another expression of the paradigmatic vacuum left behind by the failure of market liberalism as a global guiding principle — a vacuum that, despite all modern attempts at new policymaking, has not yet been replaced by anything sufficiently convincing.

If this is true, then it was — and still is — worth continuing to work on precisely this in 2025, despite all the turmoil, and to draw lessons from more or less successful experiments in new policymaking under Joe Biden or Germany’s traffic-light coalition. For example, by better understanding why so many people feel a loss of control that leads them to doubt democracy and institutions. And why, for instance, Joe Biden, with his Inflation Reduction Act, ​did not achieve greater political success​.

By now, understanding has matured of what a proactive policy could look like — one that anticipates economic upheavals and attracts new industries at an early stage, so that social disasters like those once seen in the Rust Belt do not occur again. That a transformation fund in the small German state of Saarland can serve as a concrete example prompted economists around Dani Rodrik at Harvard University, following the Berlin Summit 2024, to produce a ​case study​, which was published recently.

Local embeddedness is essential, ​argued Saarland’s finance minister Jakob von Weizsäcker​ at the Berlin Summit 2025. This is a fundamental insight that more recent research on industrial policy is seeking to further develop under the heading of place-based policies.

Another insight that has been maturing and generating new ideas is this: it achieves little to cling to the old idea that climate protection can primarily be achieved by punishing climate-damaging behaviour through higher prices — if the principle of carbon pricing proves politically unsustainable in practice; and if raising fuel prices, for example, achieves little as long as people lack affordable alternatives in the form of reasonably priced electric vehicles with sufficient range and charging infrastructure. In that case, it may be better to subsidise much more aggressively first — and only then price the old technologies, as Eric Lonergan, Michael Grubb and Isabella Wedl argue in their ​Forum paper​ on appropriate sequencing.

Still, there were also advances in 2025: in Germany, the debt brake was finally loosened, for whose strictness there were hardly any compelling economic reasons left. The challenge now is how best to design and deploy the €500 billion package in order to ​address the dramatic long-term consequences of the austerity obsession​ of the black-zero doctrine years. This is far from trivial after decades in which it was considered improper for the state to do such things at all — and when, accordingly, no one was thinking about how to do them. Naturally.

All of these advances in understanding were drowned out by the din of tariff conflicts, nationalist clamour, or confused attempts to return to the supply-side economics of bygone times. Yet they could be extremely valuable if it becomes clear that neither noise nor retro thinking will lead people to feel more economic control again, nor avert climate crises or dramatic inequality. That the time for something new and better thought through might unexpectedly return is at least hinted at by some of the election results of recent weeks in the United States.

In this spirit, many thanks to everyone who, over the past year, has contributed ideas — or even just listened and tried to follow along. It is worth it. And it will continue to be worth it — in a year 2026 that will not, at first glance, be much easier. What is at stake is a new paradigm that once again brings people along and wins them back for democracy. That takes time.

Have a wonderful weekend — and a reflective, restful time! 

Thomas Fricke 
and the Forum team

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