Forum newsletter: When Structural Reforms Benefit Populists / Symposium with Lars Klingbeil on November 28

Dear friends and colleagues,

It’s tempting to mock it: for just about everything, the black-red federal government has set up commissions and advisory councils — for pensions, bureaucracy, the debt rule, the modern state, even for AI and China’s competition. Ever since, people have sneered that everything takes far too long — and that, in the end, nothing ever comes of it. Yet at the latest since the emergency decisions on citizen’s benefit (Bürgergeld), one might suspect that it’s not such a bad idea to let experts take a second, careful look at certain issues.

The fact that abuse of the Bürgergeld is demonstrably a marginal phenomenon hasn’t stopped the government from energetically announcing a reform — even though, among those who may in future face sanctions, it’s often unclear whether they can actually work: either because other reasons speak against it; or because they only qualify for menial jobs that are already oversubscribed; not to mention that it makes little sense to push someone into taking a job when it might be wiser to wait a bit longer for one that urgently requires their specific skills.

If that’s true, one can at best hope that the new rules will improve people’s sense of fairness. Quite possibly, however, the opposite will happen — and resentment will grow. According to mainstream historical research, there is considerable evidence that structural upheavals tend to boost support for populists and authoritarians especially when people are also deprived of state benefits. Timo Fetzer’s analyses suggest this was true for Brexit. And according to leading economic historians, the Nazis’ electoral gains in 1932/33 were particularly strong in those regions where Brüning’s austerity policies hit hardest — fatal side effects of fiscal restraint.

If there’s even a grain of truth in that, the government might be unintentionally contributing to the next rise of the AfD. Many people simply can’t understand why their benefits are being cut even though they’re not performing better or worse than before — and it’s equally hard to explain why, for some abstract higher social goal (pensions or punishing “refusers”), their standard of living must now fall. Such arguments are only fit for talk shows — especially in times when people are still feeling the aftershocks of an inflation they didn’t cause themselves.

It’s high time for commissions that think through — and calculate — such reforms with much greater seriousness. Otherwise, they may end up doing more harm than good.

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What would actually be far more important right now, incidentally, is to ensure that the billions mobilized through the special fund are spent in ways that truly strengthen the country in the long run. There’s certainly no shortage of needs. To that end, we’ll hold a symposium on November 28, with Federal Finance Minister Lars Klingbeil already confirmed as a participant. It starts at 3 p.m. Anyone who would like to be placed on the preliminary list can simply reply to this email. A registration form with more details will follow.

Have a great weekend,

Thomas Fricke

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