Forum newsletter: Vanishing Prosperity in the Annual Economic Report / The Primacy of the Economy in Crisis / A Short Cut on Inheritance Tax with Martyna Linartas and Stefan Bach

Dear friends and colleagues,

Small children sometimes try to make themselves invisible by holding their hands in front of their faces. In a way, that is what is happening with the annual economic report the German government has just published – a report from which it has removed the special chapter that, since 2022, had discussed indicators of well-being beyond the legendary gross domestic product, such as climate risks or wealth inequality. The motto seems to be: what is not visible in the report cannot be a problem.

The omission of this broader measure of prosperity fits neatly with a reflexive turn toward a kind of policy that places the primacy of the economy front and centre, as in long-forgotten market-liberal times – the idea that everything will work out if only the economy in the narrow sense is doing well. From that perspective, one might say that reducing inequality is not particularly important – more of a lifestyle extra.

But in 2026, this assumption looks increasingly far-fetched. We live in a time when populists and authoritarians exploit people’s discontent to sow doubt about democracy; and when export-dependent German companies are suffering from the geopolitical struggle between China and the United States. Politics comes first.

To prevent such crises, it helps little to make people work longer. And addressing the gap between rich and poor, or the social consequences of austerity policies, is anything but a lifestyle extra – especially if these factors help explain why trust in democracy is eroding, and why this erosion is not economically neutral either. The same is true of the question of whether it will still be possible to prevent major climate catastrophes – and to manage a rapid transformation of the economy. What happens when this fails is something German carmakers and their workforces are already experiencing first-hand, as heavily subsidised Chinese competitors pull ahead.

The consequences of unchecked wealth concentration will soon demand attention in Germany in any case – even if the issue no longer appears in the federal government’s annual economic report. The Federal Constitutional Court is set to deliver its ruling on the legality of the inheritance tax as it has been applied for years – and will likely criticise the fact that far too many people are able to evade taxation through perfectly legal loopholes.

Why inheritance tax exists at all, where it comes from, and how a reform might work – these are the questions we will explore in our next New Economy Short Cut: this coming Thursday, 12 February, at 4:00 p.m., with Stefan Bach from DIW Berlin and inequality researcher Martyna Linartas, who examines the history and impact of inheritance tax in her latest book. Registration: ​here​.

Have a great weekend,

Thomas Fricke 

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