Newsletter: Berlin Declaration in Project Syndicate & Le Monde

Dear friends and colleagues,

Let’s put it this way: the likelihood of Joe Biden winning against Donald Trump in November has not exactly increased after the TV duel between the two presidential candidates. And in France, too, shortly before the first round of voting on Sunday, there is nothing to suggest that right-wing populists will not win strongly there as well. The Berlin Declaration signed by a few dozen leading thinkers at and after our Berlin Summit on “winning back the people” will not be able to do much to change this. If the basic diagnosis is correct, it is at least a matter of remedying the now deep-seated resentment of many people over a perceived or actual loss of control – and regaining trust in a (better) social leitmotif: this will take time, even if Joe Biden at least is already trying to implement something like this with the IRA and other initiatives.

The leading French daily newspaper “Le Monde” is now publishing a special shortly before the election in which it also prints the “Déclaration de Berlin” – in French for the first time.

In a recently published commentary on Project Syndicate, Dani Rodrik, Laura Tyson and I try to explain how important such a new paradigm can be in practice – in comparison to what once constituted the dominant belief in the healing power of the market for decades in form of the Washington Consensus. Headline: From the Washington Consensus to the Berlin Declaration.

Branko Milanovic and Isabella Weber agree that the Declaration offers an alternative to the Washington Consensus, as they explained in our New Economy Short Cut this week. The old paradigm has not yet disappeared, but it is in trouble, according to Isabella Weber. If economic efficiency leads to social disasters, it is simply not efficient, says Branko Milanovic. Hence the recommendations for a more proactive regional and industrial policy, a climate course with much stronger positive incentives and a reduction in inequalities.

According to Branko, the difficulty in establishing the new arises from the fact that for those who stand for a new paradigm, there is no universal economic truth that transcends time – unlike what the advocates of the market-liberal Washington Consensus postulated: at that time, the same recipes applied everywhere and at all times – whether in the USA, Latin America, Germany or later in Eastern Europe. The world was simple then. In reality, it depends on time and place.

There was also criticism, of course. For example, the fact that not everything was addressed in the Berlin Declaration – which is nevertheless important. It was indeed important for many signatories to note that the declaration is only a starting point (albeit a crucial one). Over the next few months, projects are now being discussed on many of the fundamental recommendations, in which more and also more concrete answers are required. There will be new insights into whether the positive effects of Biden’s IRA can still curb discontent in some key US states. And the aim will be to find out more and more about the extent to which the new US climate policy can serve as a model.

Our next New Economy Short Cut will also tackle new fundamental questions. French economic historian Eric Monnet will talk about his book “Balance of Power” – and about the need to give central banks more democratic legitimacy in view of their growing responsibility. This, too, would not have existed under the Washington Consensus. Date: July 11 at 2.30 pm. Register here.

Have a good weekend,

Thomas Fricke

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