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the New Economy Ticker
The latest news, debates, proposals and developments on new economic thinking at a glance.
In a recent opinion piece, Rana Foroohar argues that the recent US economic recovery reflects a deliberate choice by the Biden administration to prioritize pandemic relief and employment, even at the risk of inflation. Comparing the post-pandemic to the post-2008 recovery, it seems that the old consensus to accept higher unemployment due to fiscally induced inflationary risks vanished.
But I think that the current economic situation in the US reflects something important: the kind of recovery that we have is a choice. In the past, we’ve mainly chosen high unemployment in lieu of more fiscal stimulus, which many economists feared would cause inflation to rise too quickly (think Larry Summers and Jason Furman and the whole idea that fiscal stimulus must be “timely, temporary and targeted”).
According to Foroohar, this decision resulted in everything that one could have hoped for. It led to manageable inflation, stable employment, and improved financial well-being for the average American, dispelling the belief in a trade-off between Main Street and Wall Street. The administration’s bold approach could serve as a promising example of how the right choices can lead to a more equitable and prosperous future.
Read the whole piece here (paywall).
“The question is at what point does inequality have a detrimental effect” – Interview (Paywall, German)
Interview: Dieter Schnaas, Wirtschaftswoche, 30.10.2023
Inequality researcher Branko Milanović talks about imbalances in income distribution, lessons from economic history – and the end of his elephant curve for the time being.
These are the foundations Germans want for the economy – Article (German)
Julian Olk, Handelsblatt, 24.10.2023
Heat pumps and rents have triggered major debates in politics about the role of the state. But where does the population stand? A survey shows: the state should often fix it.
“I think the image of the sick man is completely exaggerated” – Interview (Paywall, German)
Interview: Thomas Fromm & Maike Schreiber, Süddeutsche Zeitung, 31.10.2023
British economic historian Adam Tooze does not believe that Germany has been deregistered as a business location. However, there are some very important things for the government to do.
Sociologists on social triggers: “Many people are exhausted by change” – Article (Paywall, German)
Hans Monath, Tagesspiegel, 26.10.2023
When do we perceive politics as constructive? And when does it emotionalise us? Thomas Lux and Steffen Mau explore and interpret the dangerous irritant potential of gender stars and heating laws, for example.
Biden joins the AI regulation party – Article
Rana Foroohar, Financial Times, 30.10.2023
The US has been the biggest innovator in AI, but we’ve been slow to regulate it.
Narcissism of small differences delays accord on EU fiscal rules – Opinion
Martin Sandbu, Financial Times, 22.10.2023
The 27-nation bloc must strike a deal soon in order to prepare for much bigger economic and geopolitical challenges.
The recently published Tax Evasion Report 2024, coordinated by Gabriel Zucman and others, documents the scale of global tax evasion and avoidance and proposes a global minimum wealth tax of 2% for the richest individuals as counteracting policy.
The report argues that billionaires have been operating on the “border of legality” in using shell companies to avoid tax by moving certain types of income, including dividends from company shares, through dedicated holding companies that usually serve no other purpose.
These holding companies are in a grey zone between avoidance and evasion. To the extent that they are created with the purpose of avoiding the income tax, they can legitimately be seen as closer to evasion.
As quoted in a Guardian article on the report, these loopholes are mostly used by the super-rich, which is why they propose to introduce a global minimum wealth tax of 2% for the world’s richest people:
These types of loopholes allow the super-rich to avoid certain forms of income tax, resulting in effective tax rates worth just 0%-0.6% of their total wealth, the report found. Meanwhile, income taxes levied on most wealthy citizens who do not employ these loopholes, end up paying between 20% and 50%. The Observatory, which deployed more than 100 researchers to gather the report’s data, is now calling on global leaders to use the next G20 summit in Brazil in November 2024 to launch talks over a global minimum 2% annual tax to be levied on the wealth – rather than the income – of the world’s richest people.
Yesterday, the German Federal Ministry for Economic Affairs and Climate Action (BMWK) published its new industrial strategy ‘Industrial policy at the turn of the times: Securing industrial locations, renewing prosperity, strengthening economic security’.
Based on the central challenges facing German industry – the geopolitical turning point, neglected location factors and the transformation towards climate neutrality – the strategy justifies the industrial policy of the Federal Government, breaks it down into different fields of action and identifies further needs for action. In particular, the strategy again advocates a bridge electricity tariff for energy-intensive companies and emphasises the importance of a Germany Pact with the Länder to accelerate planning and approval procedures.
A short summary of the importance of industrial strategy is provided by Nils Redeker on Platform X, for example:
The DE Ministry of the Economy just published its long-awaited industrial strategy. It does not add many new measures but provides a pretty honest description of what DE is doing and why it is doing it. And for the EU it has some actual news. Here are the 3 most important points
— Nils Redeker (@niredeker) October 24, 2023
Inheritance should become fairer – Radio feature (German)
Kirstin Langen, Deutschlandfunk, 18.10.2023
In Germany, 300 to 400 billion euros are inherited or given away every year. Taxes are due on larger savings deposits, but those who inherit businesses often do not have to hand over anything to the tax authorities. Soon the Federal Constitutional Court will deal with the issue.
“A new underclass has emerged in America” – Interview (Paywall, German)
Interview by Ines Zöttl, Spiegel, 03.10.2023
In his new book, Angus Deaton, winner of the Nobel Prize for Economics, takes aim at American capitalism. The majority of the population is disconnected – and the rise of Donald Trump is the logical consequence.
Happiness beats money – Commentary (Paywall, German)
Alexander Hagelüken, Süddeutsche Zeitung, 06.10.2023
Economic performance alone says little about how people are doing in a country. It’s time to define prosperity differently and to pay more attention to those who are dissatisfied. Otherwise, they will be driven into the arms of right-wing populists.
Germany must invest to neutralise the far-right threat – Opinion piece
Adam Tooze, Financial Times, 01.10.2023
A once successful growth model has run out of steam and migrants are needed to fill labour market shortages
How Claudia Goldin transformed our understanding of women and work – Commentary
Soumaya Keynes, Financial Times, 13.10.2023
The winner of the Nobel Prize in economic sciences has explored expectations, incentives and constraints.
Accompanying institutions for industrial policy – Blog post (Paywall, German)
Achim Wambach, Makronom, 11.10.2023
The controversies surrounding industrial policy are not new, but the current problems are. Accompanying institutions that evaluate the measures and feed findings into policy are necessary.
OUR MAIN TOPICS
New Paradigm
NEW PARADIGM
After decades of overly naive market belief, we urgently need new answers to the great challenges of our time. More so, we need a whole new paradigm to guide us. We collect everything about the people and the community who are dealing with the question of a new paradigm and who analyze the historical and present impact of paradigms and narratives – whether in new contributions, performances, books and events.
Redefining
the role of
the state
REDEFINING
THE ROLE OF
THE STATE
For decades, there was a consensus that reducing the role of the state and cutting public debt would generate wealth. This contributed to a chronic underinvestment in education and public infrastructure. New research focuses on establishing when and how governments need to intervene to better contribute to long-term prosperity and to stabilize rather than aggravate economic fluctuations.
Remaking
finance
REMAKING
FINANCE
More than a decade after the financial crisis there still seems to be something seriously wrong with the financial system. Financial markets still tend to periodically misprice risk and contribute to boom and bust cycles. A better financial system needs to discourage short-termism and speculative activity, curtail systemic risk and distribute wealth more broadly.
Greening
prosperity
GREENING
PROSPERITY
During the high point of market orthodoxy, economists argued that the most 'efficient' way to combat climate change was to simply let markets determine the price of carbon emissions. Today, there is a growing consensus that prices need to be regulated and that a carbon price on its own might not be enough.
Reducing
inequality
REDUCING
INEQUALITY
The rising gap between rich and poor has become a threat to social cohesion in most rich countries. To reverse this trend it will be crucial to better understand the importance of different drivers of income and wealth inequality.
Innovation Lab
INNOVATION LAB
Do we need a whole new understanding of economic growth? What would be a real alternative? How viable are alternatives to GDP when it comes to measuring prosperity? These and other more fundamental challenges are what this section is about.
Globalization
for all
GLOBALIZATION
FOR ALL
After three decades of poorly managed integration, globalization is threatened by social discontent and the rise of populist forces. A new paradigm will need better ways not only to compensate the groups that have lost, but to distribute the gains more broadly from the start.
Europe
beyond markets
EUROPE
BEYOND MARKETS
The euro was planned during a period in which economic policy making was driven by a deep belief in market liberalism and the near impossibility of systemic financial crises. This belief has been brought into question since the euro crisis, which showed that panics do happen. New thinking needs to focus on developing mechanisms to protect eurozone countries from such panics and to foster economic convergence between members.
Corona Crisis
CORONA CRISIS
The current Corona crisis is probably the worst economic crisis of the post-World War 2 era. Economists are working hard on mitigating the economic effects caused by COVID-19 to prevent a second Great Depression, the break-up of the Eurozone and the end of globalisation. We collect the most important contributions.