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the New Economy Ticker
The latest news, debates, proposals and developments on new economic thinking at a glance.
In a representative survey on the topic of public debt conducted by Fiscal Future and d/part in June 2023, over 3,000 people in Germany were asked about public debt and government investment.
At first, superficial glance, population surveys seem to support the assumption that people in Germany expect a reduction in debt in terms of fiscal policy. When asked about this, many people state that they are rather sceptical about extensive government debt. But can we really conclude from this that they consider government investment to be less important and prioritise fiscal discipline? Existing research casts doubt on this.
Find the whole briefing here.
Monster of the mainstream – Article
Quinn Slobodian, The New Statesman, 20.11.23
Argentina’s new president Javier Milei embodies the zombie neoliberalism of the 1990s.
Why Mainstream Economics Got Inflation Wrong – Blogpost
James K. Galbraith, 15.11.23
Leading economists’ misdiagnosis of inflation in 2021-22 was the latest episode in a long-running series of failures, from not foreseeing the 2008 financial crisis to endorsing self-destructive austerity in the 2010s. Either mainstream economists need to re-examine their core beliefs, or the profession needs a new mainstream.
« The United States and the European Union must support a United Nations tax treaty » – Article (Paywall, French)
Collectif, Le Monde, 21.11.23
Fourteen economists, lawyers and former politicians – including Jayati Ghosh, Joseph Stiglitz and Thomas Piketty – are warning of the crucial vote on Wednesday 22 November at the United Nations on a resolution on international tax cooperation.
Best books of 2023 — Economics – Article
Martin Wolf, Financial Times, 15.11.23
Martin Wolf selects his best reads of the second half of 2023.
Three and a half ideas for a new debt brake – Article (German)
Fabian Franke, Die Zeit, 24.11.23
Christian Lindner’s solution to the budget crisis is short-term, the demands for a reform of the debt brake remain. This is what it could look like.
The Hidden Gender Wealth Gap – Article
Celine Bessiere & Sibylle Golac
As important as equal pay and other labor-market advances for women have been, progress toward economic parity with men remains tenuous and incomplete. As inequality becomes less about wages and more about wealth, women once again find themselves facing profound structural disadvantages.
“Democracy has not delivered what it promised” – Interview (Paywall, German)
Markus Zydra, Süddeutsche Zeitung, 21.11.23
Economist Raghuram Rajan foresaw the global financial crisis – and now recognises fractures in the system. He explains where they are, why so many people are turning to authoritarian regimes and what can be done about it.
The think tank Dezernat Zukunft has published a new information page on the German debt brake. The website explains and visualises the fiscal rule on three levels. Firstly, how it came about. Secondly, how it actually works. And thirdly, how it could be reformed.
The impact of the debt brake on the budget, education, infrastructure and society is enormous. Nevertheless, few people understand it. And experts doubt whether it is really future-proof. An attempt to explain it, including a proposal for reform.
Find the website here.
A recent article published in Die Zeit discusses the results of the Forum’s new wealth simulator ‘ReBalance’, which was launched today. A key finding of the simulator is that wealth inequality in Germany would increase over the next ten years without reforms.
In capitalism, capital means freedom. And in Germany, it is distributed extremely unequally. This applies not only to inheritance, but to wealth as a whole. According to calculations by the Forum New Economy, an association of economists, the top ten percent of wealthy people in Germany hold 61 percent of all assets, the upper middle class 38 percent. The poorer half of the population owns only 1.4 percent of all wealth.
The article focuses on the effectiveness and financial viability of various proposals for a basic heritage.
But how much could such a basic inheritance actually change the unequal distribution of wealth in Germany? The Forum New Economy is publishing new calculations on Friday this week. The results are available to ZEIT in advance. They show that In order to have a noticeable effect, the basic inheritance would have to be quite high – and would be correspondingly expensive. If every German were to receive 10,000 euros when they come of age, this would be just enough to maintain the current distribution of wealth, i.e. to prevent further upward redistribution. With 20,000 euros, the poorer half of the population would receive 2.7 percent of all assets. The state would have to raise 17 billion euros every year for this, which is more money than the federal government spends on healthcare. If the government were even to transfer 60,000 euros for every 18th birthday, as the Jusos are demanding, the share of assets of the lower half would rise to five percent. However, this would also cost 65 billion euros a year, far more than the entire defense budget.
Find the wealth simulator ReBalance here.
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).
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.