“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.

More and more external shocks such as wars or earthquakes complicate short-term modelling and forecasting, and necessitate qualitative assessments of future challenges. In a recent contribution, Martin Sandbu has proposed three ways to think about the (longer-term) future world economy. He identifies three structural shifts, each of which entail certain problems.

1. Globalisation: Fragmentation of the world economy into different blocs. Potential cost: Loss of trade-induced efficiency gains (e.g. by duplication of production in different blocs). But costly only under the assumption of large economy of scale effects.
2. Climate: Increased volatility through climate change, geopolitical shocks, or financial crises. (Potential) cost: Higher insurance costs.
3. State: Rise of the supply side. More actively intervening governments, e.g. with industrial policies, managing climate change, the digital transition, or the de-risking of global supply chains. Potential cost: Inefficiencies. Potential benefits: mitigation of costs associated with volatility or fragmentation.

This list could easily be complemented by additional challenges. Take for example (within and between country) inequality or the rise of right-wing populism. Solving all these issues together, which are inherently interconnected, will require more than just hoping for the free forces of the market. Which underlines the importance of an overarching and consistent new economic paradigm.