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).

“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