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The latest news, debates, proposals and developments on new economic thinking at a glance.
Austerity ruined Europe, and now it’s back – Article
Yanis Varoufakis, Project Syndicate, 17.07.2023
The United States is experiencing an investment boom, owing to industrial policies that grant enormous subsidies – including to European firms – for investing in America, largely in green tech. Europe, meanwhile, is responding with a return to the austerity policies that caused it to fall behind the US in the first place.
Brussels’ economy chief says bloc must pump billions of euros into critical industries to compete globally.
Eleven theses on globalization – Article
Branko Milanovic, Substack, 18.07.2023
There has recently been lots of discussion of globalization, its effects, especially on poverty and inequality, and many contradictory statements, some even absurd, were made. Here are eleven theses on globalization.
Taking Aim at Sellers’ Inflation – Article
Isabella M. Weber, Project Syndicate, 13.07.2023
Economists and political leaders at multilateral and European institutions have finally accepted that corporate profits are a primary driver of inflation today. But getting the analysis right is only the first step; now we need a fundamental change in how we address the problem.
Does state money make people happy? – Article
Mark Schieritz & Petra Pinzler, die Zeit, 19.07.2023
Does the state have to dump billions into the economy to keep Germany competitive – and safe from political turmoil? Yes, says the Green State Secretary Franziska Brantner. The economist Stefan Kolev thinks this is a mistake.
US consumer protection does not go far enough for President Joe Biden. In an appearance, he railed against unfair corporate mergers – and the rental market: “People are tired of being taken for fools.”
What if the EU becomes right-wing? – Article
Mark Schieritz, die Zeit, 20.07.2023
The EU is considered a liberal project. Now nationalist forces could take power in Brussels and rebuild the EU according to their own ideas.
No, you are not middle class – Article
Nils Wischmeyer, Süddeutsche Zeitung, 15.07.2023
People count themselves in the middle of society even though they are top earners or poor. This leads to wrong political decisions. There is only one way out: pay slips on the table.
The CDU/CSU and FDP in particular like to talk about performance and efficiency. When it comes to restructuring the tax system in this direction, however, they prefer to keep quiet.
Full-time work is not a solution – Article
Jutta Allmendinger, Die Zeit, 19.07.2023
Finally, there is a debate about poverty, families and welfare, writes sociologist Jutta Allmendinger. These are her proposals for a modern family policy.
In the 1980s, Ronald Reagan initiated an economic policy that was imitated around the world and became known as ‘Reaganomics’. Now Joe Biden is introducing a new paradigm shift in economic policy with “Bidenomics”. So argues Max Krahé in a recent article for the blog Politik&Ökonomie. And he is not alone: the Financial Times speaks of a “revolution in economic policy”. And many German media are also reporting with amazement on the change in economic policy coming from Washington.
But what has triggered this change and what exactly is behind “Bidenomics”? And what are the first results of the numerous measures? Krahé explores these questions in his article.
The bottom line is that the failure of the previous market-liberal paradigm left no choice but to reorient economic policy (and it’s not Krahé who says this, but Jake Sullivan, Joe Biden’s national security adviser). It eroded the American industrial base, destabilised democracy and failed to provide answers to the climate crisis. The new geopolitical situation also plays a role.
At the heart of Bidenomics are three laws: IRA, CHIPS and the Infrastructure Act. But what have they achieved? Krahé attests the programmes “a lot of light and a little shadow” – investment levels have risen sharply despite high interest rates, the pre-Corona growth path has been restored, and higher emissions reductions are realistic. At the same time, there is a risk of over-subsidising individual sectors – a financial bottomless pit.
Read the full commentary here.
Focus on Produktivity, not technology – Article
Dani Rodrik, Project Syndicate, 07.07.2023
Scientific and technological innovation may be necessary for the productivity growth that enriches societies, but it is not sufficient. Without the right kind of complementary policies, technological progress may not lead to sustainably rising living standards; and in some cases, it may even set a country back.
Who’s rich here?- Article
Franz Kotteder, Süddeutsche Zeitung, 10.07.23
Germany is losing its middle class. That is no reason to gloat. The debate on parental benefits shows this: We need a new solidarity.
The federal budget weakens Germany’s prosperity – Article
Marcel Fratzscher, die Zeit, 07.07.23
German Finance Minister Christian Lindner wants to stick to the debt brake, more investment but no tax increases. He will not achieve any of this.
What if there is nothing central banks can do about inflation? – Article
Martin Sandbu, Financial Times, 06.07.23
Except for making things worse after it goes away by itself
The United States is changing the rules of the global economy, says historian Adam Tooze. Security is becoming more important than wealth. Germany must adapt and spend more.
Debate Monitor Skills Shortage – Article
Susanne Erbe, Makronom, 03.07.2023
In a Makronom series, researchers have examined the various aspects of the skills shortage from different perspectives. A new Debate Monitor summarises these and other findings on one of the biggest problems facing German economic policy.
This goal should be subject to public scrutiny and measured against current needs.
“The CDU must act more socially” – Article
Robert Roßmann, Süddeutsche Zeitung, 11.07.23
The workers’ wing criticises the party leadership for neglecting social issues – which also hurts in the debate with the AfD. But now Friedrich Merz is appointing Carsten Linnemann, of all people, as secretary-general.
Traffic light coalition gives the Cartel Office drastic powers – Article (DE – Paywall)
Julian Olk, Handelsblatt, 03.07.2023
Germany is getting the biggest competition reform for decades. The Cartel Office will be able to take market-dominating companies to task much earlier.
Florian Diekmann, der Spiegel, 04.07.2023
The AfD is particularly successful among workers and trade unionists. Here, Jena sociologist Klaus Dörre talks about what makes the right-wing party attractive to these people – and what strategy could help.
The energy crisis has hit the German economy hard – Article (DE – Paywall)
Tom Krebs, Handelsblatt, 01.07.2023
For Tom Krebs, four percent less gross domestic product and record losses in purchasing power contradict the assessment that we have weathered the crisis well.
Successful rebels – Article (DE)
Patrick Bernau & Alexander Wulfers, FAZ, 28.06.2023
When other scientists deviate from the majority opinion, they are often ostracised. Economists then become all the more influential.
Diane Coyle, Project Syndicate, 23.06.2023
The tercentenary of Adam Smith’s birth is an opportunity to consider how his insights into the dynamics of economic growth continue to shape our understanding of the world today. But what if the division of labor that underpinned Smith’s theory of growth has reached its limit?
How the rich became untouchable – Article (Paywall)
Lenz Jacobsen, die Zeit, 02.07.2023
Wealth inequality is becoming increasingly obscene, but politically hardly anyone seems to care. Why is that?
“1.5 million immigrants per year required” – Article – DE
The economic expert Schnitzer proposes more immigration to combat the shortage of skilled workers. The new Skilled Workers Act is already going in the right direction, but the Federal Republic of Germany as a whole is not making as much progress “as we could and should”.
Budget emergency endangers Lindner’s investment incentives for companies – Article (DE – Paywall)
Martin Greive & Jan Hildebrand, Handelsblatt, 29.06.2023
Finance Minister Lindner wants to boost business investment with super write-offs. Due to the poor budget situation, the project is now likely to be smaller.
How can the shortage of skilled workers be contained? In a recent interview with Makronom, IZA Director Simon Jäger talks about the extent of the shortage and possible countermeasures. Why the market, which should significantly increase wages when supply is tight, does not always regulate everything?
I think that the findings from modern labour market research on the market power of companies in the labour market play a crucial role in understanding. The labour market is not a perfectly competitive market and frictions are not the exception but the rule. The complaint about labour shortages is also evidence of wages being paid below labour productivity in some sectors.
To counter the problem, better immigration offers, for example, are an important pillar. The IZA proposes linking immigration to collective bargaining and expects a double dividend from this: An increase in labour migration together with an additional incentive for productive, growing companies to enter into collective bargaining agreements.
Read the whole interview (in German) here.
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.