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the New Economy Ticker
The latest news, debates, proposals and developments on new economic thinking at a glance.
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).
“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.