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the New Economy Ticker
The latest news, debates, proposals and developments on new economic thinking at a glance.
Another Predictable Bank Failure – Article
Joseph Stiglitz, Project Syndicate, 13.02.2023
The collapse of Silicon Valley Bank is emblematic of deep failures in the conduct of both regulatory and monetary policy. Will those who helped create this mess play a constructive role in minimizing the damage, and will all of us – bankers, investors, policymakers, and the public – finally learn the right lessons?
How companies face the shortage of skilled workers – Article (German)
Julia Freuding, Johanna Garnitz and Stefan Sauer, Makronom, 16.03.2023
Unsurprisingly, from a company’s point of view, a comprehensive package of political measures is needed in the fight against the shortage of skilled workers. But most companies have now also realised that they have to take action themselves to find suitable staff.
The 72-hour scramble to save the United States from a banking crisis – Article
Jeff Stein, Tony Romm and Gerrit De Vynck, Washington Post, 14.03.2023
It seemed like a simple question: Did the treasury secretary have any concerns about the economic risks posed by Silicon Valley Bank?
The burden of debt – Article (German)
Mark Schieritz, Die Zeit, 16.03.2023
The interest costs in the budget have increased tenfold, says Federal Finance Minister Christian Lindner. That sounds dizzying. How does he come up with it?
The Silicon Valley Bank fallout makes the case for digital currencies – Column
Martin Sandbu, Financial Times, 16.03.2023
If we think all deposits must be safe, what is the point of banks?
SVB and the Fed – Blog Post
Noah Smith, Noahpinion, 15.03.2023
Financial Dominance? Charting a course between inflation and bank failures.
When? 22.03.2023, 3pm (CET)
Where? Online, Register here.
One obvious way to tackle gender inequality in economics is simply to promote more women to leadership roles within the discipline. Yet deeper structural impediments show that this option is not as simple as it seems. What more needs to be done to create the conditions for achieving genuine inclusivity in the field – especially for women from the Global South and other traditionally marginalized communities?
Panel Discussion:
How to increase women’s labour force participation? – Blog post
Katharina Wrohlich, Makronom, 10.03.2023
Increased working hours for women could alleviate the shortage of skilled workers – and also reduce existing inequalities between men and women. Policy instruments to achieve these goals have been known for years.
Guns, Ships and Chips: On Economic Inflexibility – Opinion Piece (Paywall)
Paul Krugman, New York Times, 07.03.2023
What do shipping containers and artillery shells have in common? This isn’t a trick question. The answer is that both have been in very short supply at some point over the past three years. And these shortages tell us something disturbing about modern economies: They aren’t nearly as flexible as many people, myself included, had thought.
Legal opinion on the constitutionality of the wealth tax – Report (German)
Alexander Thiele und Hans-Böckler-Stiftung, 07.03.2023
A wealth tax is compatible with the Basic Law. In view of the high inequality in the distribution of wealth and the considerable financial challenges facing the Federal Republic, its introduction is not only well justifiable, it would also contribute to the realisation of fundamental constitutional principles.
Tearing Down Big Tech’s Walls – Article
Margarethe Vestager, Project Syndicate, 09.03.2023
For decades, tech platforms were left mostly free to do as they wished, and the harm caused by this approach has become obvious. Fortunately, the European Union has been pushing back on behalf of democratic and humanistic values, and it is now finalizing its biggest legislative and regulatory contribution yet.
What’s Next for Globalization? – Article
Dani Rodrik, Project Syndicate, 09.03.2023
With hyper-globalization in decline, the world has an opportunity to right the wrongs of neoliberalism and build an international order based on a vision of shared prosperity. But to do so, we must prevent the national-security establishments of the world’s major powers from hijacking the narrative.
When will ‘inheritance for all’ come? – Interview (German)
Antje Lang-Lendorff with Stefan Bach, taz, 07.03.2023
For a fair start in life, economist Stefan Bach proposes a basic inheritance for all. Similar small-scale models already exist elsewhere.
The Debt-Inflation Channel of the German Hyperinflation – Study
Markus Brunnermeier et al. (2023) – March 2023
Unexpected inflation can redistribute wealth from creditors to debtors. In the presence of financing frictions, such redistribution can impact the allocation of real activity. We use the German inflation of 1919-1923 to study how a large inflationary shock is transmitted to the real economy via a debt-inflation channel. In line with inflation reducing real debt burdens and relaxing financial constraints, we document a tight negative and convex relation between firm bankruptcies and inflation in aggregate data. Using newly digitized firm-level data, we further document a significant decline in leverage and interest expenses during the inflation. We show that firms that have more nominal liabilities at the onset of the inflation become more valuable in the stock market, face lower interest payments, and increase their overall employment once the inflation starts. The results are consistent with substantial real effects of the inflation through a financial channel that operates even when prices and wages are fully flexible.
In late January, the European parliament voted to relax capital regulations for banks. Its new official stance departs significantly from the original Basel III agreement, boosting shareholder profits but reducing bank stability. Numerous exemptions result in a decrease of additional capital requirements to just 4% by 2030 (rising to 7% by 2033) instead of the expected 20%.
Opponents of tougher rules argue that implementing stricter capital regulations would leave them at a disadvantage in comparison to their bigger and more profitable counterparts in the United States. This competitiveness argument was also put forward by German Federal Finance Minister Christian Linder at the Deutsche Bank Digital New Year’s Reception, as cited in this article:
“The priority is to reconnect financial stability with consumer protection and competitiveness. Explicitly, the competitiveness of the banking and financial centre is also one of my political goals,” he said.
There is, however, evidence that the regulatory shift in Europe is (at least in part) a capitulation to the European banking industry’s lobbying activities. As new research by Finanzwende shows, Banking industry lobbyists outnumbered civil-society representatives 176 to 2 in meetings on Basel III regulation with the European Commission since the end of 2019. And as Thierry Philiopponnat, the chief economist of the European non-profit Finance Watch, is cited in a recent opinion piece by Rana Foroohar:
Moves to make Basel III transitional arrangements permanent ‘will not defend EU banks against US ones but only protect the vested interests of European megabanks, vis-à-vis their smaller European competitors.’
Thus, the conventional wisdom that America leads on innovation, Europe on regulation, seems to be challenged, as the US is toppling the EU from its regulatory throne.
Reinventing the European Union – Article
Jean Pisani-Ferry, Project Syndicate, 02.03.2023
Russia’s invasion of Ukraine and new economic imperatives have called into question the EU’s long-standing reliance on regulatory standards as a form of soft power. To survive in a world where autocrats increasingly flout the rules governing the international order, the EU’s member states must find a new route to integration.
“Then the government has failed in its job” – “I have to defend myself against economic nonsense” – Interview (Paywall, German)
Julian Olk & Jens Münchrath, Handelsblatt, 02.03.2023
Sachverständigenrat head Monika Schnitzer and IW director Michael Hüther argue about whether the German government should raise taxes to finance the crisis and transformation.
ECB confronts a cold reality: companies are cashing in on inflation – Article
Francesco Campa, Reuters, 02.03.2023
Higher margins, not wages are driving inflation.
No fear of bans – Column (Paywall, German)
Mark Schieritz, die Zeit, 01.03.2023
Gas, combustion engines or sugar: the state sets framework conditions for production and consumption. Bans can be very helpful for both.
It’s no use: Taxes must go up – Commentary (Paywall, German)
Claus Hulverscheidt, Sueddeutsche Zeitung, 27.02.2023
The Finance Minister’s party, of all parties, has walled itself off in its “any tax increase is the devil” ideology. Germany can no longer afford this.
How much work can go? – Article (German)
Malene Gürgen, taz, 26.02.2023
In the UK, a pilot project on the 4-day week was successful. What is the argument for working less? And what can that look like in concrete terms?
Works councils help against the right – Study
Uwe Jirjahn, Thi Xuan Thu Le, January 2023
If there is employee representation in a company, the workforce tends less towards radical right-wing parties. This is the result of a study.
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.