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the New Economy Ticker
The latest news, debates, proposals and developments on new economic thinking at a glance.
Germany does not need a turnaround in supply policy – Article (German)
Achim Truger, WSI Mitteilungen
Deep economic crises, such as those caused by the Corona pandemic and the energy crisis, are bad times for market liberals and regulatory politicians, who traditionally speak out against state interference in the economy and in favour of a lean state.
The Myth at the Heart of Modern Economics – Interview
Seth Ackerman in interview with James Forder, Jacobin, 10.04.2023
A fabricated story about the causes of 1970s inflation — repeated in high school textbooks and the New York Times — plays a surprisingly important role in shaping economics today. It may well have helped spur the Fed’s ongoing campaign to engineer a recession.
In Search of a New Political Economy – Article
Daron Acemoglu, Project Syndicate, 07.04.2023
The late-twentieth-century assumption that democracy and markets would ultimately triumph everywhere has since been met by an intellectual backlash that is even more wrong-headed. To chart a better path forward, we will need to revise our thinking in several policy domains at once.
Bundeskartellamt Gains More Power Than Ever Before – Article (German, Paywall)
Martin Greive & Julian Olk, Handelsblatt, 04.04.2023
Der Minister hat sich mit seinen Kabinettskollegen Lindner und Buschmann auf eine grundlegende Reform des Wettbewerbsrechts geeinigt – inklusive Zerschlagungen. Der Protest der Wirtschaft ist massiv.
Banking Regulation Has Failed – Essay (German, Paywall)
Meike Schreiber, Süddeutsche Zeitung, 02.04.2023
The emergency takeover of Credit Suisse and the collapse of several US regional banks show: The banking system is still far too fragile 15 years after the financial crisis. Now it needs completely new approaches.
How Profits Fuel Inflation – Article (German, Paywall)
Christian Siedenbiebel, FAZ, 29.03.2023
Pandemic, Ukraine war, energy shock – all contributed to inflation. But do higher corporate margins also play a role? The ECB ventures into the topic.
The general welfarist argument against inequality requires interpersonal welfare comparisons and is grounded on the assumption of a single decreasing marginal utility function. In this case, taking one euro from a rich person and giving it to a poor one increases social welfare, because the welfare gain is larger than the loss.
In a recent blog post, Branko Milanovic gives three reasons why we should care about inequality even without the necessity of interpersonal well-being comparisons (which are controversial):
Read the whole piece here.
How to tackle inequality? One interesting idea about taxing the rich is coming from the Patriotic Millionaires, an US organisation of millionaires who want to pay more taxes. Read an interview (German) with their chair Morris Pearl about a wealth tax that automatically rises and falls with the level of inequality here.
Economics: A Paradigm in Self-Defense – Article (German)
Helena Schäfer, FAZ, 29.03.2023
Despite calls for a reform, Economics sticks to its neoclassical models. The climate question now challenges the profession.
Beyond industrial policy – Artikel
Anne-Marie Slaughter & Elizabeth Garlow, Social Europe, 29.03.2023
To tackle 21st-century challenges and ensure a sustainable future, we need a policy framework that recognises the value of human connection.
Banking Union: No Deregulation of European Financial Markets – Article (German)
Gerhard Schick, Tagesspiegel, 29.03.2023
The EU wants to further integrate financial markets. This is good and important but must not lead to softer rules for banks.
For better Innovation Policy: Taking the Netherlands as Example – Article (German)
Anke Hassel & Maik Bohne, Wirtschaftswoche, 28.03.2023
Germany kann only manage the transformation with a strong innovation system. But strategic orientation and political will are still missing. Instead of using the US or China for comparison, we should rather consider our neighbour. A guest article.
Building The Post-Neoliberal World – Artikel
Rana Foroohar, Financial Times, 27.03.2023
A conference in California debates whether the free market has been left unchecked for too long.
Monetary policy is not solely to blame for this banking crisis – Artikel
Martin Wolf, Financial Times, 27.03.2023
It’s a fallacy to suppose there is a simple solution to the failings of our financial systems and economies.
A new study by Das Progressives Zentrum and the Heinrich Böll Foundation has investigated what German citizens expect from German European policy.
In its coalition agreement, the German government committed itself to an “active European policy” and a “constructive claim to shape” the EU. At the EU level, however, the past year was overshadowed by crisis management in the wake of Russia’s war of aggression. In supporting Ukraine or in energy policy, the EU proved to be capable of acting in many respects, but the scope for action was often trapped in the narrow corset of the crises. The EU continues to face enormous challenges in defence capability and the climate-neutral restructuring of industry. In this context, the fifth edition of the long-term study Selbstverständlich europäisch!? examines how the German population assesses Germany’s role in the EU and what their expectations are.
Read the whole study here.
A new policy brief by the Jaques Delors Centre in Berlin focusses on the political flaws of the Commission’s proposal and warns, not to squander this golden opportunity for reforming the fiscal rules.
On the reform of fiscal rules, the EU risks letting a once-in-a-decade opportunity slip. The time window for a successful reform is tight. And the Commission’s current proposal is economically sound but politically overconfident. This risks drawing the Commission into political fights it cannot win, and would repeat some of the mistakes of the last reform process. At the same, current rules remain impossible to apply. Those who romanticize the old framework therefore need to realize that a retreat to the old system is not an option. The EU thus needs a compromise and needs it fast. To get there in the little time left, we propose four improvements: first, the system needs some numerical benchmarks for debt reduction in the adjustment period; second, it should include a clear definition of the scope of possible deviations through growth-oriented reforms and investments; third it should come with explicit carve-outs for national expenditures linked to some EU programs; and fourth, it needs credible enforcement through better ownership not only at the national but also at the European level.
For this topic, see also our past Short Cut with Jeromin Zettelmeyer and Achim Truger on the Commission’s proposal.
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.