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The latest news, debates, proposals and developments on new economic thinking at a glance.
Analogous to the debt brake, European fiscal rules were also suspended during the corona pandemic. As things stand, the intention is to return to the existing system next year. According to Mühlbach, this would result in high consolidation pressure and cuts in essential investments. Instead of repeating the mistakes of the past decade, fiscal rules should be adapted to the current macroeconomic environment of low interest rates. Mühlbach suggests creating exceptions for investment in the existing set of rules and changing the Maastricht criteria in the long term. The medium-term budget target based on the structural deficit should be abolished and replaced by an expenditure rule, he said.
The full analysis is available here.
World-renowned economist and inequality researcher Thomas Piketty in conversation with Rob Johnson, President of the Institute for New Economic Thinking about Piketty’s just-released book, A Brief History of Equality.
When? June 13, 6 pm (CET)
Where? Online
More debt – urgently needed or dangerous? – Debate (Paywall, German)
Bastian Brinkmann, SZ, 01.06.2022
The traffic light government wants to authorise 140 billion euros in new loans. This is highly controversial, not only in the Bundestag, but also among economists. A debate.
The ECB’s Interest-Rate Balancing Act – Article
Jens van’t Klooster, Project Syndicate, 01.06.2022
As monetary policymakers seek to tackle record-high eurozone inflation, they should not forget that financial stability and a faster green transition are crucial to price stability. Cutting green investments in order to push down prices in the short run will make the economy more vulnerable to climate-related shocks.
The Zeitenwende is also an economic turning point – Germany and Europe now need an economic and social resilience strategy – Article (German)
Matthias Machnig, bpö, 31.05.2022
24 February 2022 has fundamentally changed the world. Politically and geopolitically, because Russia’s attack on Ukraine, which is contrary to international law, brings the long stable post-war and post-communist peace and security order in Europe to an end. This political turning point not only has a geopolitical dimension, but also heralds an economic turning point. This economic turning point will be characterised by an accumulation of different crises and crisis symptoms.
Getting Deglobalization Right – Article
Joseph Stiglitz, Project Syndicate, 31.05.2022
It was clear at this year’s gathering of business and political elites in Davos that the longstanding vision of a world without borders is no longer credible. Unfortunately, it was also clear that recognizing this basic truth is not the same as reckoning fully with past mistakes.
The end of the fossil era? – Article (German)
Vera Huwe, Stephan Stuckmann, Makronom, 30.05.2022
The rise of asset manager capitalism is fundamentally changing the ownership structure of fossil fuel companies. Yet despite their exposure to systemic climate risks, asset managers remain agents of the status quo.
Back to the future with supply policy? – Article (German)
Rudi Kurz, Makronom, 25.05.2022
With an ambitious strategy paper, Finance Minister Christian Lindner has attempted to provide an initial economic and financial policy response to the major challenges of our time. But how far can the concepts from the 1970s go in the new era?
A recently published study by Christian R. Proaño, Juan Carlos Peña, and Thomas Saalfeld of the University Bamberg examines the relationship between inequality, macroeconomic performance and political polarisation in advanced economies.
The most interesting takeaway is that the link between income inequality and political polarisation appears to have significantly changed over the last 20 years. Whereas inequality was connected to the success of far-left parties in elections before 2000, since then far-right (but not far-left) parties could utilise inequality by increasing votes.
Both average net income inequality, as well as the bottom 10% income share are statistically significant, while the top 10% or top 20% income shares are not. The link of income inequality and the increasing success of far-right parties, thus seems to be based on the deterioration of the relative economic position especially of the poorest fraction of the population.
Read the whole study here.
The Actually European!? study by Das Progressive Zentrum and Heinrich Böll Stiftung examines how German citizens evaluate the actions of the German government and the EU and what expectations they have of Germany’s role in Europe. The long-term study also surveys what Germans perceive to be the country’s role within the EU for the fourth year in a row.
Based on the survey’s results, the authors identify three main areas of future German EU policy:
measures.
Read the full summary of the study 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.