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the New Economy Ticker
The latest news, debates, proposals and developments on new economic thinking at a glance.
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The coalition agreement of the new traffic light government has been published. Does this mark the beginning of something entirely new, possibly even a new economic paradigm? A policy that implements the desire for prosperity while at the same time committing itself to saving the climate, that creates financial policy leeway where there was none before? An excerpt of the differing opinions on the novelty of the new administration’s proposals – and the potential for a paradigm shift – can be found here.
At the Financial Times, one is certain – the coalition agreement of the traffic light government marks a significant change in political direction. The editorial board sees the planned easier borrowing for investments as a key signal of departure for the Merkel era. This includes special funds outside the main budget, more funds for KfW and a reassessment of the technical calculations of the fiscal rules. The coalition agreement is seen as holding out the promise of renewal, with the chance that in addition to German politics, the country’s economy and Europe could benefit.
The Center for European Reform also sees the investment plans contained in the coalition agreement as bold and expects more fiscal space and investment than under the previous government. It sees potential for a European domino effect in the reallocation of pandemic emergency funds, which could also motivate other countries to build up a financial cushion of emergency funds for more fiscally stringent times. The CER also trusts Germany to play a leading role in climate protection under the new government.
Columbia professor Adam Tooze was somewhat more cautious in his recent comments. Although it is too early to make a final assessment, he said, Lindner as finance minister poses a threat to all the government’s progressive ambitions. However, he said, the German economy has long since ceased to be its old conservative self, and the government is ready to take on the challenge of climate change.
A major economic puzzle in recent years has been the decline in private investment. Especially, since there seems to be no shortage of investment needs in view of climate change. Yet also DAX-listed companies are holding back on investment, using profits instead to pay dividends to shareholders or increase their cash holdings, as a new study by Finanzwende Recherche and Oxfam Germany shows.
The authors discuss the possibility of tying companies more closely to the common good again via reforms to company law. For this, in the sense of the principle “Eigentum verpflichtet” a redefinition of the corporate purpose should also include ecological and social aspects. In addition, the investment gap could be narrowed by limiting dividend payments and imposing an investment obligation. All these instruments could contribute to replacing short-term profit maximization with an orientation toward the common good.
An abridged version of the study can be found here.
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Duis autem vel eum iriure dolor in hendrerit in vulputate velit esse molestie consequat, vel illum dolore eu feugiat nulla facilisis at vero eros et accumsan et iusto odio dignissim qui blandit praesent luptatum zzril delenit augue duis dolore te feugait nulla facilisi. Lorem ipsum dolor sit amet, consectetuer adipiscing elit, sed diam nonummy nibh euismod tincidunt ut laoreet dolore magna aliquam erat volutpat.
Ut wisi enim ad minim veniam, quis nostrud exerci tation ullamcorper suscipit lobortis nisl ut aliquip ex ea commodo consequat. Duis autem vel eum iriure dolor in hendrerit in vulputate velit esse molestie consequat, vel illum dolore eu feugiat nulla facilisis at vero eros et accumsan et iusto odio dignissim qui blandit praesent luptatum zzril delenit augue duis dolore te feugait nulla facilisi.
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The OECD’s New Approaches to Economic Challenges unit has established Government Economists for New Economic Systems (GENESYS), a platform for government economists and policymakers to debate, experiment and discuss policy alternatives which could solve “systemic structural issues which threaten the future”. The goal is to help foster new analytical capabilities within governments. It is envisioned to be an informal network of country-based delegates, principally but not limited to Finance Ministries and Central Banks.
Watch their launch webcast with Paschal Donohoe, President of the Eurogroup, and others on 4 November, 14:00-16:00 GMT. Forum Director Thomas Fricke will also be present, joining a roundtable discussion to provide an overview of new economic thinking and acting, and why and how governments should embrace it.
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.