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The latest news, debates, proposals and developments on new economic thinking at a glance.
The recent political agreement between the Council and the European Parliament has introduced new numerical benchmarks for debt and deficit, requiring annual reductions that may lead to unjustified budget cuts.
A study by NEF and ETUC has compared the budget rules with estimated gaps in social and environmental investment and found that only Denmark, Sweden and Ireland can adequately fund their investment needs under the new rules. Even if the Recovery and Resilience Facility (RRF) grants were extended beyond 2026, only Croatia and Lithuania would join the aforementioned trio in meeting the minimum requirements for social and environmental investment. For all Member States to meet their public investment commitments in these areas, an additional €300-420 billion per year (equivalent to 2.1-2.9% of EU GDP) would be needed.
Infrastructure Spending Lowers Right-Wing Populists’ Vote Shares – Article (German)
In many EU countries, the poll ratings of right-wing populist parties are high – they could triumph in the European elections in June. Economists have researched how governments can take countermeasures.
Zero-Sum-Thinking Is Preventing Solutions – Article (German)
Marcel Fratzscher, ZEIT Online, 12.04.2024
Neoliberalism has failed, now a zero-sum mindset with winners and losers dominates politics and society. It is poison for cohesion.
Juliana Kaplan, Business Insider, 09.04.2024
Angus Deaton was awarded the Nobel Memorial Prize in Economic Sciences in 2015. The economist has been studying consumer decisions, welfare, inequality and poverty for decades. Now he is rethinking some of his earlier views on trade unions, free trade and immigration.
Nonsense and Bad Rules Persist In Banking – Article (Paywall)
Anat Admati, Project Syndicate, 08.04.2024
While banks and the policymakers that support them claim that banking regulations would harm average Americans, these threats are based on falsehoods and misinformation. Simpler, more effective rules would compel banks to rely more on their own equity, thus forcing them to overcome their addiction to borrowing.
Julius Betschka, Tagesspiegel, 11.04.2024
A survey by the Bertelsmann Foundation is likely to give new impetus to the debate on reforming the debt brake. This is made clear by a majority of Germans.
Forget Boomers vs Millennials, The Next Conflict Is Millennials vs Each Other – Article (Paywall)
Financial Times, John Burn-Murdoch, 12.04.2024
Growing wealth inequality between thirtysomethings could soon displace tensions between young and old.
According to the report, the current paradigm of financial policy requires an overhaul as it contributes to increasing inequality and stands in the way of equitable climate action. The authors bring forth different measures at the European level, from better financial regulation such as new liability rules for portfolio companies to curbing tax evasion by extending the scope of the global minimum tax to include investment funds. They also suggest a new European social taxonomy that could promote socially valuable investments and call for enforcing conditionality in government subsidies.
Read the full report (in English) here and a summary on Social Europe here.
Why Have Inflation Forecasts Been So Wrong? – Article (Paywall)
Willem H. Buiter & Ebrahim Rahbari, Project Syndicate, 01.04.2024
To explain why forecasters at the US Federal Reserve and other major institutions missed the mark on inflation in recent years, it is tempting to conclude that they were blindsided by unpredictably large shocks. But if the prevailing models work only when variables are relatively stable, they are of little use.
Three economic zombies worth fighting – Column (Paywall)
Martin Sandbu, Financial Times, 04.04.2024
Bad policy ideas that are surprisingly widely held.
Why the German economy is deep in crisis (Paywall, German)
Martin Greive, Handelsblatt, 04.04.2024
High energy prices are often blamed for the economic weakness, according to the German government. A new IMF analysis shows: This narrative is not true. The country has deeper problems.
Do politicians not know how to handle money? – Column (Paywall, German)
Mark Schieritz, Die Zeit, 03.04.2024
The state should not accumulate too much debt, which is why there is a brake in the Basic Law. As if the political class would otherwise throw money around without restraint.
“Life and death are more important than money” – Interview with Angus Deaton (Paywall)
Mark Schieritz, Die Zeit, 27.03.2024
Do we benefit from immigration? Does trade create prosperity? Are Americans really better off than Germans? Nobel Prize winner Angus Deaton believes so: Economists are wrong in their answers to these questions.
Poor Nations Are Writing a New Handbook for Getting Rich – Article (Paywall)
Patricia Cohen, The New York Times, 02.04.2024
Economies focused on exports have lifted millions out of poverty, but epochal changes in trade, supply chains and technology are making it a lot harder.
Who’s Afraid of Price Controls?
Tom Krebs & Isabella Weber, Project Syndicate, 26.03.2024
Although price controls have been widely implemented since Russia’s invasion of Ukraine, mainstream economists remain apprehensive about them. Building up buffer stocks of essential commodities is preferable to relying solely on stopgap measures, but buying time is better than allowing supply shocks to wreak havoc on our economies.
Economic institutes in favour of „a cautious reform of the debt brake“ (Paywall)
Martin Greive, Handelsblatt, 27.03.2024
To get out of the crisis more quickly, Germany should raise the debt ceiling, the economic researchers advise. In extreme cases, this could almost triple the room for maneuver.
Nine figures give Germany´s economy new hope
Julian Olk, Handelsblatt, 25.03.2024
This year will be miserable for the economy for the time being. This is shown by the new forecast of the leading institutes, the results of which are exclusively available to Handelsblatt. However, there are a number of signs that the recovery will soon begin.
We must arm ourselves for prosperity
Moritz Schularick, Spiegel, 27.03.2024
Germany is currently unable to defend itself and the economy is paralyzed. The state should make a virtue of this need and boost growth by spending on defense.
Europe’s High Noon
Harold James, Project Syndicate, 26.03.2024
With Ukraine depleted and overstretched, and with Russia posing a security threat to the Baltics and Europe more broadly, diplomatic and strategic coordination is more necessary than it has been since the end of the Cold War. Yet political leaders in Europe and the United States look too weak to rise to the occasion.
The woman behind Habeck
Gerald Traufetter, Spiegel, 27.03.2024
State Secretary Franziska Brantner is traveling the world on behalf of the Federal Minister of Economics to secure raw materials for German companies. Her aim is to reduce industry’s dependence on China. And encounters unexpected resistance.
The world is warming faster than scientists expected
FT Editorial Board, Financial Times, 24.03.2024
To an extent not widely appreciated, the world is now warming at a pace that scientists did not expect and, alarmingly, do not fully understand. Fossil fuel groups and investors cannot afford to ignore the warnings.
Fascism has changed, but it is not dead
Martin Wolf, Financial Times, 26.03.2024
The 1920s and 1930s were different times but a core of traditional attitudes persists. What we are now seeing is not just authoritarianism. It is authoritarianism with fascistic characteristics.
The Middle-Out Moment Is Here
Democracy Journal, Spring 2024, No. 72.
(A Symposium featuring articles by Nick Hanauer, David Goldstein, Felicia Wong, Todd Tucker, Heidi Shierholz, Jennifer Harris and many more.)
Eleven years ago, this journal published a symposium called “The Middle-Out Moment,” touting a new theory of growth no one had heard of. Today, everyone has heard of middle-out economics, but most people still don’t know exactly what it is. With this issue, we revisit the topic: naming its core tenets, touting its successes, acknowledging its hurdles and complexities—but still arguing forthrightly that this is the economic future the country needs.
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.