The future of the German model – a preview of the workshop-highlights
News on inequality, a new German industrial policy, the end of the debt brake - and an exclusive survey on the crisis of capitalism. A guided tour in advance.
PUBLISHED24. SEPTEMBER 2020
READING TIME6 MIN
When Germany celebrated its unity almost exactly 30 years ago, author Francis Fukuyama now also imagined the end of history – in which democracy and market economy as the best of all solutions prevail without alternative. What followed the fall of the wall was a march through of capitalism – with several further deregulations and an ever more erroneous belief in the omnipotence of the markets.
Thirty years later, this very capitalism is in a deep crisis of confidence. More than half of the people worldwide say that in its present form it is not suitable to solve the big challenges – whether climate crisis or drifting apart of societies. And doesn’t Germany also need to overhaul its economic model?
And now? All this will be the focus of our workshop on the “Future of the German Economic Model” in the coming days – with exclusive studies and contributions from Thomas Piketty and Mariana Mazzucato, a discussion between Nobel Prize winner Joseph Stiglitz and Federal Minister of Finance Olaf Scholz, a keynote address by SPD leader Norbert Walter-Borjans and comments by Veronika Grimm from the German Council of Economic Experts. To name but a few.
Day 1 – the systemic question – Monday, September 28
As a survey has shown, which we have commissioned exclusively from Forsa in advance – and which we will present on Monday at the start – even after many years of falling unemployment in Germany, a significant number of people express the wish that the current economic system should be fundamentally renewed. Hardly anyone says that everything in the system should remain as it is. Why is that so? And to what extent is capitalism in need of reform 30 years after its triumphant advance? This is what SPD leader Norbert Walter-Borjans will discuss on the starting panel with Johannes Vogel from the FDP, Lisa Paus from the Greens and Dalia Marin, professor of economics in Munich. Moderated by Ulrike Herrmann, author of the book “Kein Kapitalismus ist auch keine Lösung”. Monday, starting at 3 pm.
Whether our economic model should continue as it is today also depends to a large extent on the question of how well Germany’s economy will recover from the corona pandemic – what damage it will suffer, and how strongly the structural upheavals, such as the transformation to a climate-friendly economy, will impact afterwards. The second panel on Monday will feature Marcel Fratzscher, President of the German Institute for Economic Research, Holger Schmieding, Chief Economist of Berenberg Bank, Parisian analyst Véronique Riches-Flores, and Maja Göpel from the New Institute. Monday, starting at 5 p.m.
The systemically important question of the role of the state and the market in the Corona Pandemic 2020 has become an unexpectedly explosive issue. How much should and had the state help when sales in several sectors collapsed in the spring? Putting together billon packages. Getting in with corporations. And what does the current crisis teach us about a new understanding of the state that we might need again in the long term after years of market dogma? The keynote speech by Federal Health Minister Jens Spahn, one of the politicians who has been more preoccupied with the question of state effectiveness than anyone else in recent months. Very practical. Monday, starting at 6 p.m.
Day 2 – The Future of the German Economic Model – Tuesday, September 29.
The Inequality Question
For a long time, Germany was considered a model of social equalization. But since the 1980s, incomes have drifted so far apart that the state has to spend more and more to even out the gap. Meanwhile, the gap between the top wealthy and the bottom half has increased from 50 to 100 times. And: according to a survey we commissioned, about half of Germans say that social equalization no longer works. To determine how to reverse all this most efficiently, it is important to find out what the main drivers of inequality are – the subject of the second study we commissioned as part of a project of the Forum New Economy with the DIW; and whose exciting results Charlotte Bartels will present. Main focus: to what extent has the skyrocketing of real estate prices led to a further drifting apart in the country, especially between homeowners and renters? The study will be discussed on the panel by Andreas Peichl of the Ifo Institute and Lucas Chancel of the World Inequality Lab from Paris. Tuesday, 9:15 a.m.
Piketty and the German Ideology
Will Europe end up failing because Germany has a different economic ideology than France, Italy and Spain? Thomas Piketty counters. In his keynote address via Zoom, he will explain why, historically speaking, the Germans have always been much more flexible and innovative than the supposed ideological divides would suggest. For Europe today, he says, this could be a great opportunity. Agree or disagree? Veronika Grimm from the German Council of Economic Experts and Moritz Schularick from the University of Bonn and INET will discuss this with Piketty afterwards. Tuesday, starting at 10:30 a.m.
Fiscal policy beyond the debt brake
Germany’s long adherence to the black zero is considered exemplary. Yet basing fiscal policy on rigid targets for budget balances has its pitfalls, write Michael Hüther of the Institute of the German Economy and Jens Südekum of the University of Düsseldorf in a new study for the Forum New Economy: too little investment and a one-sided burden on local authorities. And: the mistakes threaten to be repeated when it comes to reducing the increased debt after the Corona crisis. Hüther and Südekum present a new model for fiscal policy -a departure from the old fiscal paradigm. What do others think of it? On the panel: Christian Kastrop, sort of the father of the debt brake, Guntram Wolff (Bruegel), Eric Longergan (M&G Investments) and Daniela Gabor (UWE Bristol). Tuesday, 11:40 a.m.
Another stimulus package?
It remains to be seen whether Germany’s economy is reliably on its way out of the crisis. The next shock could come in winter. That makes it all the more important to explore what would help in the crisis then; and how economic stimulus packages could be better reconciled than in the past with the goal of thereby also addressing long-term challenges such as climate change. Together with the IMK, we have developed a matrix to help test the double efficiency of such measures. A model experiment. Presented in our “Speed Dating” by Sebastian Dullien and Silke Tober. Discussed by Gerhard Schick of Bürgerbewegung Finanzwende. Tuesday, starting at 1:45 p.m.
Away from the export bias
One of the German peculiarities that has been criticized most frequently over the past ten years or more is undoubtedly Germany’s huge export surplus. But what should Germany actually do to make the balance more balanced? Are there historical examples of countries that, in peacetime and willingly, have eliminated such imbalances? And how can domestic demand be strengthened in the long term so that more imports are made – especially since no one seriously wants the solution to lie in reducing exports? Answers to these questions are provided by Achim Truger from the German Council of Economic Experts, Till van Treeck from the University of Duisburg-Essen and Jan Behringer from the IMK in a draft study for the Forum New Economy. Presentation on Tuesday at 2:15 p.m. Discussants: Allianz Chief Economist Ludovic Subran; Matt Klein, co-author of the highly acclaimed book “Trade Wars are Class Wars”; Heike Joebges from HTW in Berlin. Chair: CER Chief Economist Christian Odendahl.
For a new German industrial policy
In the Sunday speeches of the ordo-liberals, industrial policy in Germany is taboo. In practice, it has been practiced for a long time, write Mariana Mazzucato and Rainer Kattel in a study prepared exclusively for the Forum New Economy. In the future, it will be much more important to better coordinate this industrial policy – and to focus it on fixed missions. For example, the transformation to a climate-neutral economy – with all that that could mean for German industry. Mazzucato and Kattel present what a new model might look like – via Zoom on Tuesday from 3:45 p.m. And what the Germans think of it – can certainly be gauged from what the highly relevant panelists say: Philipp Steinberg, the chief economist at the Ministry of Economics; Klaus Deutsch from the BDI; Patrizia Nanz, head of the Franco-German Future Work; and Jens Südekum, one of Germany’s most renowned experts when it comes to industrial and regional policy.
German economists – back from orthodoxy?
Internationally, there has been a lot of criticism in recent years about how orthodox economic policy is still made in Germany. Are German economists different? Or is the image long outdated anyway? Jakob von Weizsäcker, Chief Economist of the Federal Minister of Finance, the Frenchman Jean Pisani-Ferry, the Briton Anatole Kaletsky, Nora Szech from the University of Karlsruhe, Rüdiger Bachmann from the University of Notre Dame and Anna Reisch from the Future Department discuss this.
Joseph Stiglitz in conversation with Olaf Scholz
For many years, Nobel Prize winner Joseph Stiglitz was one of the harshest critics of Germany’s financial and euro policies – and the dogma of austerity, symbolized by former German Finance Minister Wolfgang Schäuble. Now, in the Corona crisis, Germany has reacted more quickly and more massively than almost any other country, suspending the debt brake – and even ensuring a new unorthodox course in euro policy with France. Under German Finance Minister Olaf Scholz. What Joe Stiglitz thinks of the supposed new policy – he wants to say in his keynote. To then discuss it with the Finance Minister. Does Europe stand from a new common financial policy? How should Germany now deal with the high debts from the Corona crisis? When should the black zero be back – if ever? Moderated by Nicola Brandt of the OECD. Tuesday, from 6:30 p.m.
Day 3 – Wednesday, September 30
Future of the populists
One of the political Corona trends of the year is that populists seem to be losing ground. This is true for Donald Trump and Boris Johnson. But it also appears to apply to the AfD in Germany, which has lost heavily in polls. Recent surveys also suggest that populist positions were already losing support before the Corona shock. Will the AfD continue to lose ground on its way to the Bundestag elections? Or is there reason to expect new waves of populism in Germany? The answer will depend heavily on which deeper reasons for protest voting behavior turn out to be decisive. These questions will be discussed on Wednesday’s first panel by Anke Hessel of the WSI, Gustav Horn, author of the recently published book on the economic causes of right-wing populism, Thiemo Fetzer of the University of … and Robert Gold of the Kiel Institute for the World Economy. Wednesday, 9 a.m.
Speed Dating – On the Ups and Downs of Market Liberal Narratives
History shows: what is decided in terms of economic policy at particular times depends heavily on what has become established as a leitmotif or paradigm. In the decades from the end of the 1970s onward, this paradigm was strongly market-liberal in Germany – as it was even more so in the United States and Great Britain. The power of such paradigms can be measured by the ups and downs of corresponding narratives and buzz words, as Nobel Prize winner Robert Shiller has pointed out. In a scoping analysis, we tried to find out which words these are in Germany – and how often they have been used in recent decades. To do this, following Shiller, we used Google Ngrams as a tool that counts the use of words in books – with remarkable initial results. Almost all market-liberal buzz words seem to have peaked in one and the same year – before going steeply downhill. The end of a paradigm? Which year is that? Resolution by Thomas Fricke and Anne Zweynert de Cadena – on Wednesday at 10:45.
On Germany’s future role in the euro area
In the euro crisis, there was a lot of international criticism that Germany helped too little and too late. This time, the German government has launched one of the fastest and largest economic stimulus packages, waved through the ECB’s intervention – and for the first time agreed to take on joint debt to finance the recovery fund, even taking the initiative with France to do so. Is this enough to keep the euro zone stable – in a possible second Corona wave and beyond Corona? What role should Germany play in the long term? How can the contradiction between the German government’s policy and the ruling of the Federal Constitutional Court be explained and resolved? And what would be necessary to prevent the next crisis from escalating in the first place? Martin Wolf (FT), Clemens Fuest (Ifo), Philippe Legrain (Open Political Economy Network), Maria Demertzis (Bruegel), Antonella Stirati (Roma Tre Universitat) and Lucas Guttenberg (Delors Centre Berlin) will discuss this in a European conference. Moderated by Mark Schieritz (DIE ZEIT). Wednesday, from 11:30 a.m.