Dhe summer break gives the political actors in Berlin the opportunity to position themselves for the second half of the current legislative period. The federal government wants to place greater emphasis on economic policy. That is a noble goal. Neither the Chancellor’s assurance that Germany is on the verge of a new economic miracle, nor the Federal Minister for Economic Affairs’ assurance that the traffic light policy serves to restore prosperity has so far been able to convince a majority of the population.
Economic policy in this country needs a fundamental reorientation. As the Heating Act shows, the government relies far too much on paternalism and detailed regulation. The state subsidizes individual settlements of large companies with large amounts, about whose future viability in Germany no judgment can be made. The government speaks of a German pace, while not only the companies suffer from the regulatory backlog of growing bureaucratization in the country.
Ideas that lead to a crash landing
Intoxicated by the Americans’ Inflation Reduction Act, some in the government are dreaming of large-scale subsidies for supposedly promising sectors of the economy, and the European Commission in Brussels is happy to join in the dreams. Social Democrats and Greens are inspired by the visions of the economist Mariana Mazzucato, who, recalling the American moon program, advocates large-scale state intervention in favor of capitalist reform. But instead of flying to great heights, these ideas lead straight to a crash landing.
With a critical examination of the Inflation Reduction Act, the German Council of Economic Experts recently showed how economic policy should be pursued with one’s feet on the ground instead. The experts assess its overall economic consequences for Europe as minor; its importance for location decisions by European companies should not be overestimated.
The Council has good reason to warn of a transatlantic subsidy race. Instead, the experts advocate more free trade, a more efficient and less bureaucratic use of state subsidies and a more effective policy to secure raw materials.
In addition, the Council advocates an energy policy that levels out price differences that are disadvantageous for local industry. Meanwhile, the federal government is shutting down the last nuclear power plants and wants to support the industry with another subsidy (industrial electricity price), accompanied by applause from lobbyists.
It counts as little paternalism as possible
A future-oriented economic policy must above all work for a stable regulatory framework, in which climate policy goals can also be taken into account. Within this framework, companies and consumers should be regulated, supervised and patronized as little as possible.
Complaints from business about bureaucracy are of course old, but the complaints have reached such proportions, and not only in companies, that modernization of state activity seems urgently needed. A CO2-Price plus financial compensation for the needy is far better suited as a framework for an economically future-oriented and ecologically effective policy than any patronizing detailed regulation.
Giving the economy more room to breathe could also contribute to much-needed productivity growth. Because the populous baby boomers are increasingly leaving the labor force, many millions of hours of work will be lost in the coming years.
Compensation through increased employment of residents is not evident; However, any significant immigration of skilled workers threatens to fail due to political and increasingly social blockades. Where possible, this will increase the demand for automation and artificial intelligence in companies.
The fact that this country is not moving forward is not due to a lack of money. The money is used inefficiently at best. Germany lives on its substance because many people attribute knowledge and skills to the state that the state does not possess. The state, in turn, tries to win the future with unsuitable concepts from the past. Instead, one could try the social market economy.
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