Dhe pandemic and Russia’s criminal war against Ukraine are also associated with considerable challenges for the economy in Germany. There was no lack of forecasts of decline or even downfall in the home country of “German Angst”. Temporarily, the impression could arise that business and its lobbyists are primarily trying to get help and guarantees from the state – a state that they prefer to keep at a distance in better times.
With the founding of a new concerted action, the old German corporatism seemed once again to go into a wagon camp in order to isolate itself from external expertise and external criticism. One of the great strengths of the open society is that it brings together decentralized knowledge.
As an interim result, the German economy has so far come through these difficult times better than feared. A major reason is the largely underestimated adaptability of companies. That shouldn’t come as a surprise: in an economy that has been doing well for a long time and in which a lot of good money could be made, it is easy to create efficiency reserves that can be mobilized in difficult times. The swan song for the German economy was just as premature as the swan song for globalization.
The challenges persist
The challenges for the economy do not end there. In this way, it must be possible to bring about a reconciliation of successful economic activity with climate neutrality. This goal can be achieved neither with moralizing know-it-alls nor with socialist rationing business games, but rather with a market economy strategy based on innovation and openness to technology.
This applies not least to the large consumers of fossil fuels in developing and emerging countries. These countries, whose governments cannot simply say goodbye to the goal of material prosperity, are more likely to benefit from innovation on the way to a less climate-damaging economy than from the activism of people who are glued to the ground in rich countries or who pelt paintings with soup.
The great transformation of the coming decades will take place in the midst of a world economy characterized by global competition and increasing scarcity of resources in Europe. Demographic change will not only significantly reduce the supply of often highly qualified and ready-to-work workers in Europe. Since an immigration policy geared primarily to the needs of the labor market has remained foreign to Germany and large parts of Europe, the declining supply of labor would have to be offset from an economic point of view by considerable advances in productivity.
Narrowed scope for fiscal policy
This is not improbable: there are episodes in history in which a shortage of labor promoted technical progress. This connection may apply all the more to the present because the digital revolution has not yet unfolded its full potential. However, the economic exploitation of technical progress requires a political framework that does not throw obstacles in the way of companies with excessive regulation.
In addition to the scarcity of labor as a production factor, there is narrowing scope in financial policy, which, from the point of view of the market economy, does not require any complaints. The return of inflation reduces the ability of monetary policy to help governments finance spending through government bond purchases; In addition, there is less leeway in the state budget due to increasing interest payments.
Nation states and the European Commission should bid farewell to fantasies about debt-financed large-scale programs that represent state activism rather than wise use of scarce resources. A policy that, for good reason, considers a European capital market to be sensible should finally create the regulatory prerequisites for a capital market union instead of distributing funds with the watering can. The economic transformation that is currently under way poses major challenges not only for the economy but also for the state. You have to worry far less about the economy.
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