Germany needs a different economic policy. Not more regulation, but the strengthening of the market economy order is the order of the day.
“It is a mistake to believe that one can with impunity leave the field of economic, financial and monetary policy to laypeople who do not have the necessary expertise in the subject, as is done in the Federal Republic.” With this sentence Jürgen wrote Eick almost 50 years ago the first chapter of his book “How to ruin an economy”. Given the occasion, I recently remembered the book by the FAZ editor who was responsible for business at the time and picked it up again. In twelve errors or chapters, Eick analyzes the political and economic conditions in Germany in the early 1970s with a sharp mind and understandable language. Eick writes almost prophetically that everyone feels responsible for economic policy if they can only show an office, a title or another qualification – for example as a writer. The allusion referred to Rolf Hochhuth at the time, Robert Habeck was just four years old at the time.
The second chapter reads: “It is a mistake to think that inflation is a ‘venial sin’ no more than a nuisance. If only because this nuisance is rampant throughout the western world, it’s basically only half as bad.” After reading the other “mistakes” as well, the impression arises that history is repeating itself. According to Eick’s analysis, 50 years ago – in Germany the social-liberal coalition governed with Chancellor Willy Brandt – ideology, unreal world happiness, group egotism, coalition arithmetic, political tactics and manoeuvring. And today?
A rule-bound economic policy based on a competitive order is valued by the traffic light coalition just as little today as it was by the red-yellow government 50 years ago. Instead of trusting the market processes and, if necessary, influencing their politically undesirable result with targeted support of the supply or demand side in the sense of the political goal, pricing and property rights are intervened – both cornerstones of a market economy. Take the housing market, for example, which has always been a popular field of political experimentation: rent caps or even the nationalization of private property will contribute just as little to a larger supply of housing and stable prices as the decision taken by the SPD party congress in Hanover in 1973 to ban the real estate agent profession because it contribute to rising land prices.
In inflationary times, accusations such as usury in rents, usury in interest rates, usury in prices and profits and, when looking at some wage agreements, also usury in wages are quickly raised – and in individual cases they are also true. However, the best means against this are not bans, but market-based ones, namely competition and transparency. This is increasingly lacking: during the years of the pandemic, citizens have become accustomed to the all-responsible and caring state. Germany’s structures have become rigid and momentum has been lost. It will not be further interventions in the market, not ever more detailed planning for all areas of life and not further redistribution that will ensure a new start, but the renunciation of it. If wealth is not to continue to be created on credit, market forces and in particular the supply side must be strengthened. By lowering corporate taxes and improving depreciation opportunities to stimulate investment. By making work and working hours more flexible to allow for more work, for example by combining the option of a 4-day week with the option of longer daily working hours. And last but not least, through investments in education and the digital infrastructure. If this were heeded, a book could be written on how an economy was made to flourish.
The text first appeared in the Börsen-Zeitung on August 5, 2023.