In the autumn of 2021, Germany will have a new federal government that will have to face the socio-economic problems of our time with innovative solutions. These include obsolescence, unsuitable income taxation and digitisation. On May 18, 2021, Dr. Daniel Stelter, founder of the forum beyond the obvious, which specialises in strategy and macroeconomics, and Professor Dr. Achim Truger, Professor of Socioeconomics at the University of Duisburg-Essen and a member of the Advisory Council for the assessment of macroeconomic development, discussed these and other topics. The discussion was moderated by Professor Dr. Henrik Müller, professor for economic journalism at the TU Dortmund. On Global Bridges’ side, Dr. Beate Lindemann and Dr. Hans Albrecht, the executive chairwoman and the chairman of the board, respectively, took part, just as more than 50 members of the association.
After a brief welcome from Dr. Lindemann, Professor Müller gave a brief introduction into the subject. The different views of what constitutes a solid economic policy are caused by the neoliberal, supply-oriented view of Stelter and the view of Truger, which favours macroeconomics and state intervention. First of all, it would have to be agreed upon what the problems are, before one can discuss possible solutions.
At the beginning of his opening statement, Dr. Stelter contradicted Professor Müller and made it clear that he was not neoliberal and did not want a weak state, but a strong one. However, he noted that a strong state does not necessarily have to be a big state. He also noted that he and Professor Truger agreed on many points, so there are similarities between the two of them. He advocated a radical “restart” in many ways, but particularly with regard to taxation.
Dr. Stelter identified a lack of domestic investment and poor investment abroad as major problems. Due to the stable economic situation, the German economy has grown in recent years and has also become more export-oriented. However, this cannot be credited to the government that mismanaged the state funds obtained from it. In his opinion, the state has to be administered more professionally and double-entry bookkeeping has to be promoted in order to get a clear picture of the problems. The next problem is obsolescence and the resulting ever smaller number of people in employment compared to retirees. Possible solutions, such as a slight increase in working hours and greater workforce mobilisation, could, in his opinion, be implemented relatively easily. Regarding the climate restart, he noted that Germany, unlike countries like Great Britain, has chosen an ineffective way to phase out coal, as it is spending billions in taxpayers’ money instead of regulating the phase out with CO2 certificates.
Regarding the unequal distribution of wealth in Germany, Stelter said that the problem is by no means the great wealth of the rich population, but the lack of wealth of the poor, as the rich do not have more money compared to other EU countries. He advocated measures for wealth creation, such as lower tax burdens for the poorer population and simplifying the acquisition of property. In his opinion, the control curve must be made steeper so that an effective redistribution of wealth can take place. He also emphasised that it must always be worthwhile to work more, which is currently sometimes not the case.
The state should also use what he believes to be inevitable debts in the wake of the corona crisis to set up a pension fund based on the Norwegian model. This should pay out € 25,000 to every pensioner who has paid into the pension fund for at least 10 years at the start of their retirement and should also be used to give zero-interest loans to purchase property.
At the beginning of his answer, Professor Truger thanked Dr. Lindemann and Global Bridges for the invitation and professed excitement about the further discussion. He contradicted Dr. Stelter. With regard to the “new start”, he pleaded for a gradual change instead of a radical cut, as the prevailing economic system had handled the last few decades well. He admitted that here is a lot of truth in Stelter’s proposals, but criticised the lack of cost statements and concrete implementation plans. He also noted that Stelter is clearly moving towards neoliberalism, which was part of the economic mainstream twenty years ago but has fallen into disrepute since the 2007 financial crisis and the Euro crisis that followed. This is due to the fact that the weakening of workers’ rights and the welfare state, extensive privatisation and low commercial taxes are not only not economically feasible: in a democratic society, measures that are at the expense of large parts of the population cannot gain a majority.
With regard to challenges such as digitisation and the environmentally friendly restructuring of the German economy, Truger said that the state must play a strong role and that one should not rely on the self-regulation of the market in these points. Massive investments must also be made into education equality, which is an important point for him, since the solution of social problems cannot be left to the market, as is the case with deregulation.
Fear of government debt should continue to be no reason to return to working off debt too early when coping with the corona crisis and solving the aforementioned social problems. Money, and with it a certain amount of government debt, is needed in order to continue to grow economically. In doing so, he urged close cooperation with our European partners. The crisis has, in his opinion, also shown that advancing European integration is essential, simply because of Germany’s international supply chains, which suffered greatly during the crisis, while large parts of the economy noticed little of the crisis due to the strong focus on exports. Furthermore, the EU reconstruction fund should be taken as a positive sign that the EU is in a position to stick together in crisis situations and take meaningful decisions. The EU must pursue better, cross-EU fiscal policy in order to resolve disagreements between the individual member states. For example, in Germany a lot of foreign policy was dictated by the tax office, which led to disagreements with other EU countries.
Following Professor Truger’s lecture, Dr. Hans Albrecht suggested that the state is mismanaging on a large scale and is generally not acting professionally. Professor Truger replied that although there are problems, also with regard to the corona crisis, those responsible in politics have done their best and parts of the problem were caused by the private sector. By and large, the state acted correctly.
Dr. Stelter noted that the jointly planned European debt fund was nothing more than a “repository for debts” that would never be repaid, but that the project certainly offered the possibility of reducing the German national debt to zero and thus opportunities for new borrowing for investment, e.g. in education. The investments of the last few years were not spent on infrastructure or education, but were partly used sine effectu for pensions, migration and the energy transition. He also criticised the hypocrisy of CDU and SPD politicians who were now talking about rebuilding Germany, even though they had been in government for the past few decades.
When asked by a participant which indicators could be used to measure the success of the proposed investments, Stelter replied that, for example, the “World Happiness Report” could be used. He also noted that Germany is doing relatively well in an international comparison, but on the one hand there are many countries from which Germany can learn, on the other hand Germany is not ready for the upheavals of the future and, overall, thinks and acts little to prepare for the future. As an example, he cited the high numbers of school dropouts. Germany is not educating its ever-shrinking working population well enough, and this means that the pensions of the ever-growing group of pensioners are not adequately protected. In an international comparison, there are certainly countries that are better off than Germany, such as the Nordic countries, where there is inequality but the pensions of the employed are secured.
When asked what would happen if Germany could no longer contribute to the EU’s debt capacity, Dr. Stelter said that the Euro was unlikely to end because of debt sustainability issues. It would rather come to a politically conditioned end if, for example, Italy no longer wanted to make its financial policy dependent on the EU or the Dutch no longer wanted to play donors after the transfer union has been set up. In his opinion, that will not happen until the 2030s, if at all.
Subsequently, Dr. Albrecht criticised the monetary policy of the ECB, which devalues the savings accounts of the German population and the TARGET2 accounts of the EU, into which Germany pays by far the most, by printing money. He advocated better uses for the money that has to be invested instead of putting it in “election gifts” such as maternal pension. In countries like Italy, the reconstruction fund is also being exploited by mafia-like structures that dishonestly let loans slip into their own pockets. At this point, Professor Truger remarked that although the inflation rate had risen recently, it had been too low before that. He also referred to a report by the Council of Economic Experts on the assessment of macroeconomic development, according to which the current inflation rate will soon fall again. Dr. Stelter, on the other hand, predicted a return of structural inflation as a result of demographic developments and the coming, massive investments in the energy transition.
One participant then asked why high posts in the EU have been filled almost exclusively with French in recent years, for example those of the Council President and the President of the ECB. Another participant replied that the German reluctance in those matters has greatly helped Germany’s image within the EU, which was in stark contrast to German policy in the years before and during the Second World War, in which the Germans made themselves unpopular. If Germany were to stand out all the time, there would be great unrest in the EU, which would ultimately harm Germany.
Professor Truger and Dr. Stelter were both of the opinion that the Euro has various problems due to the non-statehood of the EU and the consequent limited implementation opportunities for monetary policy measures. Stelter elaborated on this by saying that while Germany levies higher taxes in order to further reduce its relatively low debt level, there are many countries in the EU that continue to make debt with significantly higher debt levels. In his opinion, you have to take on more debt and not increase taxes so that the wealthy population of Germany does not move to other EU countries to pay a significantly lower tax rate there. The planned debt repayment fund, in which the national debts of the individual countries will be pushed on to the EU itself, is a good way to take on new debts with a now sharply reduced debt burden and, among other things, to set up the aforementioned pension fund based on the Norwegian model. This is the best way to create prosperity for the German population and to tackle the problems of the future.
The current account surplus in Germany, mentioned by one participant, was also criticised by Dr. Stelter and Professor Truger, with Dr. Stelter advocated creating incentives to invest more money domestically with the aim of balancing out the surplus.
At the end of the discussion, Professor Müller and Dr. Lindemann thanked those present for their participation.