Essay: Criticism of the all-round carefree state - economy

One of those mild September evenings in Frankfurt. Garden party, Chardonnay in a glass, tailored suits, ties, jazz band. Bankers, consultants and politicians, journalists. It's the time of the late summer receptions in the banking city, the people from the boardrooms of the glass towers seem relaxed, the financial crisis isn't over yet. After all. After all, the talks are mainly about the horror out there: Russia and the war, inflation and monetary policy, the energy price shock before the hopefully not too harsh winter. The threat situation for Germany's companies and households, whose gas bills are becoming unaffordable. Companies in need, pensioners facing bankruptcy, Germany's economic model: done for the time being.

And again and again, with some familiarization effect since the outbreak of the pandemic: the state as an emergency rescuer. Billions in aid packages, gas surcharge, electricity price cap, energy price flat rate, fuel discount; so many market interventions that it is almost impossible to count them. Ironically, the CEO of a bank is outraged. "I can't believe," he says, "how quickly everyone calls for the state when they're in trouble." He hears that from customers, he reads it with astonishment on the news, and confidants perceive it in the same way. What happened there in Germany, the country of Walter Eucken and Alfred Müller-Armack, the home of regulatory policy?

As soon as there is a crisis, everyone calls for help, even those for whom remote control and tax cuts are otherwise part of their program. The conservative-market-liberal industry association BDI is pushing for lower ones energy prices, to be organized by the state, please: According to the association's president, Siegfried Russwurm, "the German economy is in dire need". The association of family entrepreneurs, known for its constant call for personal responsibility, warns that many companies "may be beyond saving if they feel the full force of gas prices". The newspaper publisher association president and billionaire Springer boss Mathias Döpfner calls for state aid for publishers. Bakers and glaziers are wailing, companies are threatening to move abroad. TUI, Lufthansa and Uniper are just the most prominent examples of companies recently rescued with tax money. The head of the insolvent paper manufacturer Hakle even blames the state: "If we had received state aid earlier, we would not be insolvent now."

"Nobody has to get through this crisis alone," says the Chancellor

The federal government has just decided on the third aid package in the current year, previously 30 billion euros, now another 65 billion, now also with special payments for students and pensioners. Don't forget anyone. "You'll never walk alone" is a new favorite phrase of Chancellor Olaf Scholz (SPD), he says it remarkably often at the moment. "Nobody has to get through this crisis alone, and I stand by that," he recently added.

This can be read as a reinterpretation of a social democratic promise of solidarity. But also with a disturbing feeling: Is full insurance for citizens and companies now a reason of state? Where are the limits of the state economy when the government has dampened the downturn in times of crisis? What is the right balance in the triangle of crisis aid, state control and the maintenance of a market economy model of society? Shouldn't we update ordoliberalism right now, the theory in which the state sets the regulatory framework, protects individual freedoms, ensures competition and otherwise relies on market forces and price mechanisms? Or will the state as caretaker, planner and entrepreneur become the superior concept in the multipolar world of the 1920s?

All of this has not yet been answered. The warnings sound loud, but those who warn offer few new ideas. Stefan Kooths, deputy head of the Institute for the World Economy, and Clemens Fuest, head of the Ifo Institute, have exaggerated and fear "neo-dirigism". According to the textbook definition, that would be an economic model with complete, central control by the state, a planned economy. Germany is still a long way from that, fortunately. Around 1929, the economist Wilhelm Röpke defined the term interventionism, and it fits better: selective state intervention according to set political goals, economic and structural policies; Energy turnaround, traffic turnaround, agricultural turnaround, digitization. The state as an investor and innovator, the state bank KfW as an "innovation and investment agency" (traffic light coalition agreement), climate and transformation funds, special assets of the Bundeswehr. Ex-Federal Economics Minister Peter Altmaier (CDU) called for a new industrial policy: "We want to promote innovative technologies more and protect strategically important areas," he described his intentions in the "National Industrial Strategy 2030".

So the government determines what is innovative and worth protecting. Robert Habeck (Greens) continues this as Economics Minister with a new style. He is considered a fan of the Italian-American economist Mariana Mazzucato, who advocates an "entrepreneurial state". The state has to recreate entire markets, she writes, it should shape them and not just regulate them when they fail. After all, the greatest innovations came about as a result of state investments in the military and aerospace, for example, and only then arrived in the private sector.

A striking number of companies and sectors consider themselves indispensable

In times of crisis, the tendency towards state interventionism typically increases. This also applies to the acceptance of state market interventions, right up to the explicit demand for them. The origin of the new German belief in the state can be located in the financial crisis after 2007. The then black-red federal government threw out life preservers for banks, stabilized the car industry with the scrappage bonus and invented the symbol of the "stimulus package". The concept of systemic relevance, which is heavily overused today, was also coined at this time. At that time, banks were "too big to fail" - so big and important that their bankruptcy could threaten the entire economic system. Similarly, the gas importer Uniper is now too important as a mainstay in the German energy system to be allowed to go under. And in the slipstream of state crisis aid, a striking number of companies and sectors consider themselves indispensable.

This brings back memories of the critique of capitalism during the financial crisis, which was sparked, among other things, by the privatization of profits and the socialization of losses: the banks had made excellent money on deregulated financial markets and distributed bonuses, but troubled the taxpayers when the party was over.

"Where are we actually going if the entire economy believes in good times that it is entitled to the profits and then calls for the state in bad times?" asks Lars Feld, director of the Freiburg Walter Eucken Institute. This kind of claim is impossible. The good times: That was before the war. Germany's economic model - cheap imports of energy and raw materials, high added value, supplying the world with machines and high-quality consumer and capital goods - has been hit hard. The deceptive peace dividend of cheap Russian energy has been scrapped, electricity prices and gas are likely to remain permanently higher than before the war.

The demise of business models is part of capitalism

Acute emergency aid may be justifiable and necessary in order to prevent deindustrialization, mass bankruptcies and unemployment and to moderate the adjustment process (that would be a solid interventionist justification). However, permanently saving business models that only work with cheap energy imports makes no sense. One can safely use Joseph Schumpeter and his theory of creative destruction: A sudden demise of business models is part of capitalism and promotes innovation. This also applies to the destructive force of the energy crisis. It's disappointing when business representatives prefer to talk about the approaching downfall than about how creatively Germany's companies are adapting to the new world situation.

Perhaps the American sociologist C. Wright Mills was right in his sharply formulated criticism of the economic elite's concept of freedom in his essay "Collectivism and the 'Mixed-up' Economy". As a result, the economic freedom with which entrepreneurs call for distance from the state, low taxes and a reduction in bureaucracy is nothing more than a fig leaf to secure their own decision-making power. Because they passed risks and problems on to the general public. According to Mills, "the only way to ensure economic 'freedom' for the entrepreneur is for the state to subsidize him".

That fits. With recourse to regulatory policy concepts, the state also ensures economic freedom by providing and maintaining public goods, guaranteeing fair competition and regulating markets when they are not functioning efficiently. The list is long. A snippet: cracked motorway bridges, Deutsche Bahn and its rail network, the Bundeswehr. climate change and extreme weather. New incentives to expand renewable energies. Demographic change and an immigration concept. The pension question. All of this calls for a state that (as Eucken already demanded) stands above the interest groups, which it is currently placating with rescue and aid packages. A lot stands in the way of an entrepreneurial state according to Mazzucato: four-year legislative periods in the federal government and federalism, different preferences depending on the governing coalition and a correspondingly different degree of influence of interest groups. Consistent state entrepreneurship is hardly possible.

Dealing intelligently with the multiple crises includes a concept for the time after: back to the maxim of setting the state framework while at the same time being skeptical about subsidies. Not only the regulatory policy, but also the communication of the federal government needs an update. It would be better to wean citizens and companies early on from the all-round carefree state. Olaf Scholz could start by changing his new slogan: "Many of you will have to walk alone." And it will be okay.

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