However, the annual economic report is a work of the entire federal government. The Ministry of Finance in particular traditionally has a say. There was a lot to talk about this time: In the now unified annual economic report, which is available to the Handelsblatt and which Habeck will present on Wednesday, some of the green paint had to give way.
As early as December, when the contents of the draft leaked from the Ministry of Economic Affairs, displeasure could be heard from Finance Minister Christian Lindner (FDP). Clearly, the Liberals have successfully intervened on many fronts. It starts with the title of the report.
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In December, the more than 100-page paper was titled “to want to further develop the regulatory framework in a climate-friendly manner”, but now it simply says: “For a socio-ecological market economy”. While the focus was initially on the rules for taming the market, the focus is now on the market itself.
This can also be seen in many other places in the report, especially in the introductory chapter on the basic structure of the social market economy. In the December draft, market intervention was still a standard tool in the repertoire of economic policy:
“The central point was the realization […] that the social balance is not neglected and that undesirable developments in market forces are corrected.”
A few weeks later it is only necessary to intervene in the market in individual cases:
“At the heart of the concept [steht] the requirement […] that the market economy process itself leads to socially balanced growth, so that a subsequent correction of the market results by the welfare state is only necessary to a very limited extent.”
It is these nuances that should say a lot about traffic light economic policy over the next four years. According to the Düsseldorf economist Justus Haucap, the coalition will continue to try to demonstrate the unity between green regulatory policy and a liberal market economy. “But one thing is clear: In everyday economic policy, this will rarely work easily and will always fail.”
Don’t just measure prosperity by growth
This discrepancy between a fundamentally common direction and different approaches is clearly evident in the annual economic report. At first glance, there are hardly any differences between the draft and the unified version. The division of the chapters and their headings are all exactly the same as five weeks ago.
The new special chapter on prosperity also appears as planned. The SPD, Greens and FDP had already announced in the coalition agreement that they no longer wanted to measure prosperity in the annual economic report solely by the growth in gross domestic product (GDP).
Instead, the traffic light wants to establish new indicators of prosperity. In the annual economic report, the Gini coefficient is a measure of income inequality and an innovator rate.
But there were obvious differences between Habeck and Lindner when it came to the influence of these values on future economic policy. In the December draft, the annual economic report coupled the need for the new indicators with obvious criticism of growth:
“This also raises the societal question of whether and to what extent a further and steady increase in material per capita consumption is preferred by large parts of the population to other goals or whether, in case of doubt, other goals of sustainability and justice are considered more important by the majority will.”
The unified version does not question the fact that the new prosperity indicators should also play a major role in the Lindners’ house. But the growth criticism is missing:
“The aim is to use suitable welfare indicators to specify and update the orientation framework for our economic growth to ensure sustainability and social cohesion in the political process, while reliably limiting the use of nature and decoupling it from economic growth.”
Elsewhere, too, there is not much left of turning away from growth as the most important creed. While the original version said that some business models would no longer pay off with the conversion to a socio-ecological market economy and that “entire economic sectors could shrink noticeably”, this passage does not appear in the new version at all. The term “shrink” no longer appears on any of the 109 pages.
Invisible Hand became invisible
Likewise, in the design of climate protection, the “failure of the ‘invisible hand’ of the market” was deleted without replacement. Habeck’s Ministry of Economics had coupled the criticism of growth and market dependence with complaints about the system:
“Rather, capitalism in general and the German social market economy still lack a systematic anchoring of sustainability goals.”
The open criticism of capitalism would certainly have given Realo Habeck applause from the left wing of the green base. But apparently he had not reckoned with his cabinet colleagues. Because now it says in the same place in the annual economic report:
“Not least after the adoption of the 2030 Agenda by the United Nations, the economic and financial policy of the Federal Government has been aimed at more sustainability in many areas for years.”
The concept of capitalism was deleted from the entire report without replacement.
Financial harmony
In the first few weeks, the traffic light signaled surprising unity in fiscal policy. Habeck, Lindner and the other members of the government never tired of explaining the usefulness of the €60 billion supplementary budget for climate investments that went beyond the debt brake, which was decided at the end of the year.
The Greens and FDP in particular were still far apart on this issue in the election campaign. The Greens wanted to reform the debt brake, the FDP by no means. The trick now used to create leeway outside of the debt brake represented a compromise.
In view of the annual economic report, it is questionable whether this willingness to compromise can be maintained over the entire legislative period. In the early version, the influence of the Greens was clear:
“In terms of financial policy, this (editor’s note: intergenerational justice is meant) is already taking place in part through the constitutional debt rule, even if considerations to give greater consideration to the ecological transformation costs here are indicated.”
In the unified version, it sounds completely different:
“Financially, this is guaranteed by the constitutional debt rule, which has proven to be sufficiently flexible to maintain the federal government’s ability to act even in crises.”
Union no longer considers the report’s legal mandate to be fulfilled
Despite all the adjustments, it is an annual economic report that Germany has never seen before. The criticism of growth and the market economy is less obvious, but shines through in many places.
That doesn’t go down well with the opposition. A statement by the Union faction states that all content in the report is subordinate to ecological goals, including growth. “Strictly speaking, the report is no longer an annual economic report, but another sustainability report,” says the paper, which is available to the Handelsblatt.
Habeck will of course see things differently at the presentation on Wednesday, after all, for him, economy and sustainability have to go hand in hand. The extent to which he will be able to implement this depends on the extent to which he can convince his coalition partners and, in particular, Finance Minister Lindner.
More: Habeck’s balancing act – How the minister wants to inspire business for his climate protection policy