It is time for a “new, modern regulatory policy”, one should reform the state and its institutions and give them more space in our economic system in order to strengthen both: This view was recently expressed by the President of the German Institute for Economic Research, Marcel Fratzscher this place.
In practice, it looks different. The plea for more state can hardly be signed as a creator in this country. We have widespread failure in office at all levels. The building authorities are a prime example. But one after anonther.
With regard to the social injustice in Germany, which has been emphasized again and again, Fratzscher cites figures on the low-wage sector. This is one of the largest in Europe. But maybe the term “low wage” doesn’t fit in a European comparison, and certainly not in an international comparison. Many jobs in Germany that were particularly labor-intensive have migrated to other European countries, precisely because Germany is a high-wage and not a low-wage country.
This is good news because we have mostly been able to replace low-paid work with higher quality work. Our company was also desperately looking for workers before the pandemic and had to realize that work has become noticeably more expensive – and that the craft is desperately looking for trainees is unfortunately no longer news.
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But you can throw figures that only measure relative poverty into the room in order to intimidate the representatives of the market economy. We already know this rhetoric from the German poverty report. But poverty is not a mass phenomenon in Germany.
We don’t have a market failure
We have never experienced a market failure, but what we (still) have in the market economy has brought people to work and has so far been able to provide for all immigrants.
The cautionary example of alleged market failure in the financial crisis of 2008 and 2009 is repeatedly misquoted. The origin was not in neoliberal dogma, but in a socio-political objective that the American government and the US Federal Reserve had set: As part of a large social program, the idea was to be realized that every American could afford a home.
Accordingly, loans could also deliberately be granted to people who were actually not creditworthy. The money for this had to be cheaper than ever and the credit default risks had to be calculated as small as possible. Of course, the financial system responded to this trend. And since there was a lot of money in the market, financial jugglers also appeared.
If default risks are no longer properly assessed, then financial crises are often the result. I am absolutely in favor of controlling dubious financial derivatives, they shouldn’t even come onto the market. However, we have to remain fair when assessing the cause of the last financial crisis: the market mechanisms were interfered with to such an extent that risk and liability were separated from one another. In a neoliberal capitalism in which credit still has a properly valued price, that cannot happen at all.
Secondary school students do not fall by the wayside
On Fratzscher’s thesis of a lack of educational opportunities in Germany: What does this actually have to do with market failure? Our predominantly state education system is in need of modernization, but in its current structure it could already do a lot more. But the problems in the education system have nothing to do with social inequality.
If you do not recognize this, you are starting in the wrong place. Teachers need to develop more commitment again to lead their students to their goals and to give them a sense of responsibility along the way. Perhaps more competition and a more liberal market would do us good.
For the political goal of social justice, we should primarily work on giving all students a school leaving certificate.
Secondary school and junior high school students don’t fall by the wayside either if they are ready for action and the economy is not going crazy. On the contrary, the income prospects for German apprenticeships are very good, the content of the training is superior to many of the programs that go through as a degree abroad. It is therefore wrong and unrealistic to use the number of high school graduates and university graduates from educationally disadvantaged families as the main benchmark for a socially just education system, especially in an international comparison.
I can agree with Mr. Fratzscher regarding the caution with regard to the agglomeration of market power. As a convinced market economist, I prefer atomistic structures. In a common economic area, there is also monitoring by antitrust authorities. The European Union does not seem to have taken a step into world politics. In fact, the dominance of the big tech companies is a thorn in the side of politics on several continents. But the wrong conclusions should not be drawn from this dominance either.
Fortunately, we have built up reserves
Combating climate change, for example, is inconceivable without the variety of technical solutions that can only flourish in a liberal economic system. Of course, there are also large, visionary development steps such as the hydrogen-based energy supply, which is associated with huge research investments. If this technological development is the right one, it will not work without state start-up funding.
However, the legally independent and private companies should be responsible for implementation again very quickly. This is the only way to guarantee competitive implementation, high implementation speed and, above all, efficient allocation of resources. All of this must be the basis of the European Union’s Green Deal strategy. Otherwise we run the risk of taking over financially to a large extent.
Finally, on the subject of state support in the pandemic: Of course, the state supported companies, and of course many companies would not have made it temporarily without the state. But that’s not an argument against a market economy. If the state abruptly pulls the plug in the form of lockdowns and thus seriously changes the rules of the game, then it cannot simply leave companies out in the rain financially. In connection with the pandemic, one thing is clear: saving human lives comes first.
Fortunately, the social market economy system had built up reserves in previous years in order to be able to afford the financial aid in the pandemic – that we are now overworking ourselves is another issue. Overall, the question arises to me: Why should we need even more state, especially against the background of the pandemic experience?
The author: Natalie Mekelburger is chairman of the board of the Coroplast Group in Wuppertal.
More: What entrepreneurs really need from the future federal government.