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Ideological dispute over economic methods: What do Lars Feld, Marcel Fratzscher and Veronika Grimm stand for?

2021-02-25T14:08:15.343Z

The five economic modes are likely to shrink to four over the weekend: The grand coalition has got caught up in the dispute over a new appointment for the advisory body. It also deals with ideological issues.



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There were still five: The Council of Experts in its (still) current line-up with Achim Truger, Veronika Grimm, Lars Feld, Volker Wieland and Monika Schnitzer

Photo: 

dpa / council of experts

If the Berlin politicians were to deal with the reports of the economic experts in as much detail as they are currently doing with the staffing of this advisory body, the economists would certainly be happy.

For weeks, the black-red coalition has been arguing about who should belong to the body in the future.

Lars Feld's second term of office, chairman since March last year, expires on February 28th.

And it looks like his position will remain vacant for the time being.

SPD Finance Minister Olaf Scholz does not want to grant Lars Feld another term of office.

The CDU and CSU, on the other hand, reject Scholz's counter-proposals, the economists Marcel Fratzscher and Jens Südekum.

The tone is sometimes shrill: CDU party leader Armin Laschet is said to have called the SPD chancellor candidate "Apparatschik of the SPD" in a parliamentary group meeting and accused him of "arrogance and ignorance" on Twitter.

Of course, these are partisan skirmishes in the run-up to the general election.

But there is more to it than that: It is also about the future content of economic policy - for example, the question of whether and when the debt brake currently suspended due to the corona crisis should be sharpened again.

And last but not least, it is about ideology.

Because economics has always been a political science.

In contrast to the natural sciences, there are only a few truly irrevocable laws.

And with it a lot of leeway for political interpretation.

Whether the original liberal Adam Smith or the communist Karl Marx - they were all economists, albeit with very different worldviews.

It is no longer quite as polarized today - neither in the economic debate nor in the Expert Council for the Assessment of Overall Economic Development (SVR), as the body is officially called.

In the past few decades, the more conservative-liberal positions dominated there.

But something could change now.

At least a bit.

How is the board made up?

And how could the Council change in the future?

An overview of which positions the protagonists stand for.

The controversial boss

Icon: enlarge Photo: Patrick Seeger / dpa

Lars Feld

is not only the previous chairman of the economy, but also something like the ordoliberal conscience of the council.

Ordoliberalism is a German variant of neoliberalism that was founded in the 1930s by scientists working with Walter Eucken and whose ideas were also partially adopted by the then Minister of Economics and later Federal Chancellor Ludwig Erhard (CDU) - keyword »social market economy«.

In contrast to classic laissez-faire liberalism, ordoliberalism is about embedding the free market in a rule-based order.

The state sets the basic rules, but otherwise holds back.

This school of thought has shaped German economics for decades, but has been considered a marginal phenomenon internationally since the financial crisis of 2007 and 2008 at the latest.

Feld, who heads the Walter Eucken Institute in Freiburg, is a staunch advocate of solid state finances and was already involved in the conception of the so-called debt brake in the noughties, which is now anchored in the Basic Law and which strictly limits the annual borrowing of the federal government and the states .

The conservative with a moderate tone

Icon: enlarge Photo: Peter Kneffel / dpa

In the dispute over the composition of the Advisory Council, Lars Feld's fans often portrayed the economist as a kind of "last bulwark" of ordoliberalism.

Monika Schnitzer

must have overlooked them.

The competition expert perfectly fulfills the profile that the Union and FDP want: Schnitzer is campaigning for an increase in the retirement age.

She is extremely critical of debts and government interference in the economy.

However, even if the suggestions for it come from the conservative camp.

The professor at the LMU Munich also spoke out against an increase in purchase premiums for electric cars, as the Bavarian Prime Minister Markus Söder (CSU) wanted.

Schnitzer recently told SPIEGEL in an interview that once the corona crisis was over, the "debt level would have to be reduced quickly."

In 2005 Schnitzer was one of the signatories of the "Hamburg Appeal", in which more than 200 professors called for drastic cuts in the welfare state.

At the same time, Schnitzer has a different tone than many of her - mostly male - predecessors.

The style of the SVR reports has changed, she says.

She claims that "the statements on some topics no longer sound so apodictic."

The comrade of the trade unions

Icon: enlarge Photo: Stefan Boness / Ipon / imago images

Achim Truger

is the left among the wise.

When he was nominated for the Expert Council at the beginning of 2019 at the suggestion of the trade unions, there was similar excitement as is currently around Lars Feld.

The liberal economist Justus Haucap described him as a “scientific lightweight”, Lars Feld put Truger's scientific approach “directly into question”, as he wrote on Twitter at the time.

The accusation against Truger: He had too few publications in well-known academic journals.

In the meantime, peace has returned to some extent in the Council of Wise Men - but ideologically, Truger remains an outsider there, who, like his predecessor Peter Bofinger, repeatedly attracts so-called minority votes in the council's reports.

If the council wants to cut government spending, for example, SPD member Truger argues that it is more likely to increase taxes or incur more debt.

In doing so, he follows the doctrine of Keynesianism, which - referring to the British economist John Maynard Keynes - aims to stimulate the economy by increasing overall economic demand.

In practice, this usually means that the state should spend more money, for example through economic stimulus programs.

The man of the employer

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Volker Wieland

is the man for interest and currencies on the Advisory Board.

At a young age, he got to know the practice of monetary policy on the staff of the legendary US Federal Reserve Chairman Alan Greenspan.

He is now Professor of Monetary Economics at the Goethe University in Frankfurt.

Ideologically, Wieland is most likely to be assigned to ordoliberalism, which Feld also represents.

For example, Wieland has repeatedly criticized the purchases of government bonds by the European Central Bank (ECB).

In contrast, he considers the German debt brake, which is currently the subject of particularly intense debate among economists, to make sense.

Such attitudes have already caused political anger for Wieland.

When his mandate was due for extension in 2018, the SPD had reservations, but ultimately gave in.

Wieland has the support of the employers' associations.

Like the trade unions, they are traditionally allowed to appoint a member of the Expert Council.

However, all wise men are formally appointed by the Federal President at the suggestion of the Federal Government.

Wieland's second term expires in early 2023.

Then there could be the next dispute about the replacement.

The climate protector

Icon: enlarge Photo: Timm Schamberger / dpa

For a long time, the Council of Economic Experts was a mirror of the traditional distribution of economic interests in the republic: Conservative economists wanted, above all, booming growth (vulgo: bubbling corporate profits), trade union representatives higher wages and more participation.

The world has become more complex, however, and that - late, but at least - was also reflected in the committee.

Veronika Grimm was promoted

to the Advisory Council together with Monika Schnitzer in 2020.

Two women on the council, that was a novelty.

In terms of content, the advisory committee is now much broader with Grimm.

In addition to growth, profit and distribution, it brings another dimension: sustainability.

Grimm is an expert in climate economics and has made a name for herself in Nuremberg, among other places, as the head of an interdisciplinary energy center.

Among other things, it is campaigning to reduce CO₂ emissions with market-based instruments.

In order to stop climate change, “extensive reforms in energy pricing” are needed, Grimm recently told “Die Zeit”.

You intend to burden higher earners with a higher carbon tax, but not to keep the income with the state, but to relieve low-wage earners.

Otherwise, however, their commitment to left-wing redistribution projects is limited.

She rejects a property tax for the rich.

Instead, it calls, in the best business-liberal manner, to use the corona crisis for "reforms to strengthen the competitiveness and resilience of the economy".

The rejected candidate

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If there is such a thing as the anti-field, then it is

Marcel Fratzscher,

President of the German Institute for Economic Research (DIW).

Whether it was about aid for Greece, the low interest rate policy of the European Central Bank (ECB) or the German debt brake - in the major economic policy debates of recent years, Fratzscher has always been on the side of the more internationally oriented economists, who are also not afraid of a stronger role for the state like higher debt and cheap money.

The CDU and CSU are too left.

Your rejection of Fratzscher has another reason: the professor, who started his career at the ECB, has been perceived in recent years as an advisor to SPD politicians, starting with the former Minister of Economic Affairs, Sigmar Gabriel.

The "Frankfurter Allgemeine Sonntagszeitung" even described him as the "noisy claqueur of the Social Democrats".

The claqueur may have been exaggerated, but Fratzscher is always vocal: Hardly any other economist is so omnipresent in the media and so popular in politics.

His influence should therefore remain great - even without membership in the Expert Council.

The possible reconciler

Icon: enlarge Photo: Stefan Boness / Ipon / imago images

If someone like

Jens Südekum is

classified as “too left” in the Union, that may say more about the conservatives' slipped coordinate system than about the subject of their displeasure.

Jens Südekum, 45, professor at the University of Düsseldorf, is one of the younger German economists who have gained more and more attention in politics and the public in recent years - and to whom the ideological disputes within German economics are actually alien.

On the contrary, you have internalized one of the key phrases of economics.

In the English economist jargon it reads:

It depends.

Apodictically "eternally" valid economic laws are rather alien to this generation.

She understood that economic mechanisms can never be independent of the social and political environment.

The fact that Südekum is pleading for higher new debt without a specific repayment plan in view of the historically low interest rates and the historically great tasks caused by the corona crisis makes him suspicious of the debt brake fans in the Union.

But Südekum is not someone who trivializes public debt.

On the contrary, he has dealt intensively with how excessive debt levels paralyze many municipalities in Germany.

However, he also says just as clearly: The opposite currently applies to the federal budget.

Given the funding environment and the low interest burden, the government could push meaningful investments with more debt.

It always depends on the circumstances.

Icon: The mirror

Source: spiegel

All business articles on 2021-02-25

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