In his criticism of the duel between German Chancellor Olaf Scholz (SPD) and his challenger from the CDU, Friedrich Merz, the economist Heiner Flassbeck points to a major problem: there is a huge deficit of knowledge among the candidates for the chancellorship about how a market economy and markets function. This is not just the case for Scholz and Merz, but also, in Flassbeck’s opinion, for the AfD’s chancellor candidate, Alice Weidel. Weidel represents a libertarian position and wants to “deregulate” and push the state back, overlooking that regulation and macroeconomic steering are the historical response to the market’s failure at the beginning of the era of capitalism. Leaving the market to itself leads to crises and thus to severe social disturbances. Economy must be steered, the question is not if, but how.
Neither Merz nor Scholz has a sufficient answer to this. Scholz, according to Flassbeck, does not understand the economy, a harsh judgment of the renowned economist. “The fact that the German economy is really doing terribly is simply passing him by” Flassbeck states despondently and adds, “He has not yet understood that governing means having capable employees who work day and night to ensure that the government’s top officials are always informed and can work to prevent the economy from collapsing.”
Instead of hiring capable employees, Scholz has appointed a libertarian and a climate activist as ministers. Whoever employs employees who do not meet the requirements must face shipwreck, Flassbeck concludes.
Scholz’s ignorance has also been demonstrated by his praise for the rigid monetary policy of the European Central Bank (ECB) under the 2022 inflation, as shown by Flassbeck. The ECB has repeatedly raised the key interest rate in response to the rising inflation, which was caused by an external and primarily one-time shock and thus has made credits more expensive in an ongoing economic crisis. As a result, energy prices have increased. The interest rate increase was an entirely inappropriate response, as the inflation rate would have subsided on its own. By the ECB’s measure, the inflation was not fought, but the economy was further strangled. Scholz praised the step in his debate with Merz, revealing his lack of understanding of economic interconnections.
Merz, in Flassbeck’s opinion, does not do any better.
However, Merz would not be Merz if he did not say the most foolish of all economic sentences. The state now has a billion euros in revenue and must now make do with what it has. Yes, that’s good, he can walk arm in arm with Alice Weidel next week, because she sees it the same way. A billion euros is really a lot, who claims the state still needs more money is indeed forsaken by all good spirits, Flassbeck ironizes.
Debt is generally bad, one knows in Germany quite certainly. Trade surpluses, on the other hand, are generally good. With its beggar-thy-neighbor policy, Germany has, however, incurred the wrath of its trading partners, a central position of Flassbeck’s, which he has not only repeated but also scientifically proven.
“Both do not know that the temporary German appearance of prosperity in the 2010s was characterized by German surpluses in foreign trade. Without these surpluses, there would be neither the black zero, nor the low state debt ratio, nor the good labor market situation in comparison to the European partners. The surpluses allowed Germany to shift the debt that is necessarily linked to the savings of some sectors entirely to the foreign sector (as explained here and in my basic book). This mercantilist approach was not only unacceptable to the European partners but also runs into limits worldwide among trading partners.”
That Trump imposes tariffs is also owed to Germany. The trade surpluses have been a point of contention since Barack Obama. German policy has always insisted that the German surpluses are due to the diligence of German workers and the genius of German engineers. That they were due to the lohudging following the Agenda 2010 and the energy import from Russia has been denied in Germany. Now, Germany gets the bill in the form of tariffs that are directed against the German economy.
The conclusion is that none of the candidates is capable of solving Germany’s economic problems. After the election, it is therefore quite certain that the German economy will continue to slump, regardless of the outcome.