Institutional Reform

Germany's economic 'Wise Men' discover gender equality

Pk Sachverständigenrat in Frankfurt
Monetary expert Volker Wieland (far right) might pass a woman on the way out. Source: DPA

For Volker Wieland, the new year is all about his professional survival. By next month, Berlin will decide whether to re-appoint the economist to the prestigious German Council of Economic Experts, commonly known as the Five Economic Wise Men. The body is easily the most influential economic institution in Germany; every November, when the council publishes its annual economic report, the federal government is obliged to issue a formal reaction.

Given his fan mail, Mr. Wieland sounds like a shoe-in for a second five-year term. Steffen Kampeter, boss of the BDA employers’ association, recently showered Mr. Wieland with praise in a letter to the German finance ministry. Nominations are conducted on a rotating schedule. After Germany’s business community fills this council seat, the unions can do so next time.

This time, however, the re-appointment is anything but routine. For one thing, only one of these sages is a woman, something completely out of step with new German gender legislation. Some politicians also wonder whether Mr. Wieland is the right wonk for the job, and sensing his departure may be imminent, see an opportunity to reform the council, whose outlook is seen as stale and too narrow. In the SPD-led economics ministry, officials are calling for the council to deal more with forward-looking topics such as structural change and emerging technologies.

Mr. Wieland is a conservative economist who regularly bashes the European Central Bank and any moves towards greater debt-sharing in Europe – an unpopular thought in Germany, a long-time creditor nation. Some members of Angela Merkel’s conservative CDU fear that any reform could skew the council to the left, but this issue isn’t about Mr. Wieland’s political convictions. The council “is currently too focused on financial markets,” sighed one high-ranking official.

“An economist with a focus on industrial structural change would do the council good.”

Michael Hüther, director of the IW economics institute

That criticism is warranted. Of the body’s five members, economist Lars Feld is devoted to fiscal and social policy, banking regulation expert Isabel Schnabel to fiscal policy alone, and Mr. Wieland to monetary policy. A fourth, Peter Bofinger, is responsible for European policy but is a monetary policy specialist by training. Surely, more diversification would make sense. (The council chair, Christoph Schmidt, covers the labor market, structural policy, energy policy, digitization and social policy all by himself.)

In the wake of the financial crisis, concentrating on keeping financial markets stable seemed a logical response. But many top German economists think it’s time to branch out into more innovative areas. “An economist with a focus on industrial structural change would do the council good,” says Michael Hüther, director of the Cologne-based IW economics institute. Another area going wanting is digitization, which despite Mr. Schmidt’s efforts is “currently under-lit,” Mr. Hüther says. Other critics maintain that the councilors, who know the German economic landscape like no one else, haven’t come up with enough practical suggestions for reform.

Mr. Schmidt rejects that notion, saying the council has given extra weight to innovative issues such as holistic welfare measurement and the impact of digitization on productivity. In 2011, the chairman called for uniform CO2 pricing, “an idea that has finally arrived in today’s political debate,” he says. The chief sage also warns against tackling topics just because they’re in vogue or popular with certain politicians. “The legitimacy of the council is based on its independence and its founding in scientific excellence,” asserts Mr. Schmidt.

It seems odd that the council should pay less attention to its spread of expertise and modern gender equality than to its vaunted independence.

The economics ministry also wants more women on the council. The most talked-about women candidates are globalization expert Dalia Marin, competition economist Monika Schnitzer and Nicola Fuchs-Schündeln, who just won the prestigious Leibniz prize for her research into economic norms and ethics. Appointing Ms. Fuchs-Schündeln would be a breath of fresh air to the council, says IW director Hüther. Furthermore, since January 1, a new German law requires government councils at the national level to “work toward” having half of their seats occupied by women. For the moment, Ms. Schnabel is the only female on the panel.

If Mr. Wieland were re-appointed, it could be seen as a snub to the new legislation. At the same time, letting him go would signal a huge break with tradition. Only once in its 55-year history did the council fail to confirm a member for a second term.

It seems odd that the council, whose legal mandate is to serve as a critical economic policy companion to the German government, should pay less attention to its spread of expertise and modern gender equality than to its vaunted independence. The council enjoys more leeway than its opposite numbers abroad, such as America’s Council of Economic Advisors, which typically departs when the US president’s term ends. Based on its past traditions combined with a very German respect for consensus, the government might turn a deaf ear to the sages’ detractors and opt to confirm the manifestly capable Mr. Wieland, leaving it to the unions to name a woman to replace Mr. Bofinger, who retires next year.

Martin Greive is a correspondent for Handelsblatt based in Berlin. Jeremy Gray, an editor for Handelsblatt Global contributed to this article. To contact the authors: m.greive@handelsblattglobal.com, j.gray@handelsblattglobal.com

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