IMF criticism

Share the Wealth

Freie Schulen investieren Zuschüsse in Lehrergehälter
Germany should invest more in education to address inequality. Source: DPA [M]

Sharing wealth used to matter more to the center-right Christian Democratic Union. The CDU’s first economics minister, Ludwig Erhard, once said lawmakers should aim for prosperity for all.

Economists at international organizations don’t put it this clearly, unfortunately, but that’s what the OECD and the International Monetary Fund are saying when they talk about “inclusive growth.” They want to see economic growth that benefits everyone, people with low incomes and high incomes alike, so that rich and poor children, men and women have the same chances to enjoy prosperity.

It’s ironic that Mr. Erhard’s country, mostly led by his CDU, hasn’t managed this in a long time. Top incomes have increased noticeably, middle incomes only a little and the lowest incomes have even declined. Family background plays too much of a role in young people’s educational success and we don’t invest enough in the future.

If education isn't helping most young people, we need more teachers.

Our high current account surplus is a sign of how the supply side, meaning conditions for companies, and the demand side, consumption, are out of balance. Ever since the financial crisis, non-German economists have pointed out that much higher exports than imports create a dangerous imbalance.

But Finance Minister Wolfgang Schäuble (CDU) understands this as “you should export fewer cars.” He’s missing the point. Besides exporting, Germans need to consume and import and to help them do so, we need higher investments, now and in the next few years.

If the bottleneck is government’s planning ability, then after years of job cuts, we need more people in public administration. If education isn’t helping most young people, we need more teachers. And if the economy is growing robustly, wages should also rise.

German companies react flexibly to changes in world markets, but our economic policy is rigid. Yes, balancing the budget was the right thing but exceeding the debt brake has become an end in itself. Saving is good but we should look at how much we save. Tax relief for low- and middle-income earners would boost the domestic economy, which lags behind foreign trade.

Also, if Germany didn’t depend so much on exports, it would be protected better against external risks like Brexit. Ultimately, sharing the wealth makes a democracy stronger. It’s time for us to make that our economic leitmotif again.

 

To contact the author: riedel@handelsblatt.com

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