Sigmar Gabriel

Drawing the Borders of the Free Market

Gabriel reading source akg images dpa (M) Handelsblatt
A photo montage of Germany's economic minister, Sigmar Garbriel reading a book on Ludwig Erhard, former Chancellor of the Federal Republic of West Germany from 1963 until 1966. He is famous for leading postwar economic reform and recovery.
  • Why it matters

    Why it matters

    Sigmar Gabriel could become the next chancellor after the 2017 elections, but must convince voters he can balance economic and social interests.

  • Facts

    Facts

    • Mr. Gabriel is Germany’s economics minister and leader of the left-leaning Social Democrats, which has fallen in popularity since elections in 2013.
    • The minister held his first speech on regulatory policy at the Walter Eucken Institute.
    • Walter Eucken was the mentor of Ludwig Erhard, the 1950s minister of economy who engineered Germany’s post-war “economic miracle” and later served as chancellor.
  • Audio

    Audio

  • Pdf

 

When he delivered his first-ever speech on regulatory policy this week, economics minister and Social Democrat (SPD) leader Sigmar Gabriel could have picked an easier venue. He spoke in the old university town of Freiburg at the Walter Eucken Institute, home to many supporters of former Chancellor Ludwig Erhard and his social market economic policies.

Mr. Erhard, economics minister from 1949 to 1963, is considered the father of Germany’s economic reform after World War II. He favored a regulatory policy that was based on fair competition, entrepreneurial freedom and compassion with the less fortunate members of society.

Mr. Gabriel, who is also vice chancellor and a possible contender to succeed Chancellor Angela Merkel after elections in 2017, is in a bind over economic policies. He is trying to defend the interests of businesses and the economy without alienating support from left-leaning social-democratic party members and voters.

His party has fallen in election polls, despite a string of measures designed to please his electorate, such as retirement at 63 and a national minimum wage.

Early last year, President Joachim Gauck spoke at the same institute and stood up for disdained “neoliberalism.” He railed against too much regulation and declared himself in favor of more competition. Applause from guardians of a social market economy was a given.

Mr. Gauck was speaking at a time when the coalition of Chancellor Merkel’s Christian Democrats and Mr. Gabriel’s Social Democrats had been working tirelessly on upcoming laws for early retirement, a minimum wage and changes in Germany’s transition to renewable energies. Chancellor Merkel and her economic advisors did not follow Mr. Gauck’s warning, and the reforms became reality.

Mr. Gabriel pleaded for an honest classification of neoliberalism in Germany today.

Following President Gauck’s reasoning at first, Mr. Gabriel opened his speech in the tradition of Walter Eucken, the economist and Freiburg scholar who after the Second World War helped create Germany’s social market economy: the state creates a general framework for economic freedom but refrains from regulating specific matters.

Above all, the so-called neoliberal professor was the mentor of Mr. Erhard, who engineered the post-war “economic miracle.”

Mr. Gabriel pleaded for an honest classification of neoliberalism in Germany today. “This term has been reinterpreted in our time in a peculiar way,” Mr. Gabriel said.

Neoliberalism has become a synonym for radical deregulation, but Mr. Eucken would have been convinced that “laissez-faire” systems of the 19th century could not have protected individuals of power and force, Mr. Gabriel said.

“He did not want a ‘night watchman state’ – one that only guards a class-divided society of prerogatives and privileges through an economy of monopolies and cartel agreements,” the Social Democrat minister said, referring to Mr. Eucken.

As economy minister, Mr. Gabriel is thoroughly aware of challenges and concerns of businesses. One example is the proposed Transatlantic Trade and Investment Partnership, the trade agreement between the United States and Europe, known as TTIP.

While his party’s more leftist members oppose the treaty, Mr. Gabriel campaigned for it again in Freiburg. The core argument for the agreement is not economic growth through making trade easier, he said.

“For me, the decisive argument seems to be that it can be an instrument for global regulatory policy,” Mr. Gabriel said.

With the free trade agreement, Europe and the United States could set standards for sustainable management and free markets, in addition to protecting the environment, workers and consumers, he said – a sentence that many Social Democrat members could not have been pleased to hear.

Mr. Gabriel saw a second policy area, where regulation was necessary, namely the “almost feudalistic robber baron philosophy” of hedge fund investors and PayPal founder Peter Thiel. For Mr. Thiel, competition in the digital data market is something for losers, Mr. Gabriel said.

“In other words, success means incontestable market domination,” the minister said, adding that this is a completely false approach and a huge regulatory and political challenge.

The industries where Germany earns its money are cars, machines, chemicals and pharmaceuticals, Mr. Gabriel said. Data, however, is a strange economic asset dominated by U.S. giants like Google and Facebook. There is still no appropriate code of conduct for dealing with it, Mr. Gabriel said.

He singled out Google as an example of data power that was getting out of hand.

“What do we do with an Internet service provider that has 95 percent of the search machine market in its grip and will furthermore become the largest provider of software, operating systems, browsers and devices?” he asked.

He immediately followed with an answer: “This question is the subject of an investigation by the European Commission. And I welcome that the Commission has now intensified its examination.”

Mr. Gabriel admitted to his own regulatory policy mistakes in Germany’s transition to renewable energy. “With the promotion of renewable energies we have created a market in which investors find a paradise.”

This paradise offers guaranteed returns on some renewable electricity forms for decades, he said. Even when the network for the supply of electricity would not be available, there will still be money.

“We need more market forces when its comes to the energy transition,” Mr. Gabriel conceded.

Founders of the social market economy, including Mr. Eucken, would surely liked to have heard that.

 

 

Thomas Sigmund is the bureau chief in Berlin, where he oversees all political coverage. Gilbert Kreijger, an editor with Handelsblatt Global Edition in Berlin, contributed to this article. To contact the author: sigmund@handelsblatt.com

We hope you enjoyed this article

Make sure to sign up for our free newsletters too!