Economist warns against overly ideological economic policy
Economist Schularick emphasizes social cohesion in the face of necessary change and urges consideration of transformation processes
Gabriel Thomas (GT)May 8, 2025
The president of the Kiel Institute for the World Economy (IfW), Moritz Schularick, warns against neglecting social cohesion when making necessary changes. In an interview with the dpa news agency, the economist calls for government decisions to always take into account their political and social impact.
In view of necessary upcoming transformation processes for more climate protection and CO2 savings, Schularick explained, "CO2 pricing is the best way, but is that politically sustainable?" At the heart of the matter, he said, is "whether making brown, dirty energy sources more expensive via taxation and emissions trading won't cause so much political resistance that we end up not making progress fast enough."
The other way, he said, is to use subsidies to make green energy so cheap that it can compete with brown - but that is the more inefficient way. "It's a matter of weighing where there's more sand in the gears in the end." Fears that CO2 pricing will disproportionately affect the socially disadvantaged because their energy share of total spending is particularly high must be credibly countered, he said. "I don't see that happening at the moment."
With regard to possible subsidies for industry, the IfW head explained, "In some cases, people are too quick to equate the interests of industry with those of Germany." Schularick is also alluding to plans by German Economics Minister Robert Habeck (Green Party) to support energy-intensive companies with a favorable industrial electricity price.
"A whole range of risk-averse conservation strategies fits the context of a perhaps outdated country that struggles to innovate and adapt - and values leisure and vacation." If you go through the country with a subsidy watering can, there is a great danger that weeds will be watered and grow.
Under certain circumstances, however, there are economic arguments in favor of supporting young innovative companies in key industries, Schularick said, also in light of enormous subsidies in the U.S. in the wake of the Inflation Reduction Act. In the case of Northvolt - the Swedish company wants to build a battery cell plant for e-cars in Dithmarschen, Schleswig-Holstein, with state aid - it would be good to be among the pioneers in Germany in terms of technology and location.
"Understanding and shaping globalization" is written on a large poster on the IfW facade. "We are in a globally interconnected, highly integrated world economy, and now there are many tendencies and the political will to implement things that make sense politically, strategically or militarily and are part of basic services more in a national or European context again," Schularick said. "There will be a cost to that, because we throw sand in the gears of the global economy and then it grinds."
Moreover, he said, after 20 or 30 years of globalization, Western democracies are not in particularly good shape. "Globalization is not solely to blame for this, and probably not even primarily, but this is coupled with developments that have a lot of discontent and uncertainty associated with them."
Climate, energy, globalization, foreign and security policy, digitalization, demographic change - there are huge transformation processes to be managed synchronously here, he said. "And the question is whether we have the necessary tools to manage them."
