Economist Isabella Weber calls for margin restrictions on essential goods and state buffer stocks - and says economic policy determines the rise of the extreme right.
Ms. Weber, the issue of affordability was the focus of the Berlin election, and almost at the same time the federal government put together a fuel price package - including a price cap and the prospect of an excess profits tax. The Union is making affordability one of its three priorities for the future. Is politics moving in the direction you want?
First of all, it can be seen that affordability has become a central election campaign issue from a fringe issue – and not just in Germany. In the USA it is the focus of almost all election campaigns around the midterms. In Great Britain it is the key word in Andy Burnham's agenda, in Mecklenburg-Western Pomerania Manuela Schwesig has made it an issue. Affordability is the buzzword of the moment.
And the federal government’s package?
This raises the question for me: What essential good is it? Fuel is actually not the essential good, but rather mobility, the ability to move. However, the measures only relate to the price of fuel. A package would be needed that does not increase the price of the Germany ticket, but reduces it to nine euros. Which includes a speed limit to save where it is easy to save. And that includes a bike bonus. In an energy crisis, it is important to make alternatives to cars as attractive as possible while ensuring that fuel remains affordable for those who rely on cars.
In a supply crisis, isn't it more important not to send the wrong price signals? It makes no sense at all to price a supply that is becoming increasingly scarce at even lower prices.
The question behind this is whether this price signal is a rational representation of scarcity conditions. That's where I put a question mark in the current energy crisis.
Vita
Isabella Weber, born in Nuremberg in 1987, teaches as an associate professor of economics at the University of Massachusetts Amherst. She researches inflation, China and international trade and heads China research at the Political Economy Research Institute there. She studied at the Free University of Berlin and the University of Peking. In 2018, she received her doctorate in development studies from the University of Cambridge, and also in economics from the New School. From 2017 to 2019 she taught at Goldsmiths College, University of London. She has held the professorship in Amherst since 2019.
Weber is one of the most vocal voices in the inflation debate. She brought up strategic price controls and a gas price cap early on. The Federal Ministry of Economics appointed her to the Gas and Heat Expert Commission. Since September 2023, she has been a senior research fellow at the Institute for Macroeconomics and Business Cycle Research (IMK) of the trade union-affiliated Hans Böckler Foundation.
The amount of fuel on the world market has decreased noticeably due to the Iran and Ukraine wars.
Of course there are shortages. But the price of oil reacts extremely strongly to what Donald Trump posts on Truth Social. Government action is also important: China, for example, is massively reducing its oil imports and thereby stabilizing the world market. What Beijing does or whether the Europeans release their reserves are political questions. These are not simple textbook supply and demand signals.
The shortage still remains. Someone has to save.
The economist Amartya Sen showed in his theory of famines: If you allow prices to take effect when there is a physical shortage of essential goods, people with little purchasing power can no longer afford the bare necessities, while those with a lot of purchasing power continue to consume extensively and even waste away. Some famines occurred not because there was not enough for everyone, but because the market distributed incorrectly.
What does this have to do with the German gas pump?
We are seeing something similar globally in this energy crisis. Indian factory workers returned to their villages in the spring because they could no longer afford cooking oil. Filipino fishermen could no longer pay for diesel for their boats. Therefore, the global North should save, but in a fair way. Hence the package approach I outlined.
And that's exactly why low prices are a wrong sign.
Consumption must be reduced where it can be substituted, for example with buses and trains, and where there is extreme consumption. Private jets and superyachts should be banned in an energy crisis. These are Veblen goods: when the price increases, consumption does not decrease.
However, there is no pure market for energy and food in Germany. Gas is now imported almost exclusively by state-owned companies; agriculture is a small-scale system of specifications, quotas and subsidies. And neither works particularly well. Why should even more government be the solution?
Of course, these are not competitive markets. But that is also due to the private actors. Four companies share 70 to 90 percent of global trade in agricultural raw materials: ADM, Bunge, Cargill and Louis Dreyfus. Their stocks are sometimes larger than the annual consumption of entire countries. In crises, they benefit from volatility and make record profits.
The state has long been the owner of gas.
Uniper and the gas storage facilities show that you can have state ownership without these actors acting in the public interest. There is no other way to explain why storage is at such a low level after the experience of the energy crisis.
What then?
There needs to be a public service mandate: import and store a lot when prices are low, and release storage when they rise. This is the logic of a buffer warehouse, a public warehouse that balances supply and demand and thus stabilizes prices. The bad news is that the state storage facilities do not currently have this mandate. The good news is that the approaches to the institutions we need already exist.
And the food? They have long been supported by the state, for example through reduced VAT or extremely high subsidies from producers.
There they rely almost exclusively on subsidies plus regulation. Those who subsidize based on acreage transfer money, but the extreme price fluctuations remain on the farms' balance sheets. Many farmers are on the verge of throwing in the towel. They work 70 hours a week, see that seeds dry up and rain destroys the harvest, and they are unable to implement the detailed guidelines.
What would a buffer warehouse change?
The farmers would have a price guarantee: they could sell to a public company within a price corridor. The purchase could be linked to climate goals, without a bureaucratic monster. This is also a question of political stability. The farmers' protests show that the democratic parties are increasingly losing the rural population.
A government infrastructure that controls prices and supplies can fall into the wrong hands. Donald Trump shows how someone uses the state's intervention rights for their own purposes.
This is basically Friedrich August von Hayek's question: Isn't subordination to markets better than subordination to the state?
But it is quite real in view of the challenge facing Western democracies from authoritarian or semi-authoritarian forces.
Subordination to markets also requires a state that enforces it and often offsets the consequences with higher social spending. Neoliberalism emerged in the 1940s as an explicitly anti-fascist ideology. This was Hayek's core argument in The Road to Serfdom. This promise was not kept. The closer we got to the ideal, the stronger the right-wing extremist forces tended to become.
How do you determine this?
At moments of crisis that became tipping points. The first was reunification in Germany, a textbook shock therapy: prices were liberalized overnight, privatized extremely quickly, and the D-Mark was introduced overnight. The result was unemployment on a scale that we in the West cannot imagine. The second shock was the financial and euro crisis, the third was the energy and inflation crisis.
After the first crises you mentioned, right-wing extremism did not increase at all.
In the 1990s there were strong right-wing extremist movements in the East. The AfD was founded in the context of the euro crisis. There is no one-to-one correlation in the sense that anyone who is worried about finances immediately becomes right-wing extremist. But such experiences of devaluation make it attractive when someone says: You are worth something because you are white, because you are German. The appreciation then runs through the devaluation of others.
But Trump is not relying on the market, but rather on state power.
We are seeing two things at the same time in the United States. On the one hand, the destruction of state structures. The Department of Government Efficiency has set out to destroy entire ministries and authorities or render them incapable of action. Why do you do that? Because it enormously increases the state's dependence on private corporations: on Palantir, on SpaceX, on a handful of companies and men who create a market with guaranteed demand.
And on the other hand?
Trump uses his power in the most brutal ways to enrich himself and those who are sympathetic to him. His tariff policy causes markets to shoot up and down, and those who are informed in advance make enormous profits. You can't stop this by saying from the outset that the state should be incompetent.
You're actually implying two things: That the economic policy of the past few years hasn't worked. And that high prices for everyday goods promote right-wing extremism. Why do you combine the two?
Briefly about the term: I am not trying to say that we are already living under fascism. The relevance of an anti-fascist economic policy does not depend on whether you call Trump or the AfD fascist. It stems from the fact that the threat of fascism is experiencing a boom that has not been seen since the 1930s. We can already read in the CDU's Ahlen program that securing democracy requires economic policy that focuses on human dignity: "The content and goal of this social and economic reorganization can no longer be the capitalist pursuit of profit and power, but only the well-being of our people."
We economic consultants share responsibility for the consequences of our recommendations for democracy.
The fact that Western societies tend to have more extreme politics has been around for longer than the high inflation rates.
Yes, as I said, there were several tipping points. There are two connections. The first is the extreme concentration of economic power. In a growing number of industries, a small number of companies divide entire markets between themselves, often globally. In the 1940s, the ordoliberals also knew that this was incompatible with democracy, because economic power translates into political power. If it's enough for just four or five people to tip, it'll happen quickly. When Trump returned, the richest people in the world quickly rallied behind him.
And the second?
Economic uncertainty. When politicians say that democracy is the best system we have ever had - and I strongly agree with that - and in the second breath: "Unfortunately there is little we can do when it comes to the affordability of your life," then trust is broken. And if we react to inflation that is driven by shocks to essential goods with higher interest rates, the declared aim of which is to cool the labor market, i.e. to send people into unemployment, we increase the uncertainty even further. I think that is extremely dangerous.
Sociologists and political scientists explain the popularity of the AfD primarily with questions of identity and fear of loss, and hardly with material disadvantage. Don't they all see that?
Fear of loss also has economic reasons. In the last state elections, more than 60 percent of people who rated their financial situation as poor voted for the AfD. But the point is not that only economic policy can stop the rise of the extreme right. There is no monocausal explanation. Nevertheless, we economic advisors share responsibility for the consequences of our recommendations for democracy.
However, the majority of AfD voters feel that the state is losing control over security and the economic situation itself.
It is precisely then that affordability is the field in which the state can concretely show that it can act. It is important to make it clear that the crisis is not inevitable. Democratic action can make our lives better again.
