Economy in Germany: Economist Moritz Schularick calls for more willingness to change

The federal government is promising reforms and focusing on rapid growth. But in addition to structural reforms, Germany must also open up to the technological challenges of the future, appeals economist Moritz Schularick from the Kiel Institute for the World Economy.

Germany has rested on its success for too long while the world has changed radically, Schularick told the Süddeutsche Zeitung. »Resting on our success was mixed with the typical German “We’ve always done it that way”. Then suddenly we woke up in a new world - with an inefficient public sector and significant technological lag.

The economist advocates investing more decisively in future issues. With AI, “a lot of learning, engineering and tinkering is still required. And the fact that we can do machines so well is an advantage and not a disadvantage. If you want to save German mechanical engineering, you have to invest in AI.«

Political reforms such as pensions are important, but above all Germany has to master “a huge technological challenge”. »We are the best at the technologies of the last century, but not the best at the technologies of this century. If we don't make up for the deficit we've gotten into because of our own brashness, then we won't be able to maintain the wage levels and welfare state amenities to which we've become accustomed," said Schularick. "No pension reform in the world will ensure that Volkswagen builds competitive cars."

At the same time, he advocated a willingness to change and take risks on several levels. For example, when it comes to regulation: “Intelligent machines only learn when they are around us, when they interact sufficiently with the environment. We can't regulate this to death. Otherwise we will soon be left behind,” warned Schularick.

"We live in a country that massively redistributes from young to old"

He also called for reforms in social achievements. “A structural reform that could really make a difference here: abolishing protection against dismissal,” said Schularick. Denmark, for example, has a “flexicurity model” that requires people to be willing to change, but on the other hand offers very generous insurance in the event that you lose your job.

Schularick advocated including the public service in such reforms. Civil servants should at least be restricted, he said. Even employees over 40 in the public sector could hardly be dismissed. “With all these rigid regulations, you have to ask: What incentive is there for companies or authorities to use AI on a large scale if in the end you have to keep all your employees?” says Schularick.

With regard to the youth protests, he said: "We live in a country that massively redistributes from young to old, for example through the pension system and a lack of investment in education. A country like that doesn’t have much of a future.”

At the same time, Germany has not seen a major increase in inequality and no decline in living standards. There is more of a stagnation.

A few years ago there were higher inflation rates, but wages also rose. »People perceive wage increases as their own achievement, while inflation is seen as the government's fault. “It is often not understood that there is an economic mechanism at work that leads to rising wages and compensates for losses in purchasing power,” says Schularick.

He criticized the “inefficiency and rigidity” of state structures. Although the state does not have less money at its disposal, it is achieving less than it did 30 years ago.