A professor at Berkeley, Ulrike Malmendier has been a member of the German Council of Economic Experts, or “wise men”, since the fall of 2022, a group of five experts who advise the government and the Federal Parliament on economic issues.
With the war in Ukraine, the energy crisis, inflation, the questioning of free trade, geopolitical disturbances, one has the impression that the “German model”, as it has functioned successfully in the years 2010, has reached its limits. Are you worried about Germany’s ability to meet these new challenges?
These are indeed considerable challenges for the German economy. Some of these factors are however temporary, such as inflation, thanks to the monetary policy adopted. With regard to geopolitical disturbances, I hope that we will manage to find a new economic balance based on international trade agreements, which make it possible to avoid unilateral dependencies while ensuring intense economic exchanges between countries. But there are also long-term challenges, such as higher energy prices in Germany compared to the United States or other European countries.
In my opinion, these challenges call into question less the “German model” than the current composition of the country’s industrial production. In the decades to come, other sectors than in the past will experience high growth rates, such as environmental technologies and artificial intelligence. I think that the decision-makers of the German economy are quite capable of making the necessary adjustments. What worries me a bit is that this process is going too hesitantly. Germany tends to cling to old industrial structures, when it is clear that deep transformations are needed. The automotive industry is a good example.
We often speak of “German resilience”, which would be defined by the ability to reach consensus, by effective social dialogue, by the solidity of the middle class, by legal certainty, by the inventiveness and flexibility of intermediate size. Are these ingredients still effective today?
I really like this definition of German resilience, and I think it will be more important than ever in the years to come. I am often asked what currently characterizes Germany’s economic attractiveness. These are precisely the criteria you are referring to. We must maintain this resilience at a high level and defend it by all means.
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