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Cake day: March 15th, 2025

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  • Getting the economy back on track for growth was a central theme of the election campaign. The problem with this is that economic growth is not the actual goal of economic policy, but related aspects such as jobs or government revenue. It is to be hoped that the coalition negotiations will take this into account. An article by Steffen Lange.

    During the election campaign, the parties largely agreed that economic stagnation in Germany was a problem that needed to be solved. The responses of the CDU/CSU and SPD were more different. While the CDU/CSU primarily focused on tax cuts, the SPD added bonuses for investments. Both also call for lower energy prices.

    These are the standard answers from the various political parties on how to support economic growth. The extent to which they really lead to economic growth has been the subject of controversial debate for decades. However, that is not the topic here. Instead, the following is about whether the proposals are suitable for solving the problems in Germany that lie behind the demand for growth.

    There is now a broad consensus among scientists that economic growth in itself is not a sensible economic policy goal. This is because economic growth can only ever be a means to an end. In most cases, the ends are (full) employment, higher income, more private consumption or higher government revenue. It is therefore never about economic growth per se, but about what growth can achieve for society as a whole.

    The question of whether the proposals of the potential coalition parties would increase economic growth is therefore not relevant. Instead, the focus should be on whether the indirect goals - jobs, income, etc. - can be promoted by the proposals. And whether they would exacerbate other problems - above all climate change. Let’s go through the aspects one by one.