Coronavirus and Economy in Germany

Coronavirus and Economy in Germany

It is good that German politicians have reacted with strong measures in the fight against the coronavirus. But it makes mistakes - because it ignores central economics.

Church and economy have always been a difficult relationship. Especially when economists identify capitalism or the market economy (which is roughly the same) as a flawed system, but still as the best one that works. Experience shows that many preachers think about it, especially at Christmas, and they are not afraid to blame the allegedly cold-hearted market economy for gaps in justice. The call then quickly follows for the state to please put things in order.

In this coronavirus year, at least the critics of the market economy can be satisfied. The state has taken over the regiment, it coordinates and directs and domesticates the measures against the epidemic and the coping with the consequences. This is evident in the shutdown organization and the unprecedentedly expensive aid packages for companies and citizens.

It should not be claimed here that this rescue policy is wrong. On the contrary, it tends to be correct, and this is what the majority of citizens and, by the way, economists also say: there is no better way to save human lives and economic strength. This is also shown by the international comparison with countries that have largely let the crisis run free. This is also borne out by initial scientific analyses comparing the economies in regions with a strict lockdown and those without. Anyone who sees it fundamentally differently has - sorry - simply no idea.

Unfortunately, there is the danger that once politicians are in the doer mode, their urge to shape things can hardly be stopped. In particular, the crisis managers in Berlin and the federal states could avoid mistakes if they were more interested in economic issues.

One of the most useful lessons in economics: creating incentives

In times of doers, that is, now, a fundamental insight is ignored, which is one of the most useful lessons in economics: "Incentives matter", incentives are important. But this assumes that politicians think about the consequences of their actions early on and right through to the end.

The federal government lost a lot of time in spring when it wanted to organize the procurement of protective masks centrally and commissioned authorities that were hopelessly overwhelmed. If she had motivated private companies to take on this task from the start, because there was a business to be done, it would have worked faster and better.

Or the attempt by Health Minister Jens Spahn to organize free bed capacity in good time in the summer in anticipation of the second wave of infections: good idea, but poorly done. The fact that the hospitals were promised a flat rate for each bed kept free led to some resorting to all sorts of tricks. For example, beds that cannot be cared for with equipment that was rented temporarily were counted. Beds that are not at all suitable for corona patients were kept vacant in order to collect the state subsidy - and politicians lulled themselves into the false sense of security in the summer that everything was ready for the stormy winter.

In times of crisis, in particular, people tend to forget that it is the task of politics to create incentive systems so that the individual does what is good for society as a whole, not out of coercion but out of self-interest. A little more of it would do the current dirigism good. Knowing that pandemic will be reined in or kept at bay, more market and less state will be required if the country continues to prosper and attain success in 2021. But that's a topic for 2021.