Let’s Get Back to the Market Economy as Quickly as Possible | fnst.org

Let’s Get Back to the Market Economy as Quickly as Possible

Thomas Straubhaar, Professor of Economics at the University of Hamburg and Member of the Board of Trustees of the Friedrich Naumann Foundation for Freedom (FNF)
Opinion29.04.2020Prof. Dr. Thomas Straubhaar
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The state is taking over the lead in the economy at a breath-taking pace. First, it paralyzed business activities. Then, it launched a huge economic support program. This is a dangerous path we need to leave as soon as possible.

The destructive power of the corona virus is shocking. The pandemic has not only killed numerous people, it has also struck the social and economic system of the post-war era. Parliamentary decision-making processes and fundamental rights that have been guaranteed for decades, have been weakened, shortened, undermined, yes even abandoned.

Strong political leaders exploit the spaces given in constitutions and laws to stand out and distinguish themselves as “doers” and candidates for higher office. New decrees override well-established laws overnight.  Nothing is taboo anymore. Normal everyday life has been suspended, mobility scaled back – and the economy is largely shut down.

In no time, orders akin to emergency measures have been put in place. Fundamental rights of the individual have either been curbed or abolished, as with the freedom of assembly. Educational institutions, shops, restaurants or hotels and even churches, synagogues and mosques have been closed – the same goes for cultural institutes, sports clubs and leisure businesses.

The state has taken over responsibility in the economy at a breath-taking pace. First, it paralyzed business activities. Then, it assisted the needy with an aid program unprecedented in history. 

Offices and government agencies – and not the customers over sales or banks over credits - are providing the companies with income and loans. Government also is paying wages and replacement benefits to employees and self-employed workers. Where this is insufficient for economic survival, the state has taken on entrepreneurial risk and assets.

All of this has little or nothing to do with the market economy. We’re witnessing a gradual nationalization of the economy. Politicians will set the tone. In the next weeks or months, politicians will determine who is allowed to do what and when and how long we are banned from doing certain things.

Technocrats and experts have the say over when and under which conditions businesses get back to work; when borders - even between federal states - are opened again; when production and services will be ramped up. Not competence or initiative of the entrepreneur, but the goodwill of politicians will decide over the fate of many companies.

This is not about criticizing the politicians and governments that the lockdown is too strict or that the recent gradual relaxations are too feeble. The situation we’re in continues to be more than complex. Too many factors are and will remain uncertain and unpredictable for a long time to come.

That's why, to be fair, we should not expect anybody to simply untie the knot and present a one fits all solution. There can only be a slow and gradual approach toward a new normality we know very little about.

What will stick with us as an indelible, depressing memory is the speed with which the market economy had to give way to the dictate of the state. Claiming there are no political alternatives, these measures have become a benchmark for what kind of government support we have to expect in times of future emergencies.

Politicians and governments have proven to the people and to the market economy at what speed and to what extent they are in a position to override fundamental individual rights and corporate decisions. Maybe, this has been appropriate as a reaction to the Corona pandemic.

But the question is: Who will instrumentalize the next national emergency to legitimize the suspension of the market economy replacing it with a state economy?  When will this happen and on what occasion? Furthermore: Who will defend the spirit and the soul of the constitution and the (individual) basic rights if the “Zeitgeist” calls for emergency laws?

"A market economy is no panacea. Still, it is much better equipped to provide for prosperity for all than a state economy". 

Prof. Dr. Thomas Straubhaar

The corona pandemic is and will not be the last crisis

How can and how will politicians and governments ask the people for sacrifices, so that they may find back to normality in an independent and responsible manner? How will it be possible in the future to deny public support to all those in need? How could claims for more generous unemployment benefits or higher pensions be rejected? Today's state aid raises tomorrow’s expectations of needy people.

Other viruses, biological, chemical and electronic will threaten the people in the future.  Technological upheavals such as big data, big business and big brother will pose serious challenges for societies.

How could radical and revolutionary state interventions as seen now during the corona pandemic be rejected in the future, when people, companies and entire industries will struggle for economic survival again? When and to what extent will politicians and the state intervene when robots, autonomous mobility, self-learning systems and artificial intelligence destroy hundreds of thousands or even millions of jobs? Today’s politics sets the standards for governments tomorrow. It will be difficult to put the lid on the Pandora’s box of comprehensive state assistance that governments have opened.

A market economy is no panacea. Still, it is much better equipped to provide for prosperity for all than a state economy. Germany’s post-war history and the comparison between the capitalist West and the socialist East prove this in a dramatically impressive manner.

Responsibility and liability for one's own entrepreneurial activity, initiative and a functioning market economy will arguably offer better conditions for returning to the levels of pre-crisis prosperity than any alternative of a planned economy. Nationalizing the economy is no triviality. It’s an economic aberration. In the long term, this mistake will harm more people than short-sighted politics aims at saving. It is essential to return to the market economy as soon as possible!

Special thanks go the FNF Turkey office for the English translation. The English article was published on 28 April on turkey.fnst.org here

Translation: Laura Kunzendorf and Ronald Meinardus