Chief economist warns of stagnation: distribution struggles in the economy

Chief economist warns of stagnation: distribution struggles in the economy

Ulrich Kater, chief economist at DekaBank, warns of distribution struggles due to the stagnating economy and makes it clear that only wealth that is generated can be distributed. This circumstance can lead to conflicts among the population because, in a stagnating economy, only through the redistribution of wealth can one individual receive more while another receives less. The German economy shrank by 0.3 percent last year and the outlook for the current year remains cloudy as it is not clear where the momentum for an upswing will come from. The global economy will pick up speed again, which is a temporary phenomenon. However, long-term problems such as demographic decline and increasing skepticism towards the market economy are also the main reasons for the stagnating economy.

The situation in the German economy points to one of the longest periods of weakness outside of times of crisis. Growth is not only currently low, but will also only increase very slowly in the future. The problems are not only evident nationally, but are also felt worldwide, impacting the export industry and the construction sector. Further investment could help the German economy get back on its feet, although financing is less often a barrier to building infrastructure than over-regulation or administrative inefficiencies.

According to Ulrich Kater, investments in a climate-friendly economy could be financed through debt, but the debt brake should remain in place within the current budget. According to Kater, the traffic light government could rely more on market economy mechanisms and performance principles instead of subsidies and distribution. Some hopeful signals for the German economy are emerging from the slow increase in the global economy, which is leading to permanently higher interest rates and thus to more investments worldwide.

A report from www.focus.de.