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Germany must become a social and ecological market economy


The writer is spokesperson for the German Greens in the European Parliament and deputy minister of the German Federal Department for Economic Affairs and Climate Protection.

In Germany, the Greens formed for the first time a coalition at federal level with the Social Democrats and the Liberals. Achieving the goals of the Paris climate agreement and driving an ecological transformation of the German economy are the main priorities of the new government.

Its plans have the potential to set a global standard in tackling the climate crisis. Germany, the world’s fourth-largest economy, wants 80% of its electricity supply to be provided by renewable energies by 2030. This will involve, among other things, the construction of wind farms on 2% of the country’s territory and the installation of photovoltaic systems on the roof of almost any suitable building.

The swift implementation of energy infrastructure projects on this scale will require reducing unnecessary bureaucracy and speeding up Germany’s notoriously cumbersome planning and licensing systems. In the medium term, Germany will switch completely to renewable energies, thus becoming a global climate leader.

The Green Party now has responsibility for the “super ministry” of economy and climate, which will oversee the final stage of Germany’s transition to 100% renewable energy, while other countries discuss the nuclear energy, which is neither environmentally competitive nor economically sustainable.

However, decarbonization goes far beyond the energy system. Since the Second World War, German economic policy has been guided by the principles of the “social market economy”. This involves in particular promoting the opening up of markets and competition, on the one hand, and the control of their negative consequences, such as environmental damage or inequalities, on the other hand.

This regulatory framework must now be extended from the economic and social domain to the ecological domain. Climate neutrality and the protection of biodiversity should be central objectives of economic governance alongside prosperity and social security. In short, Germany must become a socio-ecological market economy.

A transformed German economy will only be a source of inspiration at home and abroad if it renews its competitiveness on the basis of ecological and social innovation. And this is exactly the point where the economic policies of the Greens differ from those of most center-right parties. For them, climate-friendly innovations are best achieved through deregulation and carbon pricing. But in our opinion, modern economic policy must be based on a smart and pragmatic mix of instruments in order to create a framework for companies to modify their business models in a way compatible with the limits of the planet and of people.

This democratically defined framework for a highly competitive market economy includes the pricing of carbon emissions, but also technical standards, financial incentives and the empowerment of consumers to “green” their demand. It must allow a plurality of technological solutions in order to reconcile the economy and the planet.

The key here is the idea of ​​a humble state aware of its own limitations and inefficiencies. Taking a social and ecological market economy seriously will stimulate private investment in the economy – not to curb rushed growth, but to develop sustainable forms of production and consumption and reduce unsustainable forms. This vast program of investment, jobs and innovation will be better achieved if macroeconomic policies and financial market regulations create a relatively stable investment climate.

However, the role of the state should go beyond creating a regulatory framework. The state must help private companies to innovate by strengthening infrastructure and supporting innovation as part of an active industrial policy. However, industrial policy should not be confused with the selection of potential global champions, which would threaten the many economic and social benefits that flow from an economy based on a mixture of large enterprises, successful SMEs and social enterprises as well. as many innovative start-ups. . Green economic policy takes the ideas of German “ordoliberalism” and develops them through the pragmatic use of heterodox ideas.

Completing this transformation will be a huge challenge, not only for lawmakers and the industry, but for society as a whole. The process of modernization always creates winners and losers. Social compensation and the democratic inclusion of citizens in the transformation will be essential, in order to avoid fueling protest movements such as the yellow vests in France. But if Germany succeeds, it can be an example for Europe and beyond of how to reconcile ecology and economy.


Margarita W. Wilson

The author Margarita W. Wilson