What Germany Must Do for a Speedy Recovery

Written by Philipp Bagus

On June 29, the German parliament reacted as parliaments normally do when there is a problem, namely, by allowing the government to spend more. In order to respond to the economic difficulties due to the corona epidemic and the government restrictions, it passed a typical Keynesian stimulus package in order to boost aggregate demand.

The self-set goal of the economic stimulus package is to lead the German economy back to a “sustainable growth path…that will secure jobs and prosperity.” I interpret the term “sustainable growth” here as growth that individuals really want and would support through their voluntary actions in a market economy. It is therefore a growth that is not based on fiscal subsidies and growing public debt and that would collapse without these subsidies or in the event of public overindebtedness. To wit, state funding of new structures that are only kept alive by continuous state subsidies cannot be described as sustainable growth.

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