The fairy tale of the “private economy”

The Bavarian Economic Advisory Board is an interest group for Bavarian companies. Its president is a member of the European Parliament from the CSU. It was surely pure coincidence that the Advisory Board published a fiery speech just a few days before the European Parliament elections, which the CEO of Deutsche Börse had already given at an Advisory Board meeting in April.

But that doesn’t necessarily mean that stock exchange boss Theodor Weimer’s criticism of the government is wrong. The fact that Weimer was the board spokesman for the scandal-plagued UniCredit Germany bank for many years doesn’t mean that he doesn’t understand anything about business and politics. Quite the opposite.

This is why the following passage from his speech is surprising. American entrepreneurs told him: “Stop being a public economy that sits in front of the snake and waits for the snake to bite. Become a private economy like us… It doesn’t matter which old man becomes our president, we as entrepreneurs will lead the country.”

Phew. Left and right radicals believe that “the capitalists”, “Bilderbergers”, “Davos clique”, Rothschild or Soros “lead” the USA. But the CEO of the Deutsche Börse? Perhaps his American friends just wanted to tell him: We company bosses don’t need Donald Trump or Joe Biden to create thriving economic landscapes.

But that is also wrong. Trump protected the American economy with massive tariffs, including from European competition; Biden has continued and tightened Trump’s policies, for example with a punitive tariff of 100 percent on Chinese electric cars. Biden’s “Inflation Reduction Act” (IRA), which in reality fuels inflation through government spending, is perhaps the largest Keynesian investment program of all time.

And it’s working. The American Clean Power Association, an association of companies in the solar, wind and hydrogen sectors, says that 83 new companies have been established since the IRA was passed; other companies are ramping up production. So far, $270 billion in subsidies have been claimed. A further $53 billion has gone to manufacturers of electric cars and batteries. Since there is no upper limit – and no debt brake – spending could run into the trillions.

Now it is possible that the entrepreneurs Weimer spoke to were unaware of this. Three quarters of US citizens do not even know what the IRA says. Incidentally, you do not have to like the program. It is certainly nice that the USA wants to reduce its greenhouse gas emissions by 48 percent by 2035 compared to 2005 and be emission-free by 2050. But protective tariffs plus subsidies generally mean declining innovation and falling productivity.

Be that as it may: To claim that the USA has a “private economy” in which companies do not care who is president, as Weimer suggests, is simply nonsense. Or as they say in the USA: bullshit.