The Culprit of the Global Crisis – German Mercantilism!

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These are truly testing times. The world economic order – capitalism – is being called into question following the Lehman crisis. The world’s best form of societal organization – democracy – is being challenged by the economic success of autocratic countries such as China and Singapore.

The end of history was proclaimed prematurely by Francis Fukuyama in 1992. Coming up with convincing answers to such challenges requires the greatest effort possible. All my efforts to do this make me ever more humble the older I grow. I find out, time and again, that very much like my doctor, I do not have all the answers.

There is, however, something that makes me – for a German a rare instance – an optimist: my insatiable curiosity. This is my source of wisdom and the ultimate reason for my confidence. I am not in the premier league of the brightest intellectuals, but I am always willing to learn from the brightest. I never stop asking or inquiring. I do specialize (in economics), but remain deeply convinced that associative competences are even more relevant and therefore insist (for myself) on adopting an interdisciplinary interest and approach. My starting point for all analysis is to find out about the true utility function of man, and more than equally important, of woman. It is obvious that we, mankind, do not all tick the same, we seek to maximize either power, reputation or income. And each of the three dimensions of utility is difficult to define appropriately. Is the decision-making unit always to be the individual or a group (for a family: two/three generations)? Which period is it that the economic agent is going to maximize/optimize? Is it a month, a year, a decade or a lifetime?

These considerations are underdeveloped, and not just in economics. Quite a few of us are nothing but “Ichlinge”, i.e. persons maximizing individual utility for a very short span of their lifetime (today!). Such an attitude was promoted by the escape from hierarchical coercion exerted by the church, the aristocracy and the patriarchal family. It was the fallout from the enlightenment, degenerating into what I call fundamentalist enlightenment. This form of enlightenment disregards that man comes into existence as a product of “the other”, that man is a “zoon politicon”. This orientation led economics to limit its focus to the maximization of individual short- term income. This implied disregarding the lifetime perspective, disregarding the environmental concerns arising from human action, disregarding the intergenerational implications of economic choices driven by the maximization considerations described above. Economics degenerated into analysis of the impact (first round effects of action (including economic policy action)). Such an approach disregards the reality that development by its very nature is a game that consist of numerous - if not unquantifiable – rounds.