Germany is facing its deepest economic and democratic crisis in decades. Real wages are down, the far right is rising—and the new government has no plan that speaks to the scale of the challenge. A thread 🧵 Germany’s economy has stalled. After six years of stagnation, real GDP growth has plateaued and is almost ten percent below where it should be. The 2022 energy shock triggered the largest one-year drop in real wages since World War II. 2/10

NEW PAPER: The 2022 fossil fuel price jumps caused an oil and gas profit explosion. We show the US reaped the largest profit increase (USD 275bn) of any country. Big Oil claims this benefits the American people. In fact, 51% went to the richest 1%, only 1% to the bottom 50%. A 🧵 This new working paper has been the outcome of an interdisciplinary collaboration with high powered modelers and wonderful colleagues. @GregorSemieniuk @BJMbraun @JFMercure @PabloSalasB Link:
2/ scholarworks.umass.edu/server/api/cor…

Economic stabilization used to be part of the disaster preparedness toolbox. It is time we add it back in. Just as it was recognized that some banks were too big to fail after the global financial crisis, we have to recognize that some sectors are “too essential to fail.” In essential sectors, we need to move from a pure efficiency logic to strategic redundancies. This requires policy interventions.
Ports and other critical infrastructure should have spare capacity and a well-paid work force large enough to ramp up activity when needed. 16/

Unemployment weakens governments. Inflation kills. The politically destructive power of inflation had been forgotten. Standard policy tools left us unprepared and fueled inequality. The re-election of Trump should serve as a warning to all democrats.

My first @nytopinion. 1/ In this age of emergencies threats to supply chains are becoming commonplace. Each threat brings the risk of inflation & its power to destabilize governments. If we learned anything from last week’s election, it's that we need new means of protecting our society & democracy. 2/

The fight against price gouging is good economics.

Here is why and why it matters. 🧵

bostonglobe.com/2024/08/22/opi…
1/ Former President Trump recently called VP Kamala Harris “full communist” for her stance against price gouging. Some economists argue such policies are “not sensible.” This debate isn’t just about politics—it’s about the foundations of economic theory.

💥NEW PAPER💥
When the companies that manage essentials like food reap record profits from disasters, there is little hope for resilience. Macro policy cannot fix this. We need a new stabilization paradigm starting from buffer stocks. A 🧶

Link:
@merl_sch peri.umass.edu/images/publica…
In search of a post-neoliberal stabilization paradigm, we return to the crossroads of the 1970s: inflation triggered by oil & food price shocks set the stage for international negotiations over commodity price stabilization as part of a New International Economic Order (NIEO). 2/

Shockflation has uprooted Europe. After living standards plummeted, a far right surge is engulfing Germany & France is in turmoil.

In a new report for @Europarl_EN, @jvtklooster & I urge for a new economic policy playbook to prepare for future shocks.🧵 europarl.europa.eu/RegData/etudes…
Overlapping emergencies are our new normal. More shocks are likely to come. In Europe, wage earners bore the brunt of the costs last time around: As a result of the 2022 shockflation, real wages were pushed below their 2019 levels for many countries. 2/

The polycrisis is prefigured in Arrighi’s theory of hegemonic transition. Systemic cycles of accumulation culminate in chaos as conflict escalates & new & old rules compete.

Our new open access paper links the accumulation process & chaos using a logistic map. 🧶
@GGalanis82 Arrighi & Silver’s Systemic Cycles of Accumulation (SCA) provide a framework which links hegemonic shifts with dynamics regarding the geographical expansion of trade and production. ‘Systemic chaos’ is the pivotal moment for the hegemonic shift. But what leads to chaos? 2/

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Can price controls be optimal? Our model says: Yes, if there is endogenous price uncertainty. Economists need a more rational relation with price caps. Delaying them when shocks hit essentials deepens the crisis & fuels the far right as the German case shows. 🧶 Germany's dependence on Russian gas meant it was hit hard by the Russian invasion of Ukraine. But market fundamentalist economists downplayed the impact of the energy shock & opposed policies to control energy prices. This delayed the government’s intervention. A mistake: 2/

.@adam_tooze with all the right questions on the obsession with the 2% inflation target: "In an age of populism and mounting calls for racial justice, can marginal reductions in inflation take priority over youth and minority unemployment?" 1/ "If we favour trade unions as defenders of democracy and a powerful countervailing force against inequality, should we not be backing them rather than denouncing wage-price spirals?" 2/

It's been a lively week on Twitter and I thought I should say more about WWII-style price controls across the entire economy. Doing that for our time strikes me as mad and I haven't seen anyone advocate it. We are living in an age of overlapping emergencies, not total war. 1/ My '21 Guardian op-ed considered what the stance of leading economists on price spikes in the transition to a post-war economy could tell us about the post-shutdown inflation. The historical parallel had already been drawn by the White House Council of Economic Advisors. 2/

Corporate concentration is a possible explanation of price and profit hikes driving inflation. But concentration was high before inflation. So, why can firms hike prices in an emergency? We explore this question in a new working paper. A 🧵scholarworks.umass.edu/econ_workingpa… US profit margins have reached levels not seen since the aftermath of WWII when inflation coincided with windfall profits. As @mtkonczal shows, there is again a relation between profits & inflation. But why have the same firms that kept prices stable started price hikes? 2/

Inflation might be easing for now, but we are living in an age of overlapping emergencies. More shocks are likely to come. We need economic policy preparedness for micro stabilization. But which prices matter?

A new working paper 🧵
scholarworks.umass.edu/econ_workingpa… Inflation used to be thought of as being ‘always and everywhere a macroeconomic phenomenon’ that macro tightening should address. However, the current inflation is the result of sectoral shocks that involve large changes in relative prices & require a micro policy response. 2/