We need to ensure increased economic know-how

November 27, 2018. In a few days, the CDU will be holding its regular party conference in Hamburg in order to elect a (male or female) successor to German Chancellor Angela Merkel, who will no longer be standing for election to the office of party leader. One of the candidates is the former CDU leader Friedrich Merz. You will probably remember the man with the beer coaster. In the current succession debate, however, he is remembered not so much as the man who became known in 2003 by claiming that every citizen in Germany should be able to calculate his or her income tax on a beer coaster, but rather as the man with millions in his account and his mandate as Supervisory Board Chairman of Blackrock, the world’s biggest asset manager. We are meanwhile holding a broad public debate on whether a man who has earned millions in the private sector can or even may be the chairman of a large and established political party. And Merz himself meanwhile expresses himself almost with embarrassment about his success – as if he had done something unlawful.

Scratching at the very foundations of the market economy

I personally find this discussion in its generalised form more than strange. After all, this black vs. white way of thinking about the functioning of the economy is scratching at the very foundations of the free market economy to which the Federal Republic of Germany owes its prosperity and its permanent place in the free, peaceful world. The issue here is the categorisation of essential features that have shaped our economic system, namely performance orientation, willingness to assume responsibility and leadership, courage, and profit orientation. We cannot tolerate people being pilloried in this country because they were or are successful. It must be exactly the other way round: we need to get back to the point that successful people are respected and acknowledged for their achievements – both in society as well as within companies. They do not need to be admired or to serve as role models, as is commonly practised in the United States. However, in no circumstances whatsoever must we allow successful people to be treated disparagingly.

Lack of knowledge about the economy

Yet the whole debate indicates that there is a fundamental problem that has been troubling me for quite some time, namely the question concerning the level of economic knowledge of society at large. In the spring of this year, the German weekly “Die Zeit” commissioned a survey to be taken amongst Germans concerning their knowledge of economics. The result was quite frightening. A large majority of German citizens knows little or nothing about the system and functioning of our economy. And the study did not deal with in-depth problems posed in business administration. Instead, the questions asked were: at what level did the German stock market index (DAX) stand at the end of the year? How high is the maximum tax rate (more or less)? What is the meaning of corporate revenues? How high is the unemployment rate at present? What is a checking account? The conclusion drawn from the study was that the vast majority of respondents across all educational, age and social strata failed to answer these questions.

Success produces success

The weird discussion surrounding Friedrich Merz can possibly be explained by this obvious lack of understanding with regard to questions of an economic nature. Perhaps there are not sufficient people who know that striving for success simply belongs to those bastions of the free market economy that I mentioned at the outset. Another factor is that success in an economic system that we have come to know in Germany mostly spawns or triggers additional success stories. This success, in turn, is founded on the profits generated by companies. And in the small and medium-sized enterprise (SME) segment, which accounts for some 99 per cent of all companies in Germany, as a rule profits are reinvested in the relevant companies. This ensures innovations, new orders being placed and the associated growth, with new jobs being created in the process.

The cliché of the greedy entrepreneur

Perhaps many Germans are unaware that all this leads to their having secure jobs in the first place. And quite obviously the cliché that entrepreneurs predominantly work only for their own success rather than that wellbeing of the company and its employees continues to prevail – just as if there was a huge money bin somewhere (à la Uncle Scrooge), in which entrepreneurs store their riches for themselves alone. This image is admittedly simplistic and certainly popular in pubs discussions and in rainbow press headlines – the thing is, though, that it has little or nothing to do with reality. This is because especially in family-managed SMEs – for which the German economy is admired and respected across the globe – profits are just about fully invested in the families’ own firms. After all, it is the owner who has the biggest incentive to ensure that the company is in good health. The owner ultimately also has the most to lose. And if the company is in good health, as a rule its employees will be doing well for themselves, too.

We need another Alexander Gerst to explain economic subjects

We need to find a way in our society to give citizens increased knowledge of economic matters. Only if they understand these various connections will they not fall prey to the temptation of succumbing to the populist messages of certain interest groups or organisations. This is a task that society can overcome only by means of a concerted effort. My feelings tell me that we must not only burden schools with this particular task. The call for economics to be introduced as a mandatory subject at all secondary schools always becomes loud very fast in a discussion of this kind. I am not opposed to confronting schoolchildren with economic knowledge – quite the contrary. It certainly would be a good start. I believe, however, that we are making the issue too easy by confining ourselves to school education. The companies themselves could make a tremendous contribution to elicit and convey entrepreneurial thinking to their own employees “on the job”, as it were. I also believe that the media could likewise intensify their efforts – in particular by devoting some thoughts to how the youngsters above all can be brought to see the light, most of whom only obtain information via digital platforms or social media. The example of the German astronaut Alexander Gerst shows that it is possible to use adequately prepared content via social media to also make youngsters enthusiastic about technology and space travel. Why should that not also be possible with economic topics prepared with exciting content?