Dirk Müller:Nothing is impossible: from master plan to economic boom

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Everyone agrees that most European states are in need of reform. These re­­forms, however, can only work effective­ly and without overburdening the people or damaging the economy if they are supported by fiscal stimuli. Such fiscal measures should not necessarily be considered equivalent to government spending. Initially, it will be enough to discontinue the austerity packages and maintain the present situation. The new measures, taxes, provisions and changes in law are the biggest problem of Eu­­rope’s economy at the moment.

An IMF study has examined the issue concerning the basics behind the question of why one state becomes success­ful over time and another does not. Is it important that this state has an abundance in raw materials at its disposal? Is it the good geographic location bor­der­ing on international waters and com­­mer­cial routes, the favourable climate conditions or the fertile soils? Swit­zer­land has shown, and impressively so, that these parameters are not necessar­ily decisive. What is it then that makes Swit­zerland and many other states so successful in the long term? It is the legal and planning security for entrepre­neurs. Whoever is planning any kind of business, be it a flower shop or a chem­ical company, needs to be able to create a halfway decent and reliable business plan. He or she must be sure that the prop­erty to be acquired will be theirs on a permanent basis, without the pos­­sibility of losing it after a potential change of government two years later. The en­­trepreneur needs to assure himself that the labour laws under which he em­­ploys his staff today will also essential­ly ap­ply in the coming years. He needs to know which tax rates and charges are to be ex­­pected in the next years. As a result, chang­es and certain unforesee­able events will always be a part of busi­­ness planning. It is therefore safe to say that the more reliable an entrepreneur is able to plan, the more likely he is to take the risk. Otherwise, if the company op­­erates on an international level, he might choose to go to a country where he can plan better. If he sells flowers, he might decide not to get a credit in the first place in order to open a small shop.


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This absolute legal and planning security is the biggest advantage of Swit­zerland. Even Germany does not always offer this level of planning security. En­­ergy producers are currently experienc­ing this. First, the operation periods for nuclear power plants are extended, then the phasing out of nuclear energy follows shortly thereafter. For the companies involved, this is tantamount to ca­­tastrophe in terms of planning security. Similar conditions currently apply to the expansion of renewable energies. One of the main obstacles in this regard is an unpredictable political agenda that takes on new directions again and again. A company will not invest if it is not able to reliably prepare itself for a scenario, and this slows down the economic de­­velopment of a society.

An entrepreneur in Spain or Italy is to­­tally unaware of which new taxes will be levied tomorrow and which laws will be conjured up. In Greece, an entrepreneur can’t even reliably plan which currency will be used a year from today. This uncertainty and the complete lack of any security in planning is the biggest obstacle on the way to a healthy Euro­pean economy. Add in a politician such as Silvio Berlusconi, who, in the run-up to elections, announces that he will dis­card all previous measures and retroactively change certain decisions, and you have the recipe for the exact opposite of what the economy needs.

We are in dire need of a European master plan that clearly defines which re­­forms will be on the schedule for each state over the next five years, how these will look like and in which intervals they will be implemented. Companies need to be sure that no further significant chang­es will be made beyond that. This would be the minimum level of planning security that a company needs, regardless of its size.

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Part of this includes a clear definition by the European states of how they view the European structure in the future. We have politicians that are afraid of drafting up a clear perspective for Europe in light of upcoming elections. No matter how this perspective will look like, people and the economy can prepare for anything. However, we need politicians that are brave enough to work out and clearly define a joint vision with their col­­leagues from the other European states and prepare the general population for this shared journey. We need a narrative.

The decision of European states to es­­tablish such a shared European master plan, as well as the southern European states agreeing on a clear reform agenda for the next five years, does not cost a single euro in government expenditures, yet it would be an essential incentive for investors all over Europe.

Legal, fiscal and political planning secu­­rity forms the first foundation for econom­ic growth. What we need beyond that, due to the extreme economic tur­moil, are more economic accelerators.

The most effective measure to initiate an economic recovery on a broad scale are investments in infrastructure. The USA experienced two large economic booms that played a crucial part in the rise of the USA. The investments in rail­­way infrastructure brought about the first real wave of prosperity across all of America in the 19th century. This phe­nomenon repeated itself in the 1940s and 1950s on account of the construction of the long interstate highways.

Unbenannt-1 Nothing can boost the national economy better than investments in new in­­fra­structure, and nothing increases the val­ue of a national economy like this new in­­frastructure. You see there is a difference in whether a state spends money on so­­cial benefits, which dissolve among the population without creating any long-term added value and which require the same payments in the next year, or whether a state spends money, thus creating infrastructure and attracting new investments, as well as boosting the national wealth (capital stock) in the long run. Europe urgently needs investments in modern infrastructure. From a modern energy supply to fibre optic lines all the way to independent server farms. While the states lack flexibility due to their debts, private households are sitting on monetary assets, including life insurance, in the trillions. So what could be more logical than activating these funds for infrastructure in form of equity? Insurance companies would very much like to invest in such projects even today. However, they are only allowed to do so on a limited basis due to the re­­quire­­ments from Solvency and Basel. In this context, infrastructure funds could present a way out. Specifically, funds es­­tablished through private banks that correspond to clear specifications for sensible infrastructure projects and have been certified by auditing companies. The payments into these funds – not the profits – must have a government guarantee to meet the regulatory capital requirements and security needs of private investors for their retirement plans. This guarantee would not pose a risk for the state as property coverage would be provided through infrastructure. The market-oriented regulation would be maintained since the private banks would set up funding and the in­­vestors/insurers would only invest in the most promising projects which stand in competition to receive these funds. This way, monetary assets would be trans­formed into tangible assets. An eco­­nomic boom that would last for dec­­ades would become a reality, during which the states would be able to re­­duce their debts through tax revenues and implement the necessary structural reforms at the same time. We have to change our approach and establish our investments on the basis of equity as op­­posed to borrowed capital. This is the only way to break the cycle of new debts and the problems that arise as a result.

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The “face of the stock exchange” started working at the Frankfurt Stock Exchange after his training as a banker in 1992. His books on the global financial crisis “Crashkurs” (2009) and “Cashkurs – ein umfassender Finanzratgeber für Ein­steiger und Fortgeschrittene” (2011) were bestsellers. Dirk Müller’s most re­­cent work is titled “Showdown – Der Kampf um Europa und unser Geld”(2013).