Recent Experience with Macroeconomic Policy in the Federal Republic of Germany

Abstract

Macroeconomic policy in the Federal Republic of Germany over the last few years cannot be explained without referring back to experience with the “Act to Promote Economic Stability and Growth” (1967) and all the other events forming the essence of the 1970s. To a large extent, today’s actions not merely reflect the experiences of that time, but are also the result, as it were, of burdens imposed directly by decisions taken then. In the course of the past decade and a half there has been a major change of opinion as to what role an active macroeconomic policy should and can play. Instead of a far-reaching social consensus there are now fundamental differences between the views of the political parties and, to some extent, of those of social groupings. The common position in favour of a “social market economy” (soziale Marktwirtschaft) — CDU/CSU and, to a large extent, also FDP — or a “free economic order” — SPD — has changed to include a range of standpoints which suggests that the future will witness highly divergent developments depending on the composition of the political power structure. Yet when the Act first became law, everything seemed to be straightforward and — apparently — in accordance with well-established scientific views on macroeconomic processes.