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Five economic methods: What is the Council of Experts for?

Five economic methods: What is the Council of Experts for?

They are actually supposed to advise, not argue: the economic experts are influential economists. How long have they existed and what are they responsible for – here are the most important questions and answers.

“Disputes between economists are threatening to escalate,” the media is currently sounding the alarm. It’s about the Advisory Council for the Assessment of Overall Economic Development (SVR), in which five economists sit and advise on the economic situation. It currently includes the following professors: Monika Schnitzer, Veronika Grimm, Ulrike Malmendier, Achim Truger and Martin Werding. Last Wednesday they presented their spring report. Otherwise, the wise men stand out precisely because of their quarrels at a ratio of 4:1.

Background to the friction: All the wise men want battery-powered trucks in order to achieve the climate goals – only Veronika Grimm is against it. She advocates “technology openness” and fuel cells that run on hydrogen. That’s why she cast a minority vote against the college.

Deeper background to the dispute: Veronika Grimm has been on the supervisory board of Siemens Energy since 2023. The company is active, among other things, in the fuel cell and hydrogen business. The four others fear that this could lead to a conflict of interest. You sent an email asking the economist to choose a job – which didn’t happen. Monika Schnitzer complains particularly loudly. The women are not in agreement anyway, in 2021 both fought for the SVR chairmanship – Schnitzer won.

Why does the Economic Advisory Council exist?

The SVR was established in 1963. At that time, CDU man and economist Ludwig Erhard was still Economics Minister. The parliament in Bonn decided by law to install a staff of experts who would neutrally observe and analyze overall political developments. In contrast to the “Council of Economic Advisors” in the USA, the Council of Experts should not only advise the government in the areas of social, financial and economic policy, but also all relevant political authorities and the public. So that the national economy thrives as well as possible in the spirit of the social market economy.

What are the tasks of the Economic Advisory Council?

The main task of the SVR is to submit an annual report by November 15th every year. The federal government, in turn, must comment on this within eight weeks and explain what conclusions it draws from it. In addition, the SVR prepares special reports and expertise on special topics, primarily on behalf of the federal government. The spring report has also been available since 2014. According to the SVR, an average of 14 meetings with 37 meeting days take place per year, as well as hearings, meetings with the Federal Chancellor and press conferences.

How independent are the political advisors?

On paper they must be completely independent. Traditionally, one member is appointed at the suggestion of the Joint Committee of the German Commercial Economy (“Employer Ticket”, currently Werding) and the trade unions (“Trade Union Ticket”, currently Truger). The Federal President is responsible for selecting the five economists at the suggestion of the Federal Government. The head of state must ensure that no SVR candidate belongs to a parliament, a government, a federal or state administration or a collective bargaining party. The office is limited to five years (three for the chairmanship), but you can be reappointed. As a further safeguard, a rotation system was installed: one member leaves each year. The office is located at the Federal Statistical Office in Wiesbaden, where the committee also meets. The wise men are supported by a “scientific staff” with a general secretary and 17 scientific employees.

What criticism is there of economic methods?

Some constitutional lawyers claim that the economists are an “irresponsible subsidiary government”. This is not an exaggeration, because the Council actually works not only analytically, but is also constantly drawn to making recommendations. However, based on the guidelines, he is not actually allowed to offer the government any specific economic policy measures.

Experts also question the sense of the expensive forecasts. Who does it help if the SVR forecast economic growth of 1.3 percent for 2024 in March 2023, then quickly corrected it to 0.7 percent in the fall, only to now reduce it again to 0.2 percent?

How unified must the five wise men be?

If the five economists in the SVR cannot agree on a joint assessment of the economic situation, the majority may record different positions in the annual report. These are the so-called minority votes. In 2021, the consequences of this sovereignty became drastic. At that time there was no new chairman after the old one left. As a result, the four remaining economic systems were unable to achieve an assessment of the economic situation that would be acceptable to a majority, and a stalemate ensued. Finally, two different annual reports appeared for the first time, contained in one volume. The committee was in danger of slipping into a deep crisis.

How much does the committee cost us taxpayers?

The economists receive an unpublished flat rate from the tax pot. These are determined jointly by the Ministry of Economic Affairs and the Ministry of the Interior. There is particular criticism of the expenses to be reimbursed: According to press reports, the council’s travel costs in 2023 amounted to around 300,000 euros. Ulrike Malmendier alone, who lives and teaches in Berkeley, California, spent 200,000 euros; the average trip to Germany cost 13,000 euros. Travel costs are now capped at 100,000 euros per member. What is also important here is that the wise men are no longer the only advisory board. The federal government has now set up a number of advisory committees, from the German Ethics Council to the Federal Youth Board of Trustees and the Cycling Advisory Board to the Military Medical Advisory Board. Corresponding accompanying costs arise automatically.

Source: Stern

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