Problems and solutions for wealth formation in Germany

On November 15, 2021, the German journal konflikt Magazin reported in its weekly review reports on a recently published study by the MIWI Institute.

“The young Institute for Market Integration and Economic Policy published an English-language analysis last month entitled “Wealth formation as the basis for prosperity, democracy and social justice”. The author of the study, Yuri Kofner, goes there with reference to the “founding fathers of the social market economy” Walter Eucken, Alfred Müller-Armack and Ludwig Erhard from the thesis that wealth accumulation and especially widespread homeownership are the most important foundations for social prosperity, freedom and justice.

The problem that Kofner sees: Germans have particularly few assets and residential property compared to other industrialized nations. Despite the above-average employment and savings rate and exceptionally high average wealth, the German median wealth per capita is significantly lower than in France, Italy, Spain (or the USA) and is only slightly above Greece. Germany is the main financier of Europe – and at the same time its poor house, because in hardly any developed country the median wealth is nearly as low as in this country.

It hits the German lower and middle classes particularly hard; the comparable classes in Spain, France and Italy have two to three times more, and even the Greek middle class is on average richer than the German.

The main reasons for these conditions are the low homeownership rate, savings and investment barriers in the private sector and excessive taxes. For each of these problems, the MIWI Institute delivers solutions, such as the dismantling of regulatory barriers in house construction. The author also names the refugee and migration policy of recent years as a factor that creates a long-term need for 300,000 new flats and thus makes the German real estate market even more difficult for young families, for example. As a reform approach, Yuri Kofner suggests that migrants who already have housing in their home countries should not be provided with social housing support in Germany.

The entire study, including the extensive demands for tax reform (relief of low and normal wage earners, abolition of inheritance tax, etc.) can be found here in English.”

Source: konflikt Magazin

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