Fresh from Brussels: the planned economy of Von der Leyen’s “social taxonomy”

Guest article by Rainer Zitelmann: Von der Leyen’s planned economy: it used to be called socialism, today it is a “social taxonomy”

The taxonomic debate is entering another round. After Brussels figured out what made ecological sense and what didn’t. The question now is which sectors are socially sustainable and which are anti-social. Guest author Zitelmann considers it sheer arrogance and honestly planned.

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Yesterday I had a few hours interview with a journalist from a large daily newspaper about my future book The 10 Fallacies of the Anti-Capitalists. His first question was whether or not I had fought the battles of the past decades, since it was now clear to almost everyone that capitalism is better than a planned economy.

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I thought the topic was more relevant today than ever, and I have confirmed it today when I read that the European Commission, led by Ursula von der Leyen, is now coming up with another idea after the ‘taxonomic’ debate on sustainable development. While the first part was about the distinction between sustainable and unsustainable forms of energy production, it is now about the distinction between socially useful and socially useless enterprises.

Von der Leyen determines who is an anti-social company

Brussels ratings should therefore steer investors’ funds in the “right” direction. This means that if politicians and officials believe that a company is not paying all employees the “right” wage, it can be considered antisocial. If politicians believe that management salaries are too high in relation to the average for employees, this is another sign of anti-social behavior. If politicians and officials believe the rents charged by the real estate firm should be lower, the firm again runs the risk of being deemed anti-social.

The aim is to assess the company’s benefits to society as a whole, i.e. whether the company serves the so-called common good or not. For some companies (e.g. cigarette manufacturers) this is contradicted from the outset, for others, classification systems are created and the question of whether they are useful or not is decided not in the market but in political focus groups. The Greens and the SPD have already expressed their enthusiasm for this idea.

Taxonomic debate in Brussels: a new area of ​​activity for lobbyists

I think the lobbyists will also be enthusiastic because they now have a completely new field of action: they have to convince politicians why their company is ultimately “socially useful”.

Of course, none of this has anything to do with the market economy. It is characteristic of systems with a planned state economy that politicians determine how funds are distributed in the economy, what is to be produced and what is not – and in what quantity to be produced. In a market economy, decisions are made by companies – and whether a business is useful depends on the decisions of consumers every day.

Therefore, there is nothing more democratic than capitalism. The Albrecht brothers were for a long time the richest Germans in Germany. Why? Because they had a good idea with Aldi discounters, namely how to offer good quality products at a reasonable price. Millions and millions of customers have made the company big and its founders rich with their purchasing decisions.

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Biontech was financed by private investors with over a billion euros – and they had to endure twelve years of losses, in which losses accumulated over 400 million euros. State grants initially played almost no role compared to over a billion funds – the state found funding mRNA research too risky.

It was only when mRNA technology was mature and it was about getting everything in motion so that vaccines could be produced in sufficient quantities that € 375 million of government funding was poured in.

“Presumption of knowledge”
andalso in Brussels

What does this have to do with the topic? Friedrichs August von Hayek, laureate of the Nobel Prize in Economics, described the “presumption of knowledge” as the main error of all socialists. State-owned economies have repeatedly failed because they were based on the belief that politicians and officials know better what is good for people than corporations and consumers.

The planned economy is celebrating its revival in Brussels. What is “socially useful” and what is “socially harmful” is again decided by politicians, not by the despised market. There have been at least 24 socialist experiments in the past 100 years – but all have failed without exception. But along with the distance to unsuccessful socialism, the thinking that guided all these experiments is reborn. Today it is no longer called “socialism” but, for example, “fleet targets” (politicians in Brussels determine which cars should be produced) – or a “social taxonomy”.

Rainer Zitelmann is a historian and sociologist. His new book, The 10 Mistakes of Anticapitalists, will be published on February 22nd

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