Economist on the future: What will remain when everything becomes (radically) different?

Prof. Dr. Thomas Straubhaar, economist, migration researcher and professor of economics, in particular international economic relations at the University of Hamburg, answers our questions about the economic challenges we will have to face in the coming years.

Everything was better in the past!? Who doesn’t catch themselves thinking this in the current times? Indeed, the “abundance society” that characterized the post-war period is currently being replaced by a “scarcity economy”. But what does that mean exactly – especially with a view to the future? On the occasion of our 25th anniversary, Prof. Dr. Straubhaar provided a promising impulse on precisely this question with his keynote speech on the topic “What will remain when everything becomes (radically) different?”.

1) We are currently experiencing challenging times: There are shortages everywhere – of raw materials, building materials, heating oil and some other consumer goods, as well as of skilled workers on the labor market. What’s more, some people – not least in the advertising industry – are turning over every penny twice. Is this what our future looks like?

Looking back at the last 25 years, which were characterized by enormous prosperity and efficiency maximization, we are currently in the midst of a noticeable turning point. Life is becoming more expensive – and I assume that it will remain more expensive in the long term. Crises and their costs will characterize the coming years, and we will experience, or are already experiencing, a shift toward a scarcity economy. This change is of course accompanied by major uncertainties – and these in turn act as additional cost drivers. They increase the risks (and thus the costs) in almost every single link of the value chain, e.g. for insurance, the maintenance of sales channels, the need for redundancy – i.e. multiple lanes and warehousing – vertical integration and insourcing in order to have everything in one’s “own” hands, as well as the supply of raw materials. However, these changes do not necessarily mean deterioration. They definitely hold great positive potential, but require a change in thinking and adaptability.

2) How can this adjustment succeed? How do you manage to look ahead, especially as a medium-sized company in the advertising market?

The key is to see scarcity as a driver of innovation. The past has shown us time and again how progress and innovation emerge “out of necessity”: be it right now with Covid 19 in the accelerated development of medicines, a sensible approach to genetic engineering, the bio-sciences or a push now in alternative energies. Behavioral adjustments among the clientele, new business models among companies, a balanced combination of economy and ecology that takes into account that the profits of one always mean the costs of the other, and corresponding adjustments of the companies to minimize all costs, i.e. not only their own, can set a structural change in motion. This can meet the changes caused by uncertainty. Holistic optimization replaces individual maximization as the premise. Actually, just as Michael Jäschke has also formulated in his theory of the hybrid economy. This development will take time. But it is worth the wait: a scarcity economy sends out precisely the signals that point innovations in the right direction and accelerate the pace of progress at all levels of the economy, society and politics.

3) Promising prospects! And until then: What else can help against the growing uncertainty?

We are experiencing a turning point, away from efficiency and cost minimization and toward resilience and adaptability. Action based on three principles, the “three Vs,” helps to cut costs on a small scale: First, there is anchoring in our community – including family, neighbors and circles of friends, the common consensus we can agree on because it seems like a natural solution in the sense of Schelling’s focal points theory. In addition, trust in the common informal rules and norms we can agree on – here, too, local networks play an essential role because “people know each other,” appreciate each other, and see each other again. And in the possibility of actively turning the course of events in a positive direction. Last but not least, the third V: Variants. In other words, the willingness to be flexible, to think in variants, to have not only a Plan A, but also a Plan B and, if necessary, also a Plan C.