The price of free riding

BORDER CROSSINGS Op-ed by Katja Gentinetta, published at PRAGMATICUS

For decades, Germany, Switzerland and Austria have avoided investing in renewable energy. After all, there were cheap imports. Now the long inaction is taking its revenge. And we are paying with our morals. Turn of the times – the end of illusions – the new reality. However you put the events of the last few months into words: With the energy crisis, at the latest, the consequences are reaching individual households. And whichever paraphrase one chooses, in the end it all comes down to one realization: there is no life without sacrifice, no choice without a price. Every decision costs money – if not today, then in the future. Often, an early calculation would be wiser and a timely assumption of the costs would be cheaper. But people prefer to profit in the short term and put the bill on the back burner. This regularity is currently being demonstrated in several ways.

Neglected investments

First of all, economically. What many people do not want to admit is a simple law: There is no prosperity without growth. Even those who are under the illusion that a prosperous society can do without growth are quickly converted when a potential crisis is imminent. This is also the case now, when it is slowly becoming clear that the economy cannot keep going without energy – and thus cannot grow.  The German-speaking countries in particular have relied on energy imports for too long and thought they could get away without investing themselves. Now that these are urgent, it is suddenly necessary to rethink the impact on nature and the climate and ask: What is worse? Huge wind turbines, dirty coal, or the frowned-upon nuclear power? The conflict of goals is clear, and it awaits a decision. But because investments cannot be made so quickly, because infrastructures cannot be renewed overnight, it is now also clear that there can be no energy transition without transitional regimes – and no transitional regimes without compromises. Since energy must continue to be imported, democracies are now turning to regimes that were previously not so agreeable – a discomfort for which there would have been reasons in previous years as well, but which were preferred to be ignored.

Energy first, morale later

After all, it is still true: There are no secure imports without moral compromises in foreign policy; interests come first. Geopolitics remains a reality, whether one likes it or not. Politically, this also makes it clear that domestic gifts are never free. No matter how hidden the costs may be: At some point, they will present themselves as a bill, and the later the bill, the heavier it will be. And the higher the bill, the more painful the adjustment processes. And because adjustment processes produce winners and losers, the latter must be at least partially compensated. However, every political intervention, no matter how cleverly designed, has undesirable but unavoidable side effects.  This is how every subsidy for energy prices has to be financed. Taking the money from the taxpayers does not exactly endear politicians to the electorate – especially not in times of inflation. Asking the big winners to pay may be opportune, but it damages confidence in economic policy. It would have to be compensated with at least some guarantees for the future. Financing through debt would mean that these would also have to be serviced. And in all these financial policy considerations, it has not even been considered that cushioning energy prices threatens to undermine urgently needed savings efforts.

And so it is gradually dawning on society that prosperity, which is expressed in the fact that everyone can afford practically eve

rything, has its price. On the one hand, it was based on goods and services that were available at all times and whose prices could be kept low thanks to cheap energy – cheap because people shied away from their own investments. The price was paid in the form of political dependence. Another part of the prosperity was based on generous social benefits and pensions – if not in large sums, then at least in numbers of years. It was money that could only be spent because we had economic growth. And because it was saved elsewhere – in external security, for example.

Democracies are at their limits

This is roughly how the current situation in Europe presents itself. You can spin it any way you like: It is a situation that is pushing us prosperous democracies to our limits: economically, politically, financially.  The economic credo of efficiency was correct, but was too often thought of without its twin: effectiveness. The calculation must also work out in the long term. Because this was not the case, effectiveness is back as resilience: the demand for security in the form of stocks and redundancy, which increases costs. What sounded politically attractive yesterday must be realized today at the price of political popularity. What cost little to nothing and was available in abundance is now becoming scarce and expensive.

For policymakers, this means that the long bench that stood by so readily has disappeared, or at least become significantly shorter. The time horizon in which we have to tackle and, above all, pay for the piled-up challenges has shrunk massively. Political economy – the discipline that studies social preferences and decisions and their consequences – calls this attitude free-riding. Those who can, push costs on or off. The motto is: If someone else pays, I can profit. And what’s more, as long as I can get away with it, there’s no reason to change my behavior, because others will pay the bill – later.  This later point in time now seems to have arrived – and the others are ourselves. We, too, have cheated our way through life to some extent – or, as the saying goes, we have done the math without the host. After all, we now have the chance to build for a better future. Let’s seize it.