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1. The Economic Analysis: creeping disintegration of prosperity
The economic analysis leaves no doubt about it: basically poor regulations- meant in its broadest sense- lead to destruction in all markets of the economy, labor- and capital- as well as the product-markets. The direct consequences are the well-known employment- and growth-problems (Figure 1 and www.mckinsey. com/mgi).

Let’s have a short look at the two factor markets for labor and capital. The fact that labor has become too expensive due to wage and ancillary wage costs has been sufficiently examined. Besides, the fact that we give monetary incentives to a lot of people not to work, at least not in the Formal Economy, is also known. The reason is the over decades build up regulation of the labor markets- with an underlying perception of the human as a largely care and welfare dependent being, which hasn’t reflected reality for a long time. On the capital markets in turn, regulatory distortions cause relatively low financial costs for equity as well as for debt. The consequence is a (incidentally a phenomena that can be observed not only in Germany, but in entire Western Europe) high intensity of capital; it lies approximately 30% above the US-American. Here, as well an image of the human being, who is eventually not responsible as an investor, continues to have an effect. The main focus of the here relevant judicial frame is rather on the creditor (historically “ward”) than on the self-responsible investor. The product offers of the financial sector are targeted accordingly.

Distorted factor prices lead to uneconomic relations of factor inputs: the employment is too low, the capital intensity in relation very high. But this unpleasant, employment depressing situation needn’t necessarily lead to a more and more clear decline of the German per-capita income, thus to growth weakness, if their factor productivities were world champion like. Still many believe that they are, and in the face of the high intensity of capital they can actually rightly expect high labor productivity. Yet this belief and the resulting expectations are deceptive. As bad as the employment problem might be, employment contributes “only” one third to the affluence-gap of 30% for per-capita income in comparison with the US, because the employment per capita is10% below the figure for the US. Two thirds result from the weak productivity factor. The rate of labor productivity in Germany, for instance, is 20% below the US Value. Again, the cause analysis points at catastrophic regulations, this time on the product markets. Sustainable growth of productivity can ultimately only result from innovations- for products and processes. If economic growth of productivity is to evolve from innovations, the vast diffusion of such innovation is crucial. Competition among suppliers enhances this vast diffusion: when a provider offers a new product on the market or applies a new process, then this innovation will spread faster among the suppliers, the higher the competitive pressure is. The productivity grows correspondingly faster as a consequence of process innovation as well as the development of products with a higher added value. What distinguishes Germany- and by the way also other continental European countries- in this regard from the US the intensity of competition. It is considerably lower here, caused by innumerable regulations of all kinds. One main stream of regulations has to do with the structure maintenance of antiquated economic systems, again caused by an idea of man, in which mankind can only bear change in homeopathic dose rates.

The conclusion of the economic problem analysis therefore reads: regulations, based on outdated ideas of man, distort all markets fundamentally and lead to employment- and productivity-gaps, which multiplicatively, and unfortunately, not only in sum lead to, in the meantime, hardly acceptable gap of prosperity, which has been growing in a stealthy manner for the past years.