3.1 Weak institutions and regulatory policy

The enormous economic upswing that many countries experienced, especially in the second half of the 20th century, was based not only on technical but also on social and political breakthroughs³⁷. Particularly in the western democracies, the opening up of national markets to foreign trade was accompanied by welfare state measures that were able to mitigate the adjustment pressure which was caused by tougher international competition. An unemployment insurance or publicly financed education and retraining programmes were able to defuse distribution conflicts, at least within the respective countries. At the same time, intergovernmental and multilateral agreements established rules that promoted coordinated political action and greater reliability. The task of politics was and still is to create a sustainable regulatory framework for markets and the corresponding institutional organisations in order to preserve and consistently develop them which is supported by the population.

The term "institutions" is used in different ways. The study is based on a broader understanding³⁸, according to which the institutional structure of a society not only includes the totality of legally anchored framework conditions, compliance with which is monitored by the state or by state-legitimised organisations. Institutions also include values, norms and socio-cultural traditions in which personal attitudes, habits and behaviour manifest themselves. Institutions in all their dimensions are designed to create stability of expectations and thereby planning security and to promote joint action.

Over the past two decades, it has become clear that our traditional institutions and organisations at the national and even more so at the international level are less and less able to provide an adequate regulatory framework for the increasing global interdependencies. Persistent poverty and growing social inequalities, the instability of the global financial system, the transgression of many planetary boundaries, and above all the problems of climate change are instances of a dangerous market failure that can only be solved through more and better international cooperation. In fact, however, this market failure is exacerbated by policy failures in numerous areas, as many nation-states are unwilling or unable to ensure appropriate framework conditions or to comply with international agreements because they expect short-term advantages.

National climate protection can only make a global contribution if the emissions saved locally are not shifted to other countries by relocating production. Moreover, investments in climate protection only have an effect with some time lag, while the short-term costs are often perceived disproportionately. In this respect, self-interested actors are permanently tempted to leave the investments in protecting the earth's atmosphere (e.g. by switching to renewable energies) to others, but to further claim the advantages of climate-damaging energy production for themselves, as long as the ecological costs are not reflected in corresponding prices. This danger of free-riding becomes clear in the different reactions to the Corona crisis. In the wake of the pandemic countries such as China, which rely heavily on coal for their energy supply, have significantly increased their investments in this particularly climate-damaging form of energy production³⁹. Despite positive individual measures also the G20 countries are currently in danger of slowing down rather than promoting climate protection with their economic stimulus packages.⁴⁰

In the past few months the Corona pandemic has made abundantly clear how important international cooperation and solidarity are for the protection of health and other common goods, but has at the same time also showed how great the temptation for national go-it-alones is. "More and more states are abandoning the principle of shaping international relations peacefully, cooperatively and in mutual respect with the means of law. Instead, they rely on power politics and try to push through their own interests ruthlessly."⁴¹ – as the two major churches in Germany recently rightly lamented in a statement. In their joint statement, they also warn that "in the context of multilateral and supranational institutions, only governments act, while parliaments merely ratify ready-made decisions. Under such conditions, populists have an easy game to polemicise against multilateralism and international treaties, claiming that they lack democratic legitimacy and contradict the supposed will of the people".

Isolated departmental thinking, a lack of future orientation and weak multilateral organisations also make it more difficult to break established routines of action. The power of the familiar can be seen in the areas described above (cf. Chapter 1), for example, in the focus on fossil fuels, motorised private transport or a system of food production primarily geared to "quantity" with corresponding agricultural subsidy strategies such as area payments. What seemed to be sensible for a long time, or perhaps also was sensible at the time, unfolds self-sustaining and self-reinforcing effects that complicate or even prevent far-reaching changes. Paths are defined for individual and collective action that cannot be left without further ado ("path dependency"). Important technological and social innovations do not take place because the power of the familiar paralyses the openness and willingness to search for new solutions or makes them appear so risky or costly that people prefer to stay on the old familiar paths.

Path dependency becomes entrenched when the profiteers of these deep-rooted patterns of action decry possible alternatives as too expensive, unfeasible or as a supposed restriction of individual freedom from the start.⁴² In this case, the interplay of personal behavioural routines, traditional forms of social recognition and political framework conditions geared towards maintaining the status quo can prove to be a major hurdle to change. Those who want to overcome this are dependent on the support of future-oriented institutions that promote change and appropriate technological and social innovations.