Panic shows western timidity

This is my latest comment from Fund Strategy.

The significance of Germany’s decision to relinquish nuclear power is being grossly underestimated.

It is astonishing that Europe’s largest economy is voluntarily giving up an important source of energy. Even worse, it is a striking example of the culture of risk aversion that has gripped the western elites.

Since economic output depends on energy consumption the move is likely to hit the German economy. The German government has announced plans to make up the deficit with renewable energy but it is likely to be massively understating the costs involved.

Not only does it need to construct new sources of power generation, such as wind turbines or solar, but huge enhancements to the grid too.

If such an investment programme was necessary it would make sense. But nuclear power has, on balance, proved a relatively reliable and safe form of energy. It has certainly had problems but the same is true of other energy sources.

It would be far better to invest to improve existing energy sources and harness new ones rather than the panic shutdown of nuclear reactors.

But the importance of Germany’s withdrawal from nuclear energy goes beyond Europe. It is a graphic example of the lack of confidence of the western elites and their estrangement from their own economic norms.

They seem to have forgotten that the pursuit of economic growth is one of the founding ideals of capitalism. The market system has often failed to live up to this goal – and it should be criticised for that – but since the 1970s it has become increasingly anxious about prosperity itself.

What has emerged to take its place could be called “growth scepticism”: the tendency to criticise growth through indirect attacks. Western leaders rhetorically back growth but at the same time add so many caveats that such support loses much of its meaning.

Environmentalism, with its insistence that growth has to be constrained out of respect for natural limits, is a classic example of this trend. In contrast, from the 18th century onwards it was widely believed that growth was necessary to provide the resources to help overcome environmental challenges. In other words, nature should be subdued rather than worshipped.

Germany’s renunciation of nuclear energy is as clear an example as there is of the western elites’ lack of confidence in their own social system.