Recently in a conversation with a top politician of the Union. The state of the German economy was quickly discussed. The energy prices. The mistakes of the traffic light coalition. The threat of deindustrialization. And something with regulatory policy.
A few days later, a conference in southern Germany. Politicians, entrepreneurs and CEOs, a few association heads. And again the same song: the best years of the country? Over! The industry? Will leave the country soon! And the young people: no longer willing to perform! They’re not Chinese.
I’m encountering this kind of defeatism a lot right now. And a lot of the complaints that can be heard are not even wrong. The German business model, based on growing international trade (mainly with China) and cheap energy (mainly from Russia), no longer works the way it used to.
Rather, the opposite forces are now at work: high energy prices, lavish corporate taxes and a puny digital infrastructure. The education system, in its deplorable state, is doing no better, especially at a time when more people are retiring than ever before, while fewer and fewer people are being born.
Disruptions are not accidental
Now we could resignedly break off this text at this point, you know that from talk shows and association meetings: discussions there quickly get lost in a chorus of chants of crisis, relegation and doom.
>>Read here, what problems German tax policy is causing.
But that leads just as little as the strategy of Chancellor Olaf Scholz, who is simply trying to talk about new economic miracle years.
All of this obscures the actually relevant point: Germany has a strategy problem. While federal governments in recent years have been primarily concerned with managing economic success, they have failed to acknowledge that this success has often rested on past technological breakthroughs. The German economy has continuously improved its products over the years and made optimization a USP. But the big breakthroughs happened elsewhere. How could it come to this?
The fans of old-school regulatory policy must now be very strong. History teaches us that real technological disruptions rarely happen by accident, especially when it comes to their evolution and scaling. In many cases they are the result of strategic planning, research funding and public procurement. This is how the Silicon Valley computer industry was born. The tech industry in Israel too.
The “Made in China” plan is also a strategy for which Beijing has defined key industries and whose success it evaluates using clear indicators of innovation, quality and sustainability. Or let’s look at Japan, where the “New Robot Strategy” was launched a few years ago to promote the spread of robots in the rapidly aging society.
>>Read here, how the Biden government is promoting electric cars in the USA.
Part of this plan includes billions in government investments, education programs and, yes, robot-friendly regulation. Another example: The $280 billion Chips and Science Act in the US, which is intended to bring the semiconductor industry back to the US, a package of tax breaks, research grants and government contracts.
The work of economic politicians in such strategic industrial policy is like the work of gardeners. First they need to choose the right site, then prepare the soil and choose the right seeds. Then it takes patience and care. Similarly, new industries need to be drawn in the form of clusters and networks of research, business and investors.
Search for the vision of the future
The state then plays an important role as a gardener, providing infrastructure and education and stimulating growth with tax breaks and research funding.
Technological breakthroughs therefore require more than just a regulatory framework. You need an economic policy strategy with a vision – and a clearly defined path. Of course, the state must not start making entrepreneurial decisions: this is shown by the example of Curevac in the corona crisis.
At that time, the federal government rushed into the vaccine manufacturer – but Biontech then developed the effective vaccine, and Curevac’s course crashed on the stock exchange. In addition, not every politically desired idea is also an economically sensible idea.
However, the state must determine in which future industries the country should play a role in the coming decades. This is particularly important in Germany, where there are numerous innovation agencies, research networks, associations and future-oriented initiatives, but they have so far acted with little coordination. What is needed, therefore, is a real plan for orchestrating innovation and progress: a new Germany plan.
While the world is talking about one of the greatest disruptions of our time, the transformative power of artificial intelligence, the federal government is paralyzing itself with a discussion about heating face the problems of the future.
More: Is Germany now threatened with deindustrialization? Four reasons clearly speak against it