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Germany must get away from the primacy of the economy

2023-02-28T09:57:59.258Z


If there is something to be decided in Germany, the companies always have a say. Politicians must free themselves from this and work on a new model for the country.


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Cosco container ship in the port of Hamburg

Photo: Christian Charisius / dpa

Concerns about Germany's de-industrialization are growing.

However, the threat to the business location consists in the primacy of the economy over politics and society, which is the core of the German economic model.

This primacy is unsuitable for a world that is increasingly shaped by crises and change.

Instead of sticking to the old model, Germany must reinvent itself economically and politically.

First and foremost, this requires that politicians - across party lines - emancipate themselves from the influence of companies and make themselves independent.

The world of tomorrow will become significantly more complex and global - not just economically.

The biggest challenges cannot be solved nationally.

Climate and environmental disasters, the dominance of artificial intelligence and increasing competition for scarce resources can only be solved as a global community.

Crises will become the norm, requiring a rethink with a focus on resilience and flexibility.

With climate catastrophes, global financial crisis, European debt crisis, pandemic and now war and energy crisis, over the past 15 years we have already had a bitter foretaste of what lies ahead.

And the speed of change will increase sharply - be it exponential technological change, especially in relation to artificial intelligence, or the catastrophic effects of climate change when tipping points are reached.

»Deutschland AG« fails in times of crisis

The core of the German corporate economic model of "Deutschland AG" is the primacy of the economy over state and society, which explains mercantilism and protectionism.

For 70 years, the central economic goal has been to maximize exports and global market shares and to keep imports as low as possible.

The model works in good times, when strong export growth secures many good jobs and generates tax revenues.

In Germany, the terms export and savings world champions are understood as successes without seeing the downsides: the lack of investment and the loss of prosperity.

However, the model fails in times of crisis when global interdependencies become more important.

The asymmetry of this dependency means that many German companies have made themselves open to blackmail - and thus also hold the state and society jointly liable.

The high dependence on fossil fuels from Russia or the Middle East is just one example.

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As a result, Germany is increasingly becoming a plaything for China, the USA and countries rich in natural resources, which are politically unreliable.

A value-oriented foreign policy was viewed with incomprehension for decades.

It was more important to open up China as an export market for German companies than to call for the protection of human rights, to insist on symmetrical rules of the game, or to limit the dangerous dependency on China.

Investments in climate protection or in an efficient infrastructure received little attention because they are expensive in the short term and only pay off in the long term.

As a logical consequence of this short-sightedness, the asymmetrical dependencies are exacerbated and projects for climate protection and many other priorities fail.

The state has made itself susceptible to blackmail

This mercantilism and the primacy of corporations make the German state increasingly vulnerable to blackmail.

Because it is rational for German companies to take enormous long-term risks – knowing full well that if they fail, the German state will be forced to act as an insurance company and compensate them for the economic damage.

This happens again and again and in hardly any other country to such an enormous extent as in Germany.

After the global financial crisis in 2008, almost no country in Europe gave so much money to its banks that had gambled abroad, although in many cases this would not have been necessary for financial stability.

And the car companies also wrested an economically completely nonsensical scrapping premium from the German state at the time.

Even during the pandemic and now in the energy crisis, there was hardly a country in the world that paid more subsidies and aid to its companies.

Such large sums that the European neighbors rightly criticize the unfair competitive advantage for German companies.

The German economy today complains bitterly about the 370 billion dollars that the US government is making available to companies, households and municipalities to strengthen climate protection and sustainable technologies.

On the other hand, it is hardly mentioned that Germany – with a fifth of the economic power of the USA – has provided almost the same amount primarily for subsidies for fossil fuels in 2022.

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Concerned about de-industrialization, many point to the example of BASF, which is now relocating some energy-intensive production abroad.

Threatening German companies to relocate jobs abroad usually works extremely well to extort further funds and concessions from the German state.

But hardly anyone asks how it came about that BASF became so dependent on supposedly cheap Russian gas.

The company was one of the drivers behind Nord Stream 1 and 2 and has consciously placed itself in this dependency.

Like many German companies, BASF is apparently pursuing the strategy of reaping profits in good times in order to force the state to bail them out in times of crisis.

Less bureaucracy and lobbying

However, the state's susceptibility to blackmail goes further, since the state often holds significant shares in the company.

This proved to be fatal in the global financial crisis caused by the state-guaranteed state banks.

At Volkswagen, Lower Saxony holds 20 percent of the voting rights.

Such a group will hardly ever experience existential hardship because this runs counter to state interests.

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Companies and their associations complain about the excessive bureaucracy, which creates greater hurdles in hardly any other country.

But who is responsible for this?

The usual narrative is: the state is incompetent, too big and too inefficient.

This may be partly true, but the German state is certainly no less competent or efficient than France, Great Britain or the USA.

The truth is also that many of the rules are created at the urging of companies themselves, motivated in part by a desire to protect their own interests and gain an advantage over competitors.

And infrastructure projects - such as the expansion of renewable energies, an efficient rail infrastructure or a better education system - often fail because of the interests of a few.

The many legislative procedures in which companies and interest groups are allowed to rewrite the draft laws in their own way paint a picture in which politicians deliberately leave the steering wheel to business.

How should change and renewal be possible?

The state must emancipate itself

Today Germany is at an economic turning point.

Politicians must fundamentally change the economic model and free themselves from the grip of the economy.

Instead of subsidizing companies and cementing old structures, it must increase competitive pressure through better regulation, cut financial benefits and, in return, provide excellent framework conditions - from infrastructure and climate protection to skilled workers and an excellent education system.

The state must massively reduce the excessive bureaucracy and design laws in such a way that decisions can be made and implemented quickly and transparently.

And politicians must readjust their priorities and focus on long-term thinking and action.

Source: spiegel

All business articles on 2023-02-28

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