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Seize the moment!

Seize the moment!

After the election politicians shouldn’t waste too much time negotiating but focus on the tasks at hand – accelerating digitalization. Europe needs a strong and stable german government that is capable of acting.

Let’s be clear about this. The state of uncertainty that german politics will remain in for the upcoming weeks, if not months, is bad for the country’s standing as a business location. You don’t have to trust me on this one, but you better listen to the words of Clemens Fuest, head of Munich’s Ifo Institute. This is exactly what he proclaims, too. And even more importantly, the success of the new far right party AfD could further increase the economic problems in eastern Germany.

With respect to digitalization, Germany tends to fluctuate between excessive enthusiasm for expanding fiber-optic networks and fear of the impact of new, largely unregulated business models.

No matter the color and faces of Germany’s next government: they will have to deal with economic-policy challenges in five key areas: digitalization and automation, demographic change, globalization, climate change, and European integration. These are the main obstacles Fuest predicts for the months to come.

“With respect to digitalization, Germany tends to fluctuate between excessive enthusiasm for expanding fiber-optic networks and fear of the impact of new, largely unregulated business models, such as those underpinning avatars of the “sharing economy” like Uber and Airbnb”, economist Fuest writes in one his most recent essays. So how do German policymakers react to such adversity?

“A capitulation to the challenges“

A fiber-optic network that extends all over the country shouldn’t be the number one priority, as it would be costly and inefficient at the same time. Making sure your buddy next door has access to the internet and the rural areas are more connected would make much more sense in the short term, plus it comes at a cheaper price. According to Fuest, politicians should focus their regulatory efforts on ensuring that sensible digital business models and private investment are not obstructed.

“For a fast change towards the digital future we need experts who have the understanding for new digital businesses and exponential growth.”

With digitalization comes automation, with that, robotization is only one step further. Especially in Germany, these tendencies come with many people’s fear of job losses. This may be one of the main reasons AfD became so strong in some areas and in the Easy in particular. “Many people propose an unconditional universal basic income, to be paid for, perhaps, with a tax on robots”, says Fuest. But like most economists, he thinks such a response would be a terrible mistake. “A capitulation to the challenges that we face”, in his words. Therefore Politicians should provide a framework that puts all workers in position to pursue opportunities in tomorrow’s labor markets.

Felix Staeritz, founding partner of FACTOR10, complains a lack of experts as one of the reasons for the Politician’s struggle with digitalization. “For a fast change towards the digital future we need experts who have the understanding for new digital businesses and exponential growth. Unfortunately you don’t find these individuals in politics. They are in and prefer to stay in the private sector of our economy”, Staeritz says.

German industry leaders want a shift towards digital services to be a priority as the pro-business Free Democrats (FDP) appear set to enter coalition talks with Angela Merkel’s conservatives and the Greens for a possible “Jamaica coalition”. FDP, having returned from the political insignificance, promise to cut taxes and raise investment in infrastructure, partly funded by privatizations of federal property.

A revolution in a socially inclusive way

One of the most urgent demands of Germany’s export-led industry are investments in high-speed networks and automation in order to  strengthen global competitiveness. “We are an industrial nation and must shape the fourth industrial revolution and design it in a socially inclusive way – so that as many people profit from it as possible”, Joe Kaeser, chief executive of industrial group Siemens says.

With all of that being said, quick action seems to be mandatory now. German politicians shouldn’t waste any time and take measures in order to pave the way to a prosperous future. It would be a shame if coalition negotiations would consume weeks and months before Europe’s strongest economic nation can take the lead in digitalization again. It’s overdue.

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