Competitiveness is of crucial importance – probably the singularly most import aspect when it comes to the question: “How to sustain the high standards of the Welfare state in globalized markets”.
There cannot be any doubt, that high wages can only be paid if we maintain – at least in some fields – a leading edge in high tech. Germany cannot compete on price.
Currently important high tech fields include A.I. , quantum technology, neuro science, human genetics a.o.m..
Next to the disruptive character of these technologies, namely A.I. has a strong transformative dimension.
A second indispensable factor for success on global markets is the ability to scale up new technologies. Germany is too small. Europe cannot agree on building European scale projects. Perhaps the only exception is Airbus Industries. The ongoing discussion on arms production shows the lack of will to set up a company of European scale.
Hélas, there is plenty of reason to be concerned with the competitiveness of Germany and Europe!
This paper focuses on the “Role of the State” to foster competitiveness. While it is deliberately so, not addressing the classical aspects of “setting the framework conditions” it attempts to list number of possible roles of the state, all not new, but in the view of the author not sufficiently considered.
INTRODUCTION
Needless to mention, that new technologies are of disruptive nature. Innovation cycles are becoming ever faster. New technologies will never be stopped by regulation. If someone tries, someone else will do it and prevail.
Unfortunately, there are only two blocks of scale: the United States and China.
Unfortunately, both blocks have assets, which we in Europe do not have.
The U.S. have a large single market . China has a long-term strategy and a large single market.
For example: The single market in the U.S. has benefitted a lot the formation of hyper scalers. For example: The long-term strategy of China in A.I. is apparently paying off. Also, in the field of photo voltaic, the long-term strategy in combination with the possibility of scaling up in the large Chinese market has paid off.
The state-backed AI ecosystem in China allows for rapid development and deployment, with a distinct advantage with regard to innovation speed.
A recent counterexample for the “European Single market” is the battery market for electrical vehicles. Germany, France, Spain, United Kingdom a.o.m. , all of them are investing, or better, are trying to build battery factories with huge subventions. But unfortunately, separately and hence, frequently those projects fail(ed).
A long-term industrial strategy does not exist at European level.
THE ROLE OF THE STATE
Germany has since long a ‘so-called’ industrial policy. By and large „industrial policy“ takes the form of subventions. Increasingly, it is not technology open.
The other main trait concerns the framework conditions. This is about taxation, cutting red tape (the contrary happens), better education , digitalisation less bureaucracy to mention the more important aspects.
Needless to say, setting of framework conditions right is crucial of importance .
However, the focus of this paper is about the question of what else can the state do to foster the competitiveness.
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