/ Germany has to start planning the restart now
Both the government and the economy have shown their strength in the crisis. Nevertheless, there is a huge need for modernisation. It is a big challenge for the big State! That sums up the intellectual refrain of many observers about the year 2020 in Germany. It is a fact that the pandemic has spawned aid programmes for the economy on a scale that massively overshadows the dimensions of the stimulus programmes during the global financial crisis in 2008/9. Never in history has such a massive support package been provided to threatened and affected businesses. And what makes it particularly remarkable is that it is being provided to such wide sections of the economy. Unlike a normal economic crisis, the pandemic has not just affected the German manufacturing sector, but also its retail and service sectors - and, although the lockdowns to contain the virus were inevitable, the have hit local and regional domestic markets particularly hard.
We found ourselves looking at a flailing and stagnating market economy hanging on the drip feed of public spending. One thing was clear right from the outset: it would catastrophic if this situation were to become permanent. We still have no idea how things will pan out when the special rules that apply to insolvency during the pandemic end, and whether or not there will be a spate of bankruptcies. Nobody really knows how many companies have been saved from imminent closure because they are currently being artificially protected against insolvency. There are probably quite a few businesses out there that have mutated into ‘zombies’. However, after the dramatic slump in the second quarter we have seen remarkable capitalist resilience, although it has received little public attention so far. Three positive developments in particular have taken place that only notorious optimists were expecting.
How should the restart be structured? First of all we need a clear idea about the starting point: What is the German economy’s situation today? The answer is that Germany – like Switzerland and Austria – has always had an industrial sector primarily consisting of quality-oriented, medium-sized companies in traditional areas of innovative engineering. We have been hearing the swan song for this traditional model for decades, especially from Anglo-American quarters, but it continues to survive. In fact, countries with strong manufacturing industries withstood the global financial crisis ten years ago far more robustly than countries that had already switched over to the service and financial sectors.
Germany faces momentous modernisation challenges. If it is to continue playing and building on its central role as the EU’s industrial heartland, it needs a smart growth strategy and policy: away from the erosion of resources and towards ambitious goals for the future that realistically and cleverly draw on the innovative strengths of the existing ‘Mittelstand’ industrial infrastructure.
The entire article was published in the Capital Magazin on 10.12.2020.