Did Germany loose the digital economy race?

If Germany catches a cold, does all of Europe have angine? And even if they don't, do we all have a bad cold in Europe?

And how is Germany's technological backwardness connected to all this? Or is it the digital backwardness of all of Europe?

These questions are answered in his book “Kaput” by one of the Financial Times' leading columnists Wolfgang Munchau.

The book is by no means optimistic for any European. For in 220 pages Munchau tells how Germany missed its (European?) chance, how it let itself be ripped off by the Russians and especially the Chinese.?

And how today the recession, let's not be afraid of words, in Germany threatens the entire continent, especially when we don't know how the incoming American administration will behave.

But let's start with history.

An XVIIIth century French minister of King’s Treasury, Jean Baptiste Colbert was a strong proponent of an economic trade called mercantlisim. Very much simplifying: mercantilism is an economic school to promote as much export as possible and generate foreign trade surplus.

Munchau argues that since the end of WW2 Germany has been a neo-mercantlist country. Until it ended to be so, after the invasion of Ukraine.

German economy has been for years based on traditional industries. Most of all automotive (about 20 % of German economy and accordingly 20 % of employment). But also based on chemical and mechanical engineering (factory parts)- two other foundments of the German economic miracle.

It made a deal with Russia: We export our high machinery against your resources like gas and oil.

It made also a deal witch China: We export you our technologies (and cars) againts your cheap manufacturing for our global automotive/mechanical brands.

Yet, Munchau arguments, the Bundesrepublik overslept the digital revolution and it is probably the? key reason for current German economic troubles. The arguments?

1.Electronic cars are not just cars with different fuel. According to Munchau ?these are computers on wheels”. This seems to be a much further discussion going on, yet, I would agree that new generation of cars: eelectric and going autonomus, is much more dependant on software than hardware. It looks like the competitive advantage in the car industry is much more focused on software and AI development. China is mucha ahead of Germany and took the place of number 1 automotive exporter in the world.

2.Europe is lagging behind both the US and China in software companies. Yes, Germany has probably the biggest European software champion, namely SAP. Despite the news of ERPs deatch, SAP is still alive and kicking. Yet, on both European and German side, it is only SAP. Not a player of the level of Microsoft/Google/Apple.

3.Germany is way behind the AI race. Which it should not have been. In 2018 Merkel govrenment announced its ?AI policy”. The main feature was reliance on 1980s ?expert systems”- almost 40 years later form its invention and at the time of 2018 absolutely outdated, given the recent inventions in neural networks.

4.In the 1970 Willy Brandt’s governement supported strongly for fibre networks. Yet, in the 1980s Helmut Kohl’s governement supported strongly for HDTV copper networks. In the effect Germany is way behind of fast Internet behind its European partners.

5.Despite strong clans of entrepreneurs like the Albrecht family, owners of the international retail chain AIdi, most of the managers of Germany's large corporations intermingle with the political class. Some are once politicians and others managers. And each other. This is especially scary to hear in the context of Russian and Chinese lobbies in Germany. BTW-no one from the Albrecht family (Aldi Group) has ever met the Chancellor. The rest of the CEOs from major corporations-many times.

It can be summarized: conservative politicians (including, and perhaps especially, the SPD, which was supposed to defend the working class) tried to impose the following narrative on the public: The big German corporations will defend you. They will defend your standard of living and social status.?

Question: did they defend?

oday I am not sure, or rather, I dare to doubt.

Do I have “Schadenfreude” from the fact that my neighbors have it worse? Absolutely NO.

I am Polish and to some extent my family background is from Western Poland. From the Polish-German borderlands. And despite the times of Hitler and Bimarck, today I believe that what is good for Germany is good for Poland. And from this point of view I worry about our common economic future.

Personally, I think the biggest problem in Europe's nancial economic history is whether we want to build MSEs or support global corporations. Maybe the Germans have not noticed this problem well enough? Maybe they neglected their SMEs vs. national champions account? Maybe they haven't created enough space for financing SMEs and start-ups

Or maybe a balance needs to be struck?

#germany #economy