Companies create jobs, growth and wealth. The government needs to support them in adapting to the ever changing circumstances they are confronted with.
The government should support companies and firms in doing so, for instance by setting up the right political parameters. This includes reviewing competition rules and maintaining a balance between more traditional medium-sized enterprises and start-ups with new business models, which are crucial to the German economy.
Digitisation has penetrated all areas of our lives, integrating people, machinery and processes into networks and creating huge opportunities for the German economy.
The prerequisites for this digital transformation are universal high speed networks and an unbureaucratic and capital-rich environment for innovation. The workforce also faces challenges: Companies must identify the new skills their employees will need and train them accordingly. Moreover, companies, and especially small and medium-sized enterprises, must press ahead with their own digitisation, for example by further developing existing business models and creating new ones, perhaps in cooperation with start-ups.
The German industry is considered the backbone of the country’s economy. For it to remain in this position, the government will need to make Germany more attractive for foreign and domestic investors, encourage innovations and endorse structural change.
The digitisation of the working world and the increasing interconnectedness of people and machines will provide companies and employees with greater flexibility and leeway. At the same time, employers and employees will need to master new tasks and skills and acquire – for instance – knowledge in information technologies. If seized successfully, the chances offered by the so-called Industry 4.0 will put the German industry in a strong position, both on a European level and internationally.
International competition changes the economy. However, governments should refrain from trying to push structural change into a specific direction.
Before the global economic and financial crisis, building a large service sector was considered indispensable for reaching economic prosperity. This has changed: History has shown that both countries with a large service sector and countries with an important industrial sector can reach high income levels. Therefore, governments should refrain from steering structural change into a particular direction. Rather, they should allow for flexibility in the labour market, so as to enable the downsizing of sectors that are no longer profitable and to encourage entrepreneurship and growth in growing economic sectors.
Competition is the result of several companies offering the same or similar products or services. When this occurs, those products or services are offered for sale at low prices.
The aim of competition policy is to promote competition and to prevent the abuse of market power. Digitization, in particular, has brought new market structures and thus also placed new demands on competition policy.
R & D accelerates technical progress, drives economic growth and creates jobs. Large conglomerates are the keenest innovators; small and medium-sized enterprises still have some catching up to do.
The state must abandon its conviction that it is a better judge than business of what will be in demand tomorrow. A general tax break for R&D activity would be a better solution. A further obstacle to innovation in Germany is the shortage of young people with the appropriate technical background. In recent years there have been too few graduates in technical subjects. Women, especially, are showing too little enthusiasm for subjects like mechanical and electrical engineering and chemistry.
Every year several thousand pages of laws and decrees are published in the German Law Gazette. These regulations cost not only the public administration but also private business billions of euros.