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Major challenges ahead for German economy

Published 11 May 2021
Ben Colter

Germany’s move towards a new age in technological development and innovation holds challenges for the largest European economy, an expert has told a recent AIIA Queensland event.
Professor Michael Rosemann made this point at an event hosted by AIIA Queensland and German Week Brisbane at the Queensland Parliamentary Annexe.
Professor Rosemann, pictured above, is a Professor of Innovation Systems and is the Director of the Centre for Future Enterprise at the Queensland University of Technology. He is also the Honorary Consul of the Federal Republic of Germany for Brisbane.
In his presentation, Professor Rosemann provided a history of economic life within Germany following World War Two. Although Europe had been left crippled after the war, he argues that Germany emerged as the centre for economic prosperity in the decades after the conflict. The economic success which has characterised Germany, has seen the nation shift towards technological innovation and has begun the Fourth Industrial Revolution. There are four reasons for this economic success, which has transformed Germany into one of the world’s leading export nations.
Firstly, Professor Rosemann recognises the Marshall Plan Fund as a major reason for this success, with the plan providing monetary assistance to rebuild the market economies of western Europe after the war. However, these monetary benefits for Germany were minimal, as the country did not know whether it would have to repay these loans. Instead, Professor Roseman says that while only providing marginal economic benefit, the Marshall Plan had a significant psychological effect. It allowed Germany to return as a member of the international community.
Secondly, Professor Rosemann says that the implementation of social economics into policy is another reason for German economic prosperity. He references new economic policies designed to ensure the power of the labour market. Some of these measures have mandated procedures that see union representatives present during executive decisions within corporations. Innovative education policy is another area where social economics has influenced policy. Given the importance that Germany has placed on the education system, this is now considered a public commodity. Professor Rosemann says that he did not know of anyone that attended private schooling or paid for any form of education in Germany. He also highlights the “short-time work’’ scheme as another successful. The measure has allowed businesses to condense working hours for employees without having to lay them off. Workers still receive a reasonable amount of their wage, with the government subsidising the cost to businesses. According to Professor Rosemann, this scheme has become vital to the economic recovery of Germany throughout the COVID-19 pandemic.
Finally, another reason for Germany’s success is the decisive action of German leaders. Professor Rosemann says that German Chancellor Angela Merkel is a prime example of a leader who acts decisively. In 2019, she announced that Germany would seek to eliminate coal production by 2038 and began to close coal mines across the country. As well as this, Mrs Merkel announced that Germany would also close all nuclear power plants at the end of 2022. Professor Rosemann says this has allowed Germany to transition to more renewable forms of energy. He adds that solar infrastructure made in Germany is far superior to that produced in competing nations. Decisive action was also taken to resolve the Syrian refugee crisis, where Mrs Merkel permitted more than one million refugees fleeing the Syrian conflict to reside in Germany. According to Professor Rosemann, this action expanded the German labour market, while also providing desperately needed humanitarian assistance.
He says these policy successes have allowed Germany has become the nation that has shaped the Fourth Industrial Revolution. This new phase will see greater innovation with the development of cyber-physical systems and smarter technology. Germany will maintain its position as a leading export nation. However, Professor Rosemann says the rapid growth in technology has created a series of challenges for Germany. Firstly, it must shift its focus from products themselves to the experiences of customers using these products. He refers to new technology developed by companies including Tesla and BMW, with both having developed self-driving capabilities in their vehicles that have benefited the overall experience for the consumer. Given that Germany is the largest exporter of automobiles, he says that experiences must be enhanced for these products to remain competitive.
Secondly, he says that Germany must continue to ensure that platform providers are headquartered within Europe. Berlin has long been the start-up capital of the world, and it must continue to retain this position as technological developments become more profitable. Next, he insists that Germany must also improve its E-government capabilities. Currently, Germany is ranked 20th out of 28 EU member states in the application and use of technological innovation within government. He urges that the German Government must improve its use of technology. Lastly, he says that Germany’s overuse of cash will be a problem for future online consumption. Germany has printed more Euros last year than all other European nations combined, with the average German citizen carrying €100 on them at any time. The unwillingness of citizens to use credit and debit cards, favouring cash instead, will prevent the consumption of online products in the digital age.
While considerable economic growth has been achieved throughout the 20th and into the 21st centuries, Professor Rosemann says that Germany must not be complacent in its actions. This is because the Fourth Industrial Revolution that the nation has shaped can either propel the nation towards greater economic success or undermine its ability to do so entirely.