Expert commission: Germany digitally behind – economy

Germany’s most important and almost only natural resource is technological know-how, which school children learn. It is therefore all the more important to maintain or even expand this strength. This is not easy even in normal times, but now there is war in Europe. Once a year, the Commission of Experts for Research and Innovation, EFI for short, determines how research and innovation is doing in Germany. This Wednesday, the latest version of the report was handed over to the Federal Minister of Education and Research, Bettina Stark-Watzinger (FDP). Of course, the report could not yet consider how the war will affect research and development.

The fact that planned projects are now being restricted does not have to be the case, says Uwe Cantner, Chair of Microeconomics in Jena, and Chairman of the Expert Commission. The jolt that must now go through the country was imposed from outside, but could be used wisely, for example if the special fund that is now to be made available. After all, despite the war in Ukraine, one should not lose sight of the challenges that Germany and Europe would have to face. In addition, innovations are also needed in military technology, which have so far been lacking in Germany.

What the chancellor and a number of ministries read in the latest EFI report is not particularly gratifying. The authors, six economists, see Germany lagging behind in almost all areas. The authors have identified 13 so-called key technologies on 186 pages. These are so called because without them nothing works in many other areas. “Only in a few, for example life sciences and production technology, are we not that bad,” says Uwe Cantner Süddeutsche Zeitung.

Germany is far behind the USA, China or Korea

But the gap in digitization is particularly large. “We’re really bad at that,” says Cantner. Germany cannot compete with the USA, China or Korea. Germany does not show any strength in any of six areas of digitization, the key imports for the technology come from Asia, most of them from China. “But the question is: can we always help ourselves freely on the world markets?” In view of such a great dependency, this is a real danger.

The members of the expert commission are actually against industrial policy measures, but the case is different with digitization, especially with the production of microchips. Interventions are required here – but only catalytically, i.e. as a starting aid. Germany cannot hold its own against the big poles of China and the USA, the project must be conceived on a European level. Cantner welcomes the fact that the EU has changed the rules of the game – chip companies can now receive subsidies – and that the federal government has recognized the need to take action.

Open detailed view

However, the commission chairman also warns against overdoing it with independence. “You can’t have sovereignty everywhere,” says Cantner, and you don’t have to cover the entire spectrum. But you have to master the technologies. The EFI therefore calls for the establishment of an independent committee that keeps an eye on technological developments and evaluates changes, similar to how business wise men do. The recommendations of this body would also have to be statistically supported. It already exists in Israel and Australia.

Despite all sobriety, the report sounds dramatic in many places

The EFI report reads like a scientific paper and also meets the usual standards. Despite all sobriety, it still sounds almost dramatic in many places, the six members of the committee are so concerned about the innovative power of the country. An example: “The federal government cannot rely on the fact that it is sufficient to further develop the technological areas and economic sectors that have made Germany economically strong in recent decades and to rely on incremental innovations geared towards the highest quality and greatest efficiency Transformative change can only be realized with significant, often radical, technological innovations, social innovations and complementary behavioral changes.” You could also put it this way: “Keep it up” will not be enough, the change is too radical for that.

In many places, particular reference is made to the omissions in digitization. “Even in a globalized world, you have to master a few key technologies,” says EFI Chairman Cantner. “We absolutely have to get better at digitization and get our foot in the door.” The experts see an opportunity for this in digital platforms for business customers, known as B2B. Platforms for consumers like Google or Facebook are gone, but it’s not too late for B2B platforms. A whole chapter is therefore dedicated to them.

But why are Germany and the rest of Europe so far behind the USA and China when it comes to digitization? On the one hand, Cantner argues that the United States has always been about two years ahead of Europe. “When it comes to network effects, that’s enough to win.” Network effects mean that offers like Facebook or Google only work well if they can attract a large number of users. This gives them the edge, following the motto that the winner takes all.

“Everyone cooks their own soup”

But the Jena-based economist sees another reason: “We’re not getting anywhere because we don’t have a real digital strategy,” he says. The EFI, for example, made a very clear plea for a digital ministry, but now there is none again, but instead there is always the question of who has the hat on a certain topic. It’s not a coordinated approach, “everyone does their own thing.” Cantner complains that Germany’s federal structure often limits a more coordinated approach.

In its report, the EFI warns, in a slightly cryptic way, against “assertive individual interests”. In extreme cases, these could lead to technologies being supported that could in no way be described as key technologies. This applies, for example, to naval underwater and surface shipbuilding. This is one of the reasons why the experts are calling for an independent monitoring body to identify the technologies that are really worthy of funding.

Kudos for the Quantum Initiative

After all, there is praise for the investment in quantum technology, and many projects for this have already begun. However, funding must also be secured beyond 2025. The situation is worse when it comes to promoting artificial intelligence (AI). Five billion euros were earmarked for this, 3.5 billion were included in the budget – but less than a tenth of that has been called up so far. The government must develop concepts for how the funds could be used in a targeted manner.

In the opinion of the EFI, the digitization of administration is also progressing too slowly. Of the 575 administrative services that, according to the Online Access Act (OZG), should be available to all citizens by the end of 2022, only 84 were implemented and available as of September 2021. At least, however, the governing parties would name clear responsibilities and “with a central budget, finally push ahead with the implementation of the OZG and the standardization of structures and processes”.