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Medium-sized entrepreneurs and economists warn against the federal government’s excessive subsidy policy. This would hide competitive disadvantages instead of eliminating them.
The Hans Keim company has been in existence in Zimmern near Rottweil, Swabia, for 75 years. In the entire history of the company there was only one money from the state: 12,000 euros during the corona pandemic. Managing director Christoph Keim has mastered all the crises of the past few years on his own. “As a medium-sized company, we work every day to become better. We think about and work out how we can do things better,” says Keim.
He has no understanding of the fact that government subsidies have become more and more important and that large corporations are also benefiting. The state has been demanding more and more from medium-sized companies for years. The bureaucratic effort continues to increase, the tax burden is immense by international standards, as are rising energy costs and the growing shortage of skilled workers.
He cannot understand why subsidies should be necessary for economic success or for overcoming crises. “As entrepreneurs, we work completely differently here. When I think about how much money is in circulation and how many pots are moved back and forth here, that wouldn’t work for us in medium-sized businesses. So I’m of course very critical of it.”
“Marshalling yard through government subsidies”
One of the pots is worth around 20 billion euros: subsidies that the federal government has promised international chip manufacturers to set up production facilities in Germany. Economists like Stefan Kooths from the Kiel Institute for the World Economy have been criticizing the federal government’s ever-expanding subsidy policy since the Federal Constitutional Court’s decision.
You cannot ensure the competitiveness of an industry by paying subsidies for everything. This only covers up the disadvantages of the location. “It looks visually more pleasing at first, but in the long run it’s a disadvantage,” explains Kooths. The disadvantage for the entire system is that higher taxes have to be levied or other measures to strengthen the location have to be foregone. “That means, the bottom line is that this is a negative sum game for the entire economic area. In other words: We can then achieve less prosperity than in a system in which we leave such distorting subsidies in place. And that’s why we should stay away from them. “
Politicians like to argue that subsidies for microchip manufacturers will create more jobs. But this argument is wrong, says Kooths. Many workers are already employed in other companies. “And they now have to watch as a company that is subsidized with tax money that they have raised themselves is stealing away the best workers from them.” In times of severe shortage of skilled workers, this is “particularly hard for those affected and not an advantage for the economy as a whole. We have only made a marshalling yard possible through state subsidies, and that is simply not in the interest of the economy as a whole.”
competition through subsidized Railway works
Lars Wertenauer is already experiencing exactly this marshalling yard today. His company in southern Lusatia specializes in metal construction and powder coating. In the immediate vicinity, Deutsche Bahn is building the largest ICE train factory in Germany. The federal government provided one billion euros in subsidies and 1,200 jobs are to be created here.
And long before the plant even starts operations, Wertenauer is feeling the impact on the job market. Two employees have already moved to Deutsche Bahn. Wertenauer is worried about whether he will be able to keep well-qualified employees in the company in the future. The more highly qualified the employees are, the more difficult it is to keep them in the company. He tries it with fuel vouchers, flexible working hours and the like. And yet he now asks himself every month whether more employees will leave the company. He is afraid that at some point he will no longer be able to maintain his operations on this scale due to a lack of staff.
Is there no money for education?
Economist Kooths sharply criticizes the fact that the listed US chip manufacturer Intel alone is to receive ten billion euros in subsidies from the federal budget. “These ten billion are no longer available to be used where we know for sure that the overall economic return will be very high – especially in the education sector and especially in early childhood education, where we are giving away a lot of talent.”
In addition, the hope of achieving economic sovereignty through microchips “Made in Germany” is a utopia. In the event of another crisis, “the chips would not be given to those who originally paid the largest subsidies for the settlement, but to those who are then prepared to pay the highest prices for the chips.” The idea that you have a right to the products just because the production is located in your own economic area is not enough.
Companies want less bureaucracy
In order to better compete in international competition, many medium-sized companies like Christoph Keim from Zimmern would like to see a reduction in bureaucracy, lower corporate taxes and cheaper energy costs. This is worth more to Germany as a business location than billions in subsidies.
When it comes to subsidies, the question is: Why do I have to do this? Are others better than us? “We should keep the location conditions so attractive that people come to us, that employees come to us, that skilled workers come to us, that the company comes to us.”