Dr. Eric Schweitzer: Patience is important, reforms and innovation are critical

Germany has recovered quickly after the Lehman crisis. And even in the face of the continuing uncertainty due to the debt crisis, growth in this country is still some­­what stable. Since Germany is the best foreign customer of more than half of the EU states, such a de­­vel­­opment also helps our neighbours and partners in Europe. Already in the previous years, German im­­ports from there rose considerably: for the years from 2007 to 2011, Germany ranked second among all EU states with re­­gard to im­­port growth. This proves that the criticism voiced occa­­sionally is un­­­­­­jus­­ti­­fied, according to which Germany is de­­picted as being unilaterally export-oriented and partially res­­pon­­­­sible for the current sit­­uation in some of the euro countries.

What is true about Germany, however: it’s a good example of the efficiency of structural economic reforms. Only ten years ago, we were considered as bring­­ing up the rear in Europe – “The sick man of Europe” was the title in a re­­nowned English-language magazine back then. In this difficult phase, we managed to draw the necessary conclusions from the economic stagnation during the early years of the new mil­­len­­nium and take partly painful countermeasures. The success factors were just as valid back then as they are today: Germany has a sound industrial founda­­tion – the “old economy” is the “future economy”. The manufacturing trades contribute around 25 per cent to the economic performance, thus taking a leading position in comparison to other European countries. Producers, suppliers and service providers have been tightly interlinked for years and form the “Netzwerk Industrie” (industrial net­­­­­work). There is a balanced mixture of companies from the core industries and service pro­­viders such as research and development, consulting or market re­­search. Their inter­­action keeps the healthy cycle of innova­­tion, growth and employment going.

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Through the recent years, companies have worked on their productivity and innova­­tive power and invested in new products, services and processes, in new markets and new cooperation. Espe­­cially those industries with a strong presence in Ger­­many, such as automo­­tive and me­­chan­­ical engineering, chem­­­­­ical and elec­­tron­­ics, have made enormous efforts and have integrated new technologies again and again. As a re­­sult, the investments of com­­panies in re­­search and development rose an aston­­­ishing 40 per cent within ten years, reaching an estimated 50 billion euros in 2011. Even during the crisis in 2008/ 2009, businesses did not stint on their innovation expenditures. Today, the suc­­cess in the world markets proves this strat­­egy right. The positive attitude to­­­­wards globalisation is also a key to suc­­­­cess. Early on, the companies developed mar­­kets all over the world – and they are continuing to look around. Particu­­larly in the dynamic growth regions of Asia, Latin America and Africa, new po­­tential keeps growing, which the companies de­­­­velop by implementing sales structures first and subsequently setting up pro­­duc­­tion sites.

In Germany, we have a unique variety of companies which almost the entire world envies us for: there are large, successful stock companies, many committed small businesses and – compared to other coun­­tries – a wide range of medium-sized enter­­prises, many of which are family-owned. 90 per cent of all businesses in Ger­­many are run by families; these businesses ac­­count for 60 per cent of all jobs. Among them are many “hidden champions” who are highly inno­­vative and successful in the world markets. These companies in par­­ticular do not think in terms of quar­­terly reports, but rather take more of a long-term ap­­proach. The typical export-oriented medium-sized company on aver­­age is already active in 16 foreign markets. This attitude of “think global – act local” is unique in the world.

Politics has also supported these de­­vel­­op­­ments by providing favourable condi­­tions, for example with regard to the em­­­­ploy­­ment market. The parties to the wage agree­­­ments have made an im­­por­­t­­ant con­­­­­tribution for a long time through their intelligent wage policies. By now, approx­­i­­mately one in two persons in Ger­­­­­­many has a job – these are record numbers.

Does this mean that Germany has made it once and for all? Experience has shown: if you rest on your laurels, you’ll be left behind. The demographic de­­vel­­op­­ment is my biggest concern. Even though the development has been known for years, no decisive measures have been taken. Soon we will be hit by the full force of the decline in population. Many companies are already having difficulties filling their vacancies with appropriately qualified candidates. Germany’s most im­­­­por­­tant “raw material”, namely skilled and innovative professionals, is becoming scarce. Every one in three companies considers the shortage of skilled labour a risk for its business development, and already in the coming months at that. We – that is politics, economy and society – will jointly have to meet this challenge with smart ideas.

This encompasses not only a higher quality of school edu­cation, more further education, the in­­creased employment of people at an ad­­vanced age and a better compatibility of career and family, but also more op­­por­­tunities for people who have come or will continue to come to us from other countries.

Let’s look ahead: our European neighbours recently have begun to implement the reforms which have already made the Federal Republic of Germany strong. This means that our Euro partners will catch up in terms of competitiveness – maybe not overnight, but cer­­tainly in the medium run: Ireland has raised the pensionable age, Spain has adopted a debt brake. Italy has made its employment market more flexible, Portugal has done away with public holidays. These are only some of the most recent examples. The list of measures is long – and gets longer every day. This should spur us here in Ger­­many to not sit back and take things easy.

The above-mentioned reforms are part of the fight against the sovereign debt crisis. None of us in Europe must re­­duce our efforts. With its course of simul­­taneously saving money and implement­­­ing reforms as well as with the agreement on the fiscal pact, Europe has taken the right path. We should continue to promote the measures with determin­ation and not cause new insecurities by constantly coming up with new suggestions. In the medium to longer term, only one thing is important: regaining lost trust. The states of Europe will only succeed in this effort if they adopt a policy of authenticity – a policy where citizens are told truthfully what it will cost, a policy without new debt.

eric-schweitzer-2013-2The author, who was born in Malaysia in 1965, earned a doctorate in business administration. In 1990, he entered the management of ALBA AG. He has been a member of the board of ALBA Group since 1993 and CEO since 2011. In March 2013, Dr. Eric Schweitzer became the president of the Association of German Chambers of Industry and Commerce (Deutscher Industrie- und Handelskammertag, DIHK)