Let’s make it clear: Europe is in a huge crisis.
1.) Corona, Brexit, populism, migration, public debt, nationalism, collapse of open world trade – to name but a few keywords.
2.) Our economy is challenged not only by pandemic consequences, but by
a.) the major platforms of the Internet from North America and
b.) by the governmental industrial policy from China.
3.) Our values are also under attack – see Cambridge Analytica, Cyber-attacks, Lesbos camps, suspended civil and constitutional rights, etc.
This raises questions that shake the foundations of the European Union: Was the introduction of the EURO a mistake? What are the ways out of the crisis? What is our answer to necessary digitalization and unnecessary globalization? How do we transform Europe into a Federal Union of European States?
For us, the IEM, these are existential questions of relevance to EU-citizens and EU-entrepreneurs, small and large.
Europe’s companies have set themselves the goal of being among the global leading companies. That means: We connect our future with this continent.
We want to grow in and with Europe and create value.
So, for the IEM, Europe is not just a political standpoint, it is a community of values, a community of peace, a community of law. But it is also a location and it is a business location that lives in intensified competition with North America and Asia.
Of course, global competition is not new. We have known it for decades. And we face it with success. What is new, however, is that competition from digitization no longer only affects our European global players Daimler, VW, BASF and Siemens. No, it also affects medium-sized businesses. Figuratively speaking: The world is flat. And digitization through the pandemic consequences has made it even flatter. As recently as the 1980s, over 90 percent of German companies were only in national competition. As Emmanuel Macron put it in his speech at the Sorbonne, they were pegged. That is different today. The short leash has become the “world on the wire”. Everything is connected to everything else.
Europe and Germany have profited greatly from this. No economy in the world is as networked as the German economy. Even before Hong Kong, the USA and Singapore. But precisely because networking is so important for Europe, we can no longer consider only the classic industrial categories for Europe as a location. We must supplement the analogue location debate with a digital location debate.
Therefore, we would put forward 4 theses in this context:
- Our EU-economy is strong. Our European social market model offers every opportunity for future success.
- Our EU-values are right. Our European value-oriented model ensures peace and individual freedom. It is worth standing up for them after our painful history.
- Our EU-course must be set anew.
Our political structures are weak, our location policy must become better, so that Europe has a future. A clumsy “more Europe” does not work.
- We have no trans-European political interest group or party (except VOLT), we have no European public opinion, except some small radio and TV channels.
1. Europe is strong
Looking at the status quo, we have done many things right in the past. Europe’s share of the global export market in 2019 was 16 percent, just behind China with 17 percent and ahead of the USA with 12 percent. We have strong economic clusters. But they differ from Silicon Valley, for example, whose unique selling proposition is essentially a combination of software know-how, venture capital and outstanding marketing. Our European clusters are based primarily on high craftsmanship and excellent industrial manufacturing, but also on outstanding basic research:
The automotive cluster around Stuttgart and Munich, with Daimler, Bosch, BMW, Audi and good universities. The glass cluster near Padua. For example, the windows for the Elbe Philharmonic Hall in Hamburg were produced there. Because no other company in the world could do that. The CERN, which is financed by European member countries. Here, 3,000 excellent scientists carry out top-level research that is respected worldwide. The “Silicon-Sachsen” around Dresden. Siemens has made the start. Now Bosch is building a semiconductor plant there. Incidentally, with the support of the European Union, which has recognized its strategic importance. We have thousands of innovative, small & medium sized enterprises with high ethical and technological standards, mostly Family companies over several generations.
The European success arouses desire. Even among the major players in the valley. Because their sales consist primarily of advertising revenue. At least to a large extent, this is true of Google and Facebook. Looking at Germany, it quickly becomes clear that this advertising pie is finite. It accounts for just 0.8 percent of our GDP. No wonder that the companies in the valley are trying to penetrate industrial value creation with their data models. Be it the smart home sector, be it tele-medicine or the self-propelled car. Google becomes the alphabet. Here lies the real challenge. We have lost the competition for the major consumer platforms. But, we can win the game for the Internet of Things. This is what I am getting at.
2. Our values are right
Former Commission President Jacques Delors said: Europe is social.
I agree with that. And I will add:
- Europe is democratic, but not yet a federal union state.
- It is the rule of law, with a strong view on fair competition.
- And: Europe is solidary, the Social Market Economy as basis.
Our model of society is based on the conviction that the dimensions mentioned are not mutually exclusive, but they are possible as a whole and simultaneously. Ludwig Erhard, the father of the Social Market Economy, said: “Wealth for all!” And indeed, there is probably no other region in the world, where democracy, social security, freedom, respect for civil rights, humanization of work form such a strong unit.
Many countries in the world are far removed from the rule of law. Personal integrity and peace seem self-evident to us. But they are not. And even if the prosperity gap is widening here too, Europe is rich overall. It is therefore our fundamental rights, which we Europeans are proud of and which are part of every celebratory speech. We have fought for them in bloody wars and peaceful revolutions, lost them again and again throughout our history and in the end won them.
De jure, however, these fundamental rights are not at all European, but universal. What is particularly European is that we have committed ourselves to these values in a Charter of Fundamental Rights. And we safeguard them through a close-meshed system of national and European supreme courts. We think that is right. Of course, we are enthusiastic about the innovations from Silicon Valley, but we are also concerned about the attitude. We think it is a problem when no matter which company enters into a kind of alliance with its customers and then creates a platform with a mass of facts, whether it’s taxis, hotel beds or products from the cultural sector. One can see this as necessary civil disobedience in order to overcome long outdated structures.
But one can also speak of political blackmail and distortion of competition, when business models break rules. First, the rule-compliant competition is eliminated. Then, with reference to the mass of its users, it forces politicians to change the rules in their own sense. Never has the normative power of the factual been as strong as today. And never before did one have the feeling that this had little to do with democracy but has much to do with the power of the strongest.
Europe is about taking the right path, for example by protecting the data of its citizens. The basic data protection regulation is despite all the criticism, a highlight of European politics. We should not speak ill of this. It is right that we protect the privacy of our citizens. That we create rules that apply to everyone who works here.
And that we do not measure data solely in terms of their value for business models. We also see that data is the most important factor of personal rights and thus the freedom of people. Data are both: democracy and competition. Looking back, we will perhaps regard the past 50 years as the golden years of individual freedom. In the future we may be too advanced technologically.
But: We have every opportunity to shape this progress positively. And to find our own way between the mass surveillance from the Anglo-Saxon area and a controlled society like in China. There they are experimenting with a social points account, which is the complete behavior monitored, punished and rewarded. If you like, a Flensburg 4.0: The Cybernetic Society.
A European path may well mean that the boundaries of what we now regard as “individual” or “personal” will shift. By 2050 the world population will grow by 30 percent to nine billion people, most grow in Africa. Today, 52 percent of people live in cities. 2O5O will be 67 percent. This poses enormous logistical challenges, for example in terms of supply. That’s why we are already working on the “Smart City” today – we are currently building the machine network for it. But it also means new challenges for the safety of people, which is always a prerequisite for freedom. A European balance between personal rights and a social security architecture should always contain at least one: The right to be forgotten. A society that does not recognize rehabilitation is not a social society.
3. New framework conditions
That brings us to the third part of this article. Because, in fact, our values of freedom, security and peace are indeed central reasons why Europe should stand together and stay together. But they are rarely the reason and vision, why we should stay together.
They do not – unfortunately – form a stable cement, as we are currently experiencing again. And I also doubt that it is our European culture that holds us together. The cafés, theaters and books, that Emmanuel Macron spoke of, they may be the cement that is stronger than the centrifugal forces of nation-state thinking. But primarily, it is the prosperity that Europe creates and distributes, keeps us together. In Europe, a policy of values must therefore always be accompanied by an economic policy, preferably a Social Market Economy.
The British economist Guy Standing therefore sees the greatest challenge in a progressive impoverishment that affects three groups in particular:
- The traditional working class,
- migrants and minorities and
- young university graduates whose university degrees and high level of education no longer guarantee participation but lead to more start-up companies based on digital technology and social networks.
In the following comments on a digital location policy, the question of distribution and participation must therefore always be considered, the statement on the basic income, for example.
The impetus for a digital economy must of course be provided by the society, the companies and by the citizens themselves, or is driven by the Corona crisis, social distancing and in consequence working in remote workspaces through digital communication.
I would like to mention just a few topics that are important in my opinion:
1. the value chains of the future are no longer vertical, but horizontal. Between the manufacturers in one industry, but also between other industries. That’s why we are advocating greater cooperation and coopetition. One example: Amazon’s Alexa is a platform that puts language into context. Alexa can do one thing above all: English. But only poorly in German, French or Croatian. If companies would join forces and create a common language platform and feed it with information from cars, call centers etc., the result would be also an effective product.
2. automation and digitalization. A continent that wants to pay high wages must be productive. Currently, only 36 percent of small and medium-sized enterprises use industrial robots. And throughout Europe, only one-fifth of all companies are considered largely digital. This is too little, companies need to do more. This is not about replacing the European business model. It is about its digital expansion.
3. How do we determine the identities of users in the digital world, who do we give power over our digital ego? Do Google, Facebook and Amazon do that? Or the community via the block chain? Or do we use initiatives such as Verimi, where European companies join forces to enable common identification?
Business is already working on these fields. But the jolt in the economy must be followed by a jolt in politics. The hand that Emmanuel Macron has extended to us here should be taken urgently. He is right: Europe must not define itself through bureaucracy. The new code on the future of the telecommunications and internet markets in Europe shows that, unfortunately, that is precisely what is happening at present. The analysis was correct: Europe is falling behind in terms of strategically important infrastructure. Even the goal was clearly formulated:
We must improve the framework conditions for investment in infrastructure.
Unfortunately, analysis and ambition then fell under the steamroller of bureaucracy, which Macron criticizes. In the Code, so many
Individual interests are mixed up in the end, and nothing remains of the noble objectives: no harmonization of the radio spectrum.
That is, the most important future field 5G. Supply chains in industry 4.0 do not stop at the borders. Hopefully, autonomous cars will not stop either. But the networks that make all this possible will probably never achieve what they could thanks to the planned regulation. In addition, there are regulatory provisions that still set prices for intra-European telephone calls.
This is contrary to both the principle of proportionality and the principle of subsidiarity.
Both principles, which Europe had decreed for good reasons, only to sacrifice them again in the end. In the end, Europe celebrates the fact that it has succeeded in issuing a code at all.
Instead of acknowledging that it has once again failed in its own ambitions. This is also a question of lack of leadership. It would have been a sign of strength if the Commission had decided, in the light of the results, not to issue a new code. Or simply to start all over again.
For an “Industry Strategy“ in a digital & ethical Europe we would like to pick up where we left off by mentioning a few points that we believe are particularly important for Europe’s digital competitiveness and strategic goal setting:
- better governance
- best infrastructure
- investing in strategically important industries
First: better governance
There are many smart actors at the political level who have already made proposals. The challenge behind this is for me
not foreign. Many international SME’s are active in countries such as Poland, Hungary, Albania, Greece, the Czech Republic and Austria. Companies with their own history. Companies with their own culture. And companies with their own interests, which do not always coincide with the interests of the Group. In many respects we can say, these companies are Europe.
Until some years ago, these various national companies were managed on a comparatively centralized basis. The enthusiasm was limited. Unfortunately, so did the success. Business has shrunk. Since then, most have shifted a lot of responsibility to the individual national companies. Particularly regarding the respective market approach, which is highly dependent on local conditions. Today, these companies’ European subsidiaries are also growing. What is different? What have we learned?
The important thing is: There must be a common strategy. Even in a SME or a Group, the result must always be more than the sum of its individual parts. Otherwise it makes no economic sense at all to operate central units. These costs must be offset by higher synergies. Otherwise, they are merely a holding company. This means, for example, that the companies must work together on major issues that affect everyone and agree on a way forward. Classical in purchasing. But also, for example, in the question of which technology we agree on when operating a internet platform. In short: wherever economies of scale are particularly relevant, a uniform approach is also particularly relevant.
At the same time, however, we accept different speeds. The direction must be the same. The implementation is different. This is based on the recognition that every national company always has challenges that can be much more acute than the big lines. It is also important to support them and, if necessary, to postpone central guidelines. This does not mean, however, that each country only does what suits it best. Commitment is one of the basic prerequisites for the success of projects within large organizations.
Diversity is nevertheless an advantage. We learn from each other within the Group. Ideas not only come from the Group’s headquarters, but also from the individual countries.
Smaller markets are particularly helpful here, as we can react and test much faster and more agile there. This not only leads to mutual benefits, but also creates trust. And it inspires pride in the smaller companies when their ideas are implemented throughout Europe. This also creates a feeling of Togetherness.
As we said above, there are already many wise proposals on the table for European governance. However, we do not need a big strong leader, but we need respectful ethical leadership. And from my experience, the proposals that convince me most are those that recognize the nation states as a reality and strengthen the principle of subsidiarity, also with regard to the regions. Approaches that rely on voluntary cooperation with strong coordination. And approaches that rely on differentiation.
In other words, a Europe in which several countries and regions lead the way and there can therefore be different degrees of integration.
But also a Europe that creates unity and acts consistently in areas where economies of scale are important. This is particularly evident in foreign and foreign economic policy. The same applies to monetary and exchange rate policy, climate change, military cooperation, educational and healthy standards, etc. In large parts of other areas, but it is also social market economic policy.
In Industry 4.0, digital infrastructure is at least as important as roads, railways and waterways. Because the horizontal value chains are only created via these networks. That is why we need committed network investors.
European IT-industries have invested some billions in the past few years. Five billion euros a year in Germany alone without spectrum.
It would help us if our investments were also rewarded in business terms. Because a continent, that needs innovation, also needs incentives for innovation.
There is a lot of talk about the infrastructure in Germany. But apart from the fact that it is much better than its reputation: how can you have such a debate without taking a close look at the framework conditions?
Now, the return on investment of network operators in Germany is about two thirds lower than that of companies that rent these infrastructures at regulated prices. Entrepreneurial risk and return therefore behave in reverse proportional to each other. You won’t find that in any other market. No wonder the capital market is voting with its feet. The industry is trading at its lowest level in 15 years. Maybe somebody will ask the question why this is so. What incentive, for example, cable operators should have to expand in rural areas. And what does that mean for broadband expansion? Broadband commentators, who obviously do not see these connections, must open their eyes.
We want our EU-economy and our EU-customers to be able to use all Internet services everywhere without any problems. So many years after privatization in Europe, the framework for this must be created:
- No more regulation of wholesale products, but commercial solutions for “open access”.
- Margin guarantee for service providers who do not invest in networks, abolish them.
- Freedom for investors to choose technology. Fiber optics is an important Building block. But there are others.
- Faster administrative procedures at the Construction of infrastructure.
- Uniform radio spectrum for 5G in Europe. A patchwork of frequencies must be prevented.
- No devaluation of private investment through subsidies. Focus on under-served areas.
- Facilitate cooperation in network expansion. No transfer of telecom regulation to cooperation partners.
Third: Strategy Culture – Industry strategy
The investment ratio in Germany is 20 percent. 90 percent of all investments are made in the private sector. The state only accounts for 2.1 percentage points.
Politicians have increased consumer spending in recent years, but cut back on investments. We must not forget one thing: Silicon Valley owes its existence to the US government. For many years, the US government was the largest customer of the high-tech sector, and it has generously supported research.
Even today, the US government still funds high-tech research with billions of dollars. Think tanks like DARPA the Defense Advanced
Research Projects Agency, have an annual budget of three billion dollars. DARPA invented the Internet. It invented the
Navigation system GPS, laser technology, self-flying aircraft, the forerunners of Google Maps and the language assistants
Alexa and Siri.
So far, Europe has not been able to do much about this.
That is why we are also optimistic about some of the results of the French-German leadership, i.e. the Meseberg Summit in 2018. For example, the decision to promote future technologies such as artificial intelligence even more strongly. In Europe, “Jedi” is forming. The Joint European Disruptive Initiative. This is to be a new approach to research funding: fast, agile, concentrated on a few projects and daring. We think that is absolutely right.
But since the project is already called Jedi, we must quote Master Yoda: “Do or do not do it. There is no try.” Consistency before compromise is important. Besides AI, the EU should also occupy the fields of internet security, quantum computing, photonics, nanotechnology and the area of networked cities. We are talking here about the so-called key enabling technologies, on which former Research & Telecom Ministers already put forward good proposals.
To sum up. Europe is strong.
We have an excellent industrial base. And we have everything in place to continue to be successful in the future. This is worthwhile because a good economic policy is also a good values policy.
What we may still lack is courage and optimism. In China, 91 percent of all companies believe in AI. It’s 91 percent. And in Germany: 51 percent. And only 37 percent are willing to pay a lot of money for AI.
Apparently, we are not only the land of poets and thinkers, but occasionally also the land of the dithering and timid. Before we dare anything new, it must first be secured in all directions. So when the “rabbit progress” goes through the goal, the “hedgehog regulation” is already there. We all know how the story ends. We can’t act this way in digitalization. Otherwise others will shape it. This also applies to the way we will live. Whether value chains and lifelines can run alongside each other as easily as they do today is open to doubt.
The corona crises will also change this hyper globalization.
We at IEM are nevertheless European optimists on principle.
Deeply rooted in Europe. Deeply rooted with the people here and the values for which we stand. Europe can grow. And Europe can also be one of the world leaders in a new world order. We are proud of this. And it would be good if Europe work on the ambition to develop such global champions.
Because only with such champions will we be relevant enough to play in the global concert. For example, can we act on an equal footing with ideas and goods from China or with manufacturers such as Samsung and Apple. And in the competition for the data models of the future, we can continue to meet the requirements of our customers. We trust that Europe is smart enough to leverage its potential. That it will make more investments in infrastructure possible. That it reduces competitive asymmetries with Internet companies. And that it promotes a business model that represents European values. A digital ethic that does not do everything that is technologically possible.
But that translates into products the technology we develop here.
Some years ago, the Sueddeutsche Zeitung once asked “What is the place of Europe”. We thought about this question. And our answer is perhaps not surprising: this one place does not exist. Europe is not Brussels. It is not the Stuttgart car cluster, the Cern or Padua. It is not the Sorbonne and it is not even the café in Vienna, Budapest or Bratislava. Europe is everywhere. Worldwide with its products. Worldwide with the values it stands for. Worldwide with the ideas we have here and put them into practice. It is diverse.
Let’s fight together to ensure that this diversity can enter into relationships through real and virtual networks. That this makes understanding possible that creates understanding. That in this way global industrial platforms are created that position us in worldwide competition. And that prosperity and peace grow as a result.
Thank you very much!