Globalization has lost momentum and Germany is becoming less and less attractive as a workplace. Does the country need a new business model?
It’s not uncommon for a head of state to praise his country and encourage investment. This happens almost every day, anywhere in the world. Yet Olaf Scholz’s ode to Germany as a workplace recently at the World Economic Forum in Davos seemed to have come from another time.
A period when Germany was still at its peak; others asked with admiration: How do the Germans do this? Strong growth and seemingly never-ending prosperity every year.
Germany as a workplace is still average at best
The reality in early 2023 looks different. In almost every ranking or almost every opinion poll, Germany lags behind other workplaces. The country is still average at best, they say. Matthias Zachert, CEO of specialty chemicals company Lanxess, sums it up for many:
Zachert isn’t the only one considering high energy costs. Gas in the US currently only costs one-fifth of what German companies have to pay in that country. A real competitive disadvantage.
That’s why many corporate leaders like Zachert think: They don’t want to turn their backs on Germany as a location, “but we will focus our growth investments primarily on more competitive regions like the USA.” Also attracting with strong grants; German start-ups in particular are being lured by the Americans with generous subsidies.
Germany speed – very long approval processes
Germany – a bad position, but the Chancellor does not want to do anything with it. His new mantra: Germany speed. Germany managed to import liquefied natural gas from all over the world in record time.
Still, Scholz also knows: “But of course we have very long approval processes.” The new LNG rate should be the new recommended rate. But far from everywhere. There is also the lack of skilled workers and corporate taxes, which are very high in global competition.
The German economy, which is predominantly export-oriented, is particularly burdened by the deceleration of globalization. A development exacerbated by the Covid-19 pandemic and Russia’s war of aggression in Ukraine. As a result, the dynamic of economic globalization has virtually come to a standstill.
Does Germany need a new business model?
The outlook gives little hope. Researchers at the Prognos Institute and BayernLB Research see even continued disengagement from globalisation, namely the decoupling of the world economy, as a realistic scenario.
In a study published Tuesday, they ask whether the German business model – largely geared towards international trade – is therefore on the verge of collapse. The answer is no, but “keep going” is dangerous. Domestic companies would have to adapt their business models to the changes. Easier said than done.
The study gives examples of how it might work; that is, starting from an already strong position, focusing specifically on emerging markets. An example of this is the export of climate and environmental technologies. German companies are already well positioned here and are among the most important providers worldwide. In some technologies, such as air pollution control, the company is already the world market leader. This needs to be expanded further.
Expanding into new markets – Mercosur as an opportunity
At least as important, according to the research, is the development of new markets. If you’re on good terms with Olaf Scholz, then he gives the right signal with a trip to South America.
The point is to finally make the Mercosur agreement successful, thereby establishing the world’s largest free trade area between South America and the EU. Above all, the project offers tremendous opportunities for easier access to future coveted raw materials, but has been stagnant for years. So there is still a lack of speed here as well.
I am Ben Stock, a highly experienced professional with over 7 years of experience in the news industry. I specialize in market section writing and have published numerous high-quality articles on various topics under my name. My passion for journalism has helped me to develop an in-depth understanding of the industry, enabling me to stay up-to-date on all the latest trends and developments.