Industrial Policy

France and Germany Getting It Wrong

ARCHIV - Ein Absetzer schüttet Abraum auf eine Halde am 18.08.2014 im Braunkohletagebau Welzow-Süd der Vattenfall AG in Welzow (Brandenburg). Die südbrandenburgische Stadt Welzow hat ein mögliches Nachtarbeitsverbot für den angrenzenden Braunkohle-Tagebau Welzow-Süd ins Gespräch gebracht. Foto: Patrick Pleul/dpa (zu Vorausmeldung dpa "Nachtarbeitsverbot für Tagebau im Gespräch" vom 13.09.2016) +++(c) dpa - Bildfunk+++
Brown coal mine. For countries like Germany and France, industrial policy is critical.
  • Why it matters

    Why it matters

    Lacking effective industrial policies, France and Germany keep wasting money and economic and political uproar.

  • Facts

    Facts

    • Recent failures or excesses of government intervention into industrial policy have created expensive problems in France and Germany.
    • Germany’s sudden, top-down switch to renewables led to huge losses for major utilities and a collapse in the wholesale price or electricity.
    • France decided to set up its own wind power producers but the companies, Alstrom and Areva, couldn’t match more experienced providers like Gamesa and Siemens.
  • Audio

    Audio

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France and Germany have one worrying similarity: Both seem incapable of coming up with a sensible industrial policy.

In Germany, it’s seen as synonymous with state intervention and is therefore taboo. In France, this is the area where politicians seem determined to show their mettle. Both approaches can spell trouble.

Germany’s transition to renewables was decided upon without being backed up by a suitable industrial policy. Now, the environment, consumers and energy companies are all paying the bill.

In France, governments on both the left and the right try to lead sectors and companies to success by decree and if this success doesn’t come about, everyone hurries to cover up the failure with new interventions which make an even bigger mess. Then, an economic mishap becomes a political disaster.

And nobody seems to learn from this. Instead, new graduates come along from elite schools trying to prove themselves by meddling with companies.

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