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Germany Urged to Drop Anti-Google Stance, Reinvest in Own Stunted Tech Economy

Wirtschaftstag des CDU-Wirtschaftsrates
Kurt Lauk, the president of the German CDU's economic advisory council, speaks at a CDU conference in April 2014.
  • Why it matters

    Why it matters

    Google and other tech entrepreneurs generate up to $20 trillion globally, and more of those sales could be generated by German companies.

  • Facts

    Facts

    • Germany should create for entrepreneurs a better environment to succeed in the Internet and IT industries.
    • Imposing more regulations on the current Internet titans such as Google won’t get Germany anywhere.
    • Six of the largest IT and Internet sector providers arose from a U.S. culture that encourages innovation.
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    Audio

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In Germany, Google is vilified as an octopus, a target for attacks from all sides. Cartel, data, and copyright laws are used as heavy artillery against the American company.

But this is a loser’s debate: Germany is not even close to being a decisive battleground for online giants such as Google. Germany has to improve its chances on the most important market of the future instead of pondering regulatory pressure as a means to combat global IT and Internet companies.

An industrial nation such as Germany cannot just leave the enormous potential of the Internet and IT industries to others; industries that can generate up to $20 trillion globally, compared to a world gross domestic product of $70 trillion.

All the more so because the $20 trillion figure is not the only issue: new solutions will drive out and diminish old business models. So far, this is most apparent in the news business or trade, but it will also hit traditional industries through the web-based linking of production processes.

Six of the largest IT and Internet sector providers – Google, Microsoft, Amazon, Facebook, Apple and Salesforce.com – are based in the United States.

These did not fall from the sky – they arose from a culture that encourages innovation. Instead of going on a petty offensive, Germany’s mindset has to change completely: How can it provide its entrepreneurs with a framework to facilitate a meteoric rise to the heights of Google, Microsoft and the others? The preconditions are only partly in place.

Thus, the German Internet sector, at 3 percent of GDP, clearly lags behind European countries such as Great Britain with a sector almost three times as large. Even infrastructure such as broadband needs to catch up considerably: When measured by average speed, Germany is in the worst 25 percent of industrial countries.

In Germany, Google is vilified as an octopus. But this is a loser's debate. Germany is not even close to being a decisive battleground for online giants such as Google.

The cost of delivering on the coalition’s promise of a nationwide Internet service of at least 50 megabits a second (mbit/s) should be €20 billion ($27 billion).

By then, other countries will already be working toward 100 mbit/s.

 

Wirtschaftsrat der CDU
Kurt Lauk, a top economic adviser to German Chancellor Angela Merkel, has criticized German regulatory pressure on Google, saying Europe’s largest economy must compete, not block the digital future. Source: DPA

 

Despite solemn declarations of intent, it remains unclear how the investment is to be financed in the federal budget. But it is not just about money: The legal situation does not give companies any investment guarantees for expansion in sparsely populated areas.

The German economy and its export successes are sustained by “hidden champions” in remote areas — in the Jura region of southwest Germany and in Sauerland in western Germany, for example. And if Germans want to avoid isolating the northeast region of the former East Germany, they will need new connections there too.

The broad left-right coalition has a big majority in parliament. It has to use this, invest more in research and development and expand high-performance digital communication regionally.

Digitalization embraces all business and production processes and offers great opportunities, particularly to the innovative “Mittelstand.” The small and medium-size companies that have embraced new technology were able to increase their revenues between 2010 and 2012 by 15 percentage points more than their competitors.

This experience could be instructive given that 70 percent of worldwide venture capital for innovative companies goes to North America, and of that, more than half to Silicon Valley. And yet big areas, which constitute the future of the IT and Internet economies have yet to be divided up.

Cloud computing, big data, social media, enterprise mobility and cyber security all present German companies with the opportunity to position themselves just as SAP did 20 years ago — to this day Germany’s most successful software producer.

If the cynics prevail in almost every discussion about innovation, however, then Germany will be clearing the way for other countries to exploit the opportunities of this huge market.

Kurt Lauk is president of the economic council of the Christian Democratic Union, the conservative leading partner in the coalition government. He can be reached at: gastautor@handelsblatt.com

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