If there is such a thing as a lion’s den for upstanding conservative German economists, known as ordo-liberals, then it’s probably Keynes Hall at Kings College of the University of Cambridge in Britain.
It was at Keynes Hall, of all places, towered over by a life-size bust of the British economist and politician John Maynard Keynes, that prominent German economists assembled last week.
The Germans included Lars Feld, a member of the German Council of Economic Experts, a key group of government advisors; Clemens Fuest, president of the Munich-based economic research institute Ifo; and Otmar Issing, the former chief economist of the European Central Bank.
They assembled to meet their predominantly Keynesian-minded colleagues from Europe and the United States. In a rare moment of harmony, the guests had all been invited by the Institute for New Economic Thinking, which was founded by financial speculator George Soros, and the Freiburg-based Walter Eucken Institute, headed up by Mr. Feld.
It is of decisive importance to create success stories that not only encourage European and international investors to focus on Europe, but also restore hope of a better economic future.
Apart from the usual cliche of the stiff, rule-obsessed Germans who refuse to make a contribution to the recovery of Europe and the global economy, there ensued an open-minded, fruitful discussion about ways to overcome the crisis in which the euro zone still finds itself.
Even if no master plan to reinvigorate the euro zone’s economy was forthcoming from the meeting, there was a notable consensus that neither monetary nor fiscal policy on their own would be enough to bring about such a comeback. Instead, many of the three dozen meeting participants called for the euro zone’s framework of rules to be made more rigid, for the banks to be properly restructured at last – and for the European economy to be modernized by means of a new “industrial policy.”
Such an active industrial policy for Europe, called for by many participants, would be aimed at creating impulses to modernize the economy and create the preconditions for Europe to improve on its position as the laggard of the global digital economy. A further element should be a campaign throughout Europe to facilitate and promote company startups. A reduction in bureaucracy and the creation of favorable conditions for startups could have a greater effect than launching an additional venture-capital program.
As a basis for high-tech startups and also for the “Industry 4.0” project (which aims to digitalize German industry), it would be beneficial to have an investment program to expand broadband networks. Added to this could be a training initiative to help qualify young, unemployed people for digital jobs where a labor shortage is likely. Such a digital offensive would be ideal to give young people a perspective and, at the same time, help to shorten the gap between Europe and the United States.
Another potential area for an industrial-policy initiative would be the energy sector. The absence of a coordinated European energy policy has led to considerable market distortions to which Germany has also contributed with its ambitious but inefficient energy revolution. But it’s still not too late for a joint European energy strategy.
The expansion of renewable energy forms in the most suitable locations, an investment program to promote heat insulation and a coordinated expansion of charging stations for electric cars should all feature in the strategy. With an offensive of this kind, the European Union could aspire to a global pioneering role with regard to climate protection.
They are just a few examples of areas where industrial policy can work. There are more, including some in which the European Union could employ existing strengths by concentrating on, for example, “Industry 4.0” (digitalization), robotics or products and services for older people and those in need of care.
It is of decisive importance to create success stories that not only encourage European and international investors to focus on Europe, but also restore hope of a better economic future to frustrated inhabitants of southern Europe after so many years of crisis. The European Union must not continue with its introverted stance, trying to overcome the euro crisis with defensive measures.
Of course, there is still enough to do in that area, but if these “running repairs” are to dominate the E.U. bloc’s external image, then our reputation will continue to suffer and investors from other continents will write us off.
Such an industrial policy doesn’t necessarily have to cost a lot of money. An expansion of the European single market, combined with structural reforms and targeted support, can make a big difference. Accompanying investment programs could be financed by a reallocation from the E.U. budget, or by a more targeted use of the so-called Juncker investment fund.
The industrial policies outlined here are pragmatic. In other words, they are not beholden to any particular school of thought, and they could replace pointless disputes about the right monetary and fiscal policies and produce tangible progress for the people and companies of the European Union.
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