#ZEWPodcast: “Uncompromising Industrial Policy Is Outrageous – Let’s Do the Same”


ZEW Podcast with Ralph Rheinboldt and Achim Wambach

Germany as a centre for industrial production is facing major challenges. The high energy prices, the enormous shortage of skilled workers and the excessive bureaucracy make it particularly unattractive for companies to settle in Germany. At the same time, dependence on other countries, for example the US, China and India, continues to grow. In the #ZEWPodcast, Dr. Ralph Rheinboldt, board member at Fuchs Petrolub SE and chairman of the ZEW Sponsors’ Association, and ZEW President Professor Achim Wambach discuss possible solutions to compensate locational disadvantages at the European level. They emphasise that market intervention by European industrial policy only makes sense in the case of market failure.

“I think other countries like the US or China follow an uncompromising industrial policy that consistently prioritises the benefits for their own country,” says Dr. Ralph Rheinboldt, board member at Fuchs Petrolub SE and chairman of the ZEW Sponsors’ Association. ZEW President Professor Achim Wambach adds, “The national industry strategy for the US and China prove it. I find it quite interesting that everyone keeps saying, ‘That’s outrageous – let’s do the same!’.” High energy prices, the immense shortage of skilled professionals and excessive bureaucracy are making Europe less and less appealing to businesses. Especially in an international comparison, many regions are catching up and becoming more competitive. Is this enough to justify European policymakers taking active economic measures? Should Europe consider market interventions, just like in China or the US, to increase its appeal to businesses?

Security of supply must be guaranteed

“Security of supply is a very important issue at the moment. There are debates about how the energy market can be redesigned,” says Wambach. He assumes that a uniform electricity price in Germany cannot be maintained under the current conditions. Rheinboldt addresses the main problem and criticises: “We need green energy supply where it is actually needed. In my view, the political approval procedures for the construction of new power lines are inadequate.” One way to ensure a consistent supply in Germany is to further expand the power grid and introduce capacity mechanisms to finance a flexible, weather-independent power supply.

Germany in crisis mode: Inflation, shortage of skilled professionals and excess profits tax

“The energy supplier Stadtwerke München is now using oil instead of gas. They have a good reason to do so, as gas has become more expensive. Their profit margin is higher now because they have oil. With the additional excess profits tax now, however, they could have continued using gas,” explains Wambach. The shortage of skilled professionals further limits the benefits of a German industrial policy. It makes no sense to create incentives for companies to come to Germany and then find that the skilled professionals they need are not available. At the same time, high inflation continues, including further key interest rate hikes by the ECB. Europe is in crisis mode. In this podcast episode, Rheinboldt and Wambach explain that it will take great efforts and confidence in domestic industry to make Germany more attractive again as a business location in the future.