What good is export success if it does not lead to more wealth at home?

European Business: Dr. Stelter, do you find the lack of concern from the ranks of German companies regarding geopolitical upheaval in the world disconcerting?

Daniel Stelter: I think this impression is deceiving. The companies are well aware of the dangers and are bracing themselves for it as much as possible. They can’t lead a company in constant crisis mode. Think back to the year 2009. Everything looked like we were on our way to a new global economic crisis. If you had bet on that scenario back then, you would be the big loser today. Companies always have to be on the lookout for opportunities while at the same time preparing for the worst so that they won’t find themselves in trouble in case of another crisis. This is precisely what German SMEs are doing, who have cut back debt and been cautious with their investments since 2009. 

European Business:Does good economic growth hide the fact that we now have to rethink our own corporate strategies? Or have business leaders long since reacted and just haven’t talked about it?

Daniel Stelter: Of course, there are still risks. The German economy is booming and is speeding from one export success to the next. What is being overlooked there is that we are directly and indirectly dependent on the Chinese economy, which for its part is increasingly dependent on debts. A crisis, potentially even bigger than 2009, is brewing there. Added to that is the euro, which without question is too weak from the German perspective and thus also contributes to export success. Neither one is a stable factor in the long term. We find ourselves in an illusion of wealth that could end more quickly and more drastically than we can imagine. At the same time, more and more companies have contingency plans in reserve and try to prepare for the biggest risk. Take the euro, for example. My dialogue partners see through the fact that the causes of the euro crisis are not yet overcome and that it’s only the cheap money of the ECB that’s still keeping the monetary union together. Accordingly, they are trying to take precautions, which, in light of the dramatic disruptions to be expected if the Eurozone breaks down, is not easy. The same is true for the problem of growing protectionism. Companies are experiencing trade obstacles in daily business but don’t speak about it openly because they fear further repercussions. The euphoria about China is long gone. Companies recognize that they are allowed to play in China only as long as the local competitors are well established and strong enough. That is why they’re aligning themselves towards new markets.

European Business: What could or should a strategic realignment look like?

Daniel Stelter: At its core, economic growth depends on two factors: the growth of the workforce and increases in productivity. The latter has decreased significantly in recent years while the workforce in Europe and particularly in Germany faces a dramatic decline that cannot be stopped by immigration. In other regions of the world, particularly in Asia, however, we’re on the verge of another phase of high growth. Europe and thus Germany is therefore becoming less attractive as a production location for several reasons: more inference by the state, more redistribution for an aging society, shortage of staff, progressively worse educational performance, and stagnating or shrinking markets.  Strategically, this means that companies should be prepared for a fundamental change. Besides radical – I deliberately say “radical” – automation, it is in particular the building up of production and research capacities in the markets of the future.

Read part 2 of the interview: The acceptance of the EU is also based in particular on the promise of prosperity.