Peter Altmaier, Germany’s economics minister (pictured), dropped a small bomb on the world of German policy wonks yesterday. By proposing a “National Industrial Strategy 2030,” he is in effect suggesting a revolution in post-war German thinking on economic and antitrust policy. And all because of … China?
German economic philosophy, at least in theory, has since World War II been shaped by Ordoliberalism, which I have explained in detail here. Ordoliberalism’s political avatar, as it were, was Ludwig Erhard, in his years as West Germany’s first economics minister more than in his short and hapless time as chancellor. (And for full disclosure: Erhard was also my great-uncle, and a major character in my book.)
Erhardism, if you want to call it that, is the exact opposite of Colbertism, the French-style dirigisme that dates back to Jean-Baptiste Colbert, Louis XIV’s finance minister. If the French instinctively favor letting politicians pick “national champions” (Renault, or whatever), then the Germans, since Erhard, generally prefer free markets to choose the winners. The role of antitrust policy, Erhard would say, is to prevent agglomerations of power that hurt consumers, not to let some German company become large enough to beat foreign rivals. In the long run, that kind of regulatory “framework” (a word Ordoliberals love) will create a more competitive economy with stronger firms than interventionism can.
Well, Altmaier obviously disagrees. And the main reason is China, which is to France as Albert Speer was to Jean-Baptiste Colbert: China’s economy may also have a vibrant private sector; but its flagship companies are entirely in the service of the state and its nationalist goals. To make sure that the Chinese don’t buy up too much of Germany’s cutting-edge technology sector (as they bought Kuka, a robot company), Altmaier thus wants the German government, via a state investment fund, to take stakes in private firms, enough to block takeovers. And to let German and European firms stare down their Chinese and American rivals, he wants the EU antitrust regulator (modelled on Erhard’s German precedent) to loosen up and allow larger, transnational combinations.
Now, I’m certainly not naive about China. But let’s shift down a gear. Erhard’s premise, remember, was two-fold: Non-intervention in the economy, except for tough antitrust enforcement, 1) helps guarantee our freedom and 2) actually makes firms stronger, not weaker, in the long term. Why on earth should we protect ourselves against China by becoming ... Chinese? READ MORE
A champion derailed
Altmaier hinted that he was also motivated by one case currently in the news, the proposed merger between some parts of Siemens and Alstom, who want to create, yes, a European champion for building high-speed trains. Well, Margrethe Vestager, a Dane who is the EU’s Commissioner for Competition, didn’t get Altmaier’s hint. Channelling Erhard, she blocked the merger today.
Rest assured, the two companies will still do fine on their own. But the case is a reminder why these antitrust decisions are so difficult. The appropriate question is not whether the resulting company would be huge. It is the definition of the “market”, and whether the company would dominate it. In the case of Google, say, is the relevant market the one for internet search, or online advertising, or all advertising? In the case of Siemens-Alstom, is the appropriate market the one for trains zipping around Europe, or trains being built and sold anywhere in the world? Beats me. Beats most of us. Another reason why politicians like Altmaier should stay out of this altogether.
Spoiling Beijing's appetite
Back to the Chinese, for another moment. After they went on a binge in Germany and other parts of Europe, the German government recently tweaked some laws to make it harder for them to snap up firms. Whether it’s because of that or because the Chinese have been feeling less welcome, they are indeed slowing down. Ernst & Young, a consulting firm that helps with some of these transactions, has tallied last year’s deals and found that the Chinese spent only €31 billion on German corporate stakes in 2018, half as much as the year before.
A last one on China: Last month, I analyzed the bind Germany is in as it decides whether or not to let Huawei, a Chinese telecoms giant founded by a PLA officer, participate in building out Germany’s 5G wireless networks. (The spectrum auctions are going on right now.) The fear is that Huawei, in cahoots with the Chinese government, could build “backdoors” into the routers or other widgets, then use them for espionage.
Well, a closed meeting is happening today in Angela Merkel’s chancellery, run by Helge Braun, her chief of staff. Something may come out of that. Meanwhile, the German arm of Vodafone, a mobile carrier, already went one step further and voluntarily announced that it was removing Huawei equipment from all its German networks. (It will install Nokia gear instead.) Merkel herself, during a visit to Japan, stopped short of calling for a ban on Huawei, and instead outlined strict conditions for transparency, including opening the source code. That happens to be what I argued for. Vigilance is good, overreaction is not.
Not quite Auf Wiedersehen, but ...
And last but not least, a more personal update, one that makes me a bit sentimental. It’s about us, Handelsblatt Today, formerly called Handelsblatt Global. Yesterday, our mothership in Düsseldorf announced that it would shut us down. (The link is in German.)
The reason is that we never found a “sustainable business model,” which is of course a challenge that many news organizations in many countries can sing a song about. We don’t know details yet, but we will of course keep you, our readers, up to date. For even though we never swam in money, we did convince many of you to become loyal, demanding, and delightful fans of our journalism. Judging from your reader letters and emails, I have come to know you as sophisticated, worldly, curious people with an interest in Germany. Until Düsseldorf turns off our lights, we will continue to do the best we can for you. And who knows? There may even be a new “product” in English to rise out of the ashes. In any case, keep the faith. This is not yet a goodbye.
Handelsblatt Today Editor-in-Chief