ifo Media Center

ifo Viewpoint No. 202: Germany’s new industrial policy

By laying out his national industry strategy 2030, German Federal Economy Minister Peter Altmaier has kickstarted an important debate. How is Germany’s future as an industrial location to be secured? Many see technological change, US dominance in digitalization, and China’s ascendency as a threat to traditional industrial countries like Germany. Is a new national industrial policy the right reaction? There are three fundamental problems with industrial policy. First, politicians know no more than private investors about which technologies will win out in the future. Second, they tend to be worse than the private sector at terminating failed projects in good time. And third, there is the danger that long-established, politically well-connected companies will abuse industrial policy in order to secure privileges at the expense of competitors, taxpayers, and consumers.