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Scientific Policies

The German cure for the recession

Since the beginning of the economic crisis, experts have not stopped repeating that the best way to mitigate its effects and avoid its negative impacts on the future is to invest in more and higher-quality research, development and innovation. However, only some countries have initiated this adventure decisively. Thanks to a broad consensus of internal agreements aimed at increasing the excellence of its research facilities and partially reforming its educational system, Germany is currently the best example in Europe.

Xavier Pujol Gebellí | AUGUST 10th, 2010

The alarm sounding the predictable economic crisis in the Federal Republic of Germany was not set off as in the rest of the world by the financial meltdown which ended up bursting the housing bubble inflated by international speculation. Although the European powerhouse has inevitably also been hurt by the housing debacle, the red light first began to blink nearly five years ago when Germans noticed a sharp drop in the competitiveness of their companies and perceived that the intensive efforts in R+D being undertaken by the Chinese were beginning to bear fruit, and not just in mass consumer products but also in the high-tech sector. Germany, the traditional world leader in exports of high-end products, has already been overtaken by China. In absolute terms, the investment in R+D of the Asian giant has now reached Europe’s level and is expected to catch the United States in five years.

According to Peter Gruss, president of the Max Plank Society, if the loss of competitiveness and commercial success are added to Germany’s demographic problems, the future could look even more bleak. “Invest in brains,” he said in a recent interview with this correspondent. The formula, according to Gruss, is simply to strengthen and make the foundation of any system that claims to be competitive “more attractive,” referring to the R+D system in its broadest sense and, in parallel, a remodeling the educational system.

Five years ago a continuous process along these lines began with the initial step embodied in the form of a national pact for improving research and excellence in education and both basic and applied science.

A structured system

Few national R+D schemes are as strongly structured as the Germans’. Through a dense, interconnected network, the three classic aspects of research – basic, applied and issue-oriented – are represented and endowed with a budget that reaches 2.6% of the country’s gross domestic product.

The arms of basic science are, first, the universities, which currently receive an important part of the 7% of GDP Germany devotes to education. On the other hand, the Max Planck Society will enjoy additional 5% annual increments of its budget, which will mean some 250 million euros for the period between 2010 and 2015. For universities, the definition of formulas of excellence, the additional funds for institutions that demonstrate their strength and international competitiveness should allow improvement in the medium term. “Our universities must be attractive for both local and foreign talent,” said Gruss.

Applied science is organized by the Fraunhofer technology institutes, which receive most of their operating funds via collaborations with industry, while issue-oriented science, based on criteria defined by the central government in areas considered key or strategic, is channeled through the vast network of Helmholtz. The Max Planck Society is the home of cutting-edge scientific investigations.

The sum of all these organizations, plus the commitment to a private sector that provides two-thirds of Germany’s total R+D investment, should lead, according to Gruss, to the opportunity to enhance a characteristic pattern of incremental innovation in this country and to open up doors to “disruptive advances” born of science, regardless of their orientation.

Looking to Europe

The German model, along with the French and the British ones, are leaders in Europe, although the Swiss and the Nordic systems also enjoy extraordinarily good health. In all these countries, the goal of investing 3% of GDP in R+D outlined at the beginning of the decade at the Lisbon summit is a “reasonable” commitment, said Gruss. The northern European countries are already in this position, while Germany is at 2.6% with a clear upward trend. But Europe as a whole is far from this goal, one full point behind, while Spain is only at 1.2%. While Germany investments in R+D stands at 3% of GDP, Spain is only at 1.2%

Gruss understands that the private sector has to make greater efforts in countries such as Spain that are still far from the EU’s goal. Ideally, he said, the public sector should contribute 1%, while the private sector should add 2%. In southern European countries the balance is the opposite. In Spain, public funds are close to 70% of the total, while the private sector accounts for 30%. “To achieve the 3%, the State would have to provide far more proportionately, even more than what the German government provides,” said Gruss “It's unreal.”

How can industry be moved to get more the involved? “With incentives,” responded Gruss. For example, contributing to the funding of research activities in industry and tax incentives or grants for collaboration between academia and business would enhance the generation of value-added business of sufficient scale in order to compete internationally. The challenge is, he said, “to ensure that investors see that it is attractive to invest in a particular country’s initiatives.”

And in general, this is also the task at hand for Europe, both in terms of investment in science and education. In this sense, Gruss believes that the initiative deployed in the EU’s Seventh Framework Programme with the launch of the European Research Council is key. “You have to fund it better and enhance its goals.” The future Framework Programme, whose budget will be expanded and is already in the drafting stage, could fulfill his wish.

THE WEIGHT OF TRADITION

Although the Industrial Revolution began in the United Kingdom, it was the enormous expansion of chemistry and its associated industry, mainly located in the basins of the great German rivers, which allowed Germany to become a global economic power in the middle of the 19th century. Chemistry, with the further development of the pharmaceutical industry, engineering and later the automotive and consumer technology sectors have kept Germany in leading positions despite the effects of two world wars and then the costly unification of a territory split in two as a bargaining chip at the start of the Cold War.
This cumulative tradition has generated a corporate culture where large companies with thousands of employees coexist with an academic and scientific life which has its roots in more than three centuries of fundamental intellectual contributions from some of the great minds of science. In Germany,it is therefore perhaps not surprising to regularly hear of a corporation increasing investment in R+D despite the economic downturn. The last company to do so was the chemical company BASF, with more than five billion euros devoted to this area in the coming years. Pharmaceuticals, biotechnology and especially the automotive sector, with the electric car situated in the spotlight, are not too far behind in R+D investment.

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