The German economy: from European leader to laggard

Aug 18, 2023
The German economy: from European leader to laggard
Its problems are deep-rooted, knotty and show little sign of being fixed
August 18, 2023
This article in The Economist puts its finger into an open wound.

How did Germany shift from being a leader in the 2000s to becoming a laggard in the 2020s?

As someone who was born there but has spent the past 20 years happily settled in Switzerland, this transformation did not happen overnight. While I've observed these changes from a distance, they don't come as a surprise to me.

Over time, I've had my own share of experiences that offer insights into the situation. For instance, about seven years ago, I encountered the German administrative system when I inquired about my expected pensions. It was a frustrating ordeal. Despite providing extensive information and filling out countless forms, they couldn't provide me with a clear answer. Threatening legal action was the only way to extract any response. In stark contrast, my experience with the US system, where I also worked, was much smoother. Within a day, I had all the information I needed. Similarly, I recently encountered a similar administrative setback with my former university. Lost files and a lackadaisical approach to unusual cases left me perplexed. Legal avenues seemed ineffective against their rigid stance of "this is how it is."

This slow adoption of new technologies isn't confined to government institutions but extends to companies as well. Digitalization efforts seem to be lagging almost everywhere. Concepts like AI remain a distant dream. It seems that a country that was once synonymous with innovation made a choice to withdraw from the forefront of progress around 15 years ago, and its trajectory hasn't changed much since.

So, what's causing this shift?

I believe that Eastern European countries are poised to take the lead in Europe soon. Countries like Poland and the Czech Republic have made impressive strides in IT and digitalization. What options does Germany have? The road to recovery will be challenging, requiring a realization of the current state followed by decisive actions.

An insightful VC once mentioned to me, when I criticized Switzerland's sluggish adoption of IT and innovation, that true reforms often only happen after a significant crash. I sincerely hope Germany doesn't need to experience a similar situation for essential reforms to occur. However, in a world of uncertainties, it's hard to predict what the future holds.‍