More Spending (and Taxes): Steinbrück’s Plans for a Digital ‘Industry 4.0’

By David Knight |

Happily, it seems many of the startups who met Peer Steinbrück earlier this month left a lasting impression. Steinbrück, the centre-left SPD party’s candidate to become Chancellor of Germany in the country’s federal elections later this year, had been doing the digital rounds, following in th footsteps of current leader Angela Merkel and her deputy Philipp Rösler.

But it was Steinbrück who returned with some answers – he was speaking at the NEXT13 conference this week to lay out in detail his proposals to grow the digital economy and put it at the forefront of what he dubbed “industry 4.0”. And taking to the stage at the bcc venue, he name-checked Leipzig-based marketing agency Projecter as well as Berlin startup, and Factory resident, Mentor.

The people behind energetic young companies such as these, he said, had left a big impression on him: “What struck me most was that each of these young entrepreneurs talked about one thing first – their vision.”

And this is where politics and entrepreneurship combine. ‘What is your vision?’ is a question rarely asked of politicians, Steinbrück added, and that is to some extent justifiable. Day-to-day politics must solve the problems at hand. To illustrate the traditional approach, he quoted former Chancellor Helmut Schmidt‘s famous remark: “People who have visions should go see a doctor!”

A Compass to Guide your Decisions

And yet, Steinbrück argued, the situation was not that simple: “In politics you have to be pragmatic. This is true to a certain extent. But you also need a compass to guide your decisions. You can solve the problems and mediate the conflicts at one hand, and only if you know where you want society to go in the long run.”

That rings true in particular for the economy, with Steinbrück boldly declaring that “Germany can be and will be the leader of the fourth industrial revolution.”

The first was shaped by the steam engine, the second by electricity, and the third by early computers. The fourth, and ongoing, industrial revolution is largely concerned with digitization and networking; factors that can bring about whole new products, technology and processes.

His example was how car repair centres could in future avoid the need to have a well-stocked warehouse of spare parts, and simply use 3D printers to create whatever they needed.

Industrial production will, Steinbrück argued, become more decentralised and move closer to the customer. “With increasingly complex products, you need the people who design them and the people who make them in the same place.”

The Pioneer of Industry 4.0

He was at pains to emphasize how Germany, unlike the UK, France or the US, has retained a greater part of its industrial backbone as other developed countries see theirs fly abroad.

“Now let me tell you the best part: Germany will be the pioneer of this industry 4.0.”

Industries such as automotive, mechanical engineering, equipment manufacturing will help balance out services such as finance, Steinbrück said, and can be the launchpad for this fourth industrial revolution.

So how to pave the way for these new industry pioneers? Politics, he said, needs to address three factors – infrastructure, education and entrepreneurship.

“Broadband networks are the lifelines of the digital world [and] we are way behind in Germany. In fact we are last in Europe, even lagging behind Romania.” Much of Germany’s industrial strength is scattered throughout the country in the form of small and medium sized companies.

“Just as BMW, Mercedes and Audi grew on the autobahn system, the industry 4.0 needs a network of broadband autobahn[s] to succeed.” He went on to propose that comprehensive access to such networks is guaranteed by statutory universal service requirements and mobilising capital, allowing ordinary people and local businesses to invest in geographically specific projects.

‘The Workbench of the 21st Century’

As for education, much needs to be done in Germany, Steinbrück said: “We need to radically change schools, vocational training and universities. Technical and digital competencies belong at the top of the curriculum. The laptop is the workbench of the 21st century. Every student needs one.”

Hear hear. With skills set to be one of the key resources of the future, he also proposed much increased government investment in education, adding that it is currently underfunded by billions every year in comparison to Scandinavian countries. To help close the gap he wants to change the German constitution to allow more direct federal financing of education.

So far so good. But then, of course, there is the thorny issue of how to pay for all this. “The other thing is to raise some taxes. Not to raise all taxes for all people, but some taxes for some taxes. … taxes for those few with the broadest shoulders. Because we have to finance education, we have to finance municipalities, we have to maintain our infrastructure.”

Thirdly is entrepreneurship. The most valuable companies in Germany, the likes of Siemens, BASF and Daimler, are all more than 130 years old. Compare them to some of their American equivalents – Apple, Microsoft, Google – and that’s something that should change. What it will take for that to happen is money; lots of money. Last year, Steinbrück said, more than €30 billion was invested into early stage companies in the US; in Germany it was less than €1 billion.

Enormous Capital Reserves

He proposed reintroducing the business starter subsidy and steering more private capital into German startups: “I want to invite the insurance companies, for example, and the banking sector, to think about new ways of investing their enormous capital reserves into productive new ideas of young people, rather than into highly risky, highly speculative financial products [ ].”

Large corporations should also provide venture capital, he said, in order to bring together the strengths of traditional industry and the startup mentality.

But tied to this is the issue of changing German thinking when it comes to a culture of failure. This is something that often touched upon, as with Merkel and Rösler, and it does appear to be changing, albeit slowly.

Steinbrück said: “People deserve second chances – at school, universities and in founding businesses. This has an economic as well as a social dimension. And I want banks and bosses and business angels to let young people experiment, to let them take chances, and, no doubt, to fail sometimes. I want a society in which all people get the chance to fly freely, I wish they land safely.”

Nourishing the Digital Economy

It was a well-received speech – particularly the parts critical of the banking sector and the culture of failure – and it was useful to hear a German politician actually lay their cards on the table – explain how exactly they plan to support and nourish the digital economy.

Steinbrück has moved his campaign to the left to emphasize the differences with the still-popular Merkel, and his plans appear to involve a growth in public spending paid for by increasing taxes on the rich. France has been on this course for the past 12 months ever since President Francois Hollande, of the Socialist Party, took power. By most accounts, it ain’t going so well.

Do we really need the government to be quite so hands-on when it comes to encouraging new business? No doubt some of Steinbrück’s proposals make perfect sense – more digital education please! – and he has impressed on both occasions I have had the chance to talk to him or hear him speak, but his words may well concern those in the startup world who believe the only role government has in entrepreneurship is to stay the hell out of the way.