Financial Market Experts Are Sceptical of Active Industrial Policy

Financial market experts in Germany are rather cautious when it comes to a more active industrial policy by the government, with the majority of experts considering it to be ill-suited to achieve its objectives. This is the result of a survey conducted by the ZEW – Leibniz Centre for European Economic Research in Mannheim among 150 financial market experts as part of the ZEW Financial Market Survey in March 2019.

As the survey shows, a majority of approximately 55 per cent of the survey participants view a more active industrial policy in a critical light. In contrast, almost 43 per cent of the experts have a positive attitude towards adopting an active industrial policy in Germany. Against the background of the “National Industry Strategy 2030” presented by the Federal Ministry for Economic Affairs and Energy, the financial market experts were asked whether German policymakers should pursue a more active industrial policy in order to improve the competitiveness of German companies on the world market.

Around 75 per cent of those in favour of a more active industrial policy argued that other countries have already adopted such a policy and that Germany should impose strategic countermeasures. Almost 57 per cent of the respondents considered the protection of key industries and enterprises to be a sensible goal of active industrial policy, while just under 21 per cent perceive this to be a negative objective.

In addition, the financial market experts were asked which measures they thought fit to effectively increase Germany’s competitiveness and which industrial sectors were particularly suited to be targeted by an active industrial policy.

Easing merger control is not considered a suitable instrument by a majority of the survey participants. One third of the surveyed experts, respectively, believe that such a measure would either have no noticeable effect on the competitiveness of the German economy, or a positive or negative effect.

In contrast, the experts assume that subsidising selected industrial sectors would have a stronger positive effect on Germany’s competitiveness. More specifically, around two thirds of the experts believe that subsidies in the area of artificial intelligence would have a particularly positive effect.

“Although a majority of the experts tend to reject a more active industrial policy at the expense of competition, selected strategic measures are viewed in a more positive light. The industry strategy presented by the Federal Minister for Economic Affairs and Energy, Peter Altmaier, should therefore be endorsed when it comes to investing in Germany’s physical infrastructure, broadband expansion and e-government,” concludes ZEW President Professor Achim Wambach.