Germany´s way into the digital future

Germany is worldwide known for its highly developed industry. Old industrial traditions and the latest technologies coexist well together. The trademark “Made in Germany “symbolizes the best industrial products and engineering skills for far more than a century.

Germany is a so-called social market economy built on the principles of balancing out the factors of capital and labor through co-determination. This principle has never become popular in other countries but has brought significant advantages for German workers and employees and the economy. It does not mean that labor unions have less influence; on the contrary, through their specific knowledge and expertise within companies’ boards, they can avoid mistakes and other failures.
Germany is a decentralized country with its federal governmentі in Berlin and 16 states like Bavaria, Hessen or Saxonia. Again it is organized following the principle of balancing power between the federal government and the state government. So the states have the constitutional power for all educational questions, including schools and universities, for the police and all security questions, etc.
Even in one of the most prestigious research areas within the “Deutsche Forschungsgemeinschaft – DFG with the Max Planck institutions, the Leibnitz-Society, Fraunhofer institutes influence and financing is split between the two levels. Concerning the protection of citizens’ human rights and freedom, many different laws and authorized persons are securing personal data. These laws show their limits in weighing up overall health aspects and individual pandemia protection against individual rights in the present Corona situation.
The issue of digitalization, digitization in such conditions is gradual and applies to all spheres of economic and political aspects. What digital transformation means for Germany is formulated in “Policy 4.0 “. The main issues, challenges, and tasks related to the digital transformation of the German economy are shown in the following tableau:

The Digital Strategy of Germany, which was adopted for the period 2016-2025, outlines ten steps, including:

1. definition of the so-called era of startups;
2. creation of a gigabit fiber-optic network for Germany;
3. development of a regulatory framework to attract investment;
4. involvement/promotion of “smart networks” in critical areas of the commercial infrastructure of the German economy;
5. strengthening data protection and developing information autonomy;
6. introduction of a new business model;
7. use of the concept of Industry 4.0 to modernize production;
8. accumulation of best practices in the field of digital technology research and innovation;
9. introduction of affordable digital education at all stages of life;
10. creation of a digital agency as a modern center of excellence.

Available here

Many of the strategic documents adopted at the federal level on the economy’s digitalization address issues identified at the annual Digital Summit in Germany. Since 2016, each Digital Summit has focused on a variety of topics. After digital education in 2016, digitalization in healthcare in 2017, artificial intelligence in 2018, and digital platforms in 2019, the Digital Summit in 2020 addressed to sustainable development in the context of digitalization. Regarding the last topic, environmental goals, economic and social goals as well as were also identified. Economic growth and innovation,  climate action and environmental protection are elements of future-oriented development.

The introduction of digital technologies in the world started in the ’60s of the last century. The most rapid technological development in economic and social life has taken place since the early ’90s.
Starting with the active transformation process and characterizing the state of affairs in Germany today, it should be noted that these processes affect all segments of society and all aspects of socio-economic life.

At present more than, 80% of Germans had access to the Internet; 63% – used it daily; 9 out of 10 Germans buy online, 40% do so regularly. In 2015 the digital economy was estimated at around € 73 billion, which is around 3% of GDP, now these figures have grown significantly with the expansion of digital services in banking and industry, the provision of digital services by public authorities, the expansion of health and other services.

Comparing the indicators characterizing the level of digitalization in Germany with other countries’ indicators, it should be noted that the criteria for assessing the level of digitalization do not always correspond to the actual level of economic development.

Thus, Germany is ranking for example behind Korea, Denmark, Iceland, Australia, Sweden, Luxembourg, Switzerland, the United States and some other contries around five years ago.

There were 794.65 computers per 1,000 inhabitants in the United States, 602 in Germany, and 927 in Luxembourg. According to Digital, Social, and Mobile Report on Internet use, the Philippines ranked first with 378 minutes a day, followed by Thailand, Brazil and Vietnam. Whereas Big 5: the USA had a rate of 294 minutes a day; China, France, Great Britain, Japan – 186 minutes, Germany – 160 minutes (Tobias Kollmann, Holger Schmidt Deutschland 4,0. Wie die Digitale Transformation gelingt Springer Gabler, Wiesbaden 2016).

According to the European Commission, at the end of 2020, Germany ranks 12th out of 28 (27) EU countries. According to the Digital Economy and Society Index (DESI), Germany received only 54.4 out of 100 points, which is only 2 points higher than the EU average.

So Germany´s international ranking has not changed and at present, criticism of this development can be heard everywhere, inside as well as outside the country as the country with the largest economy in the EU.

The corona crisis has demonstrated and sharpened the existing problems in the digital sector: from health to education. Simultaneously, its specific influence on the acceleration of digitalization of the enterprises’ activity. Thus, according to a survey of 1,400 companies in Germany in September 2020 (Source: ZEW), this affected, above all, the current activities of most employees.

Also, approximately one in three companies in the information industry and one in four companies in the manufacturing sector have increased their digitization degree. This increase is also seen in the business processes of companies.

Although almost half of the companies employed in the IT sector and about 70% of companies employed in the manufacturing industry have reduced sales compared to the pre-crisis period, it is possible to note positive aspects. Almost every seventh company surveyed confirmed the possibility of increasing sales.

The issue of cybercrime has become relevant, with the average number of cyberattacks increasing by 25%. This problem needs a systemic solution and will become more acute with the further development of the economy’s digitalization.

The EU has published a summary document, “Digital Compass 2030,” which presents specific ways and indicative deadlines for their implementation.

The Commission proposes a digital compass to give concrete form to the EU’s digital targets for 2030. The goals revolve four key points:

1. Digitally empowered citizens and highly skilled digital workers;
2. Secure, efficient and sustainable digital infrastructures;
3. Digital restructuring of companies;
4. Digitization of public services.

The compass provides a robust joint governance structure with the member states, which is based on monitoring in the form of a traffic light system. The program’s anchored goals and measures should be agreed upon with the European Parliament and the European Council. Available here

Summary: within the gradual transition into the digital economy an important role is played by a multilateral and comprehensive approach, especially in sciences, education, innovation, entrepreneurship, and state support, especially in funding and organization, as well as in individual and social protection.

Dr. Viktoriia von Rosen (Diploma in Finance, Ph.D. in Banking & Finance), International Academic&Business Projects Consultant

Prof. Dr. Rüdiger von Rosen (Honorary Professor Goethe-University, Diploma in Banking, Honorary Consul of Latvia), Management Consultant

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