With high wages and a vast social welfare system, innovation is especially important to retain the standard of living in countries like Germany. But what vision do politicians and business people need to encourage it?
Research is key for Germany to regain its innovative edge
"If we don't have more competition, we will never be able to keep up against the American, Japanese and Chinese producers," said outgoing EU Internal Market Commissioner Frits Bolkestein (photo, below) in Düsseldorf. "Competition is business' elixir of life." Bolkestein called for a return to "good, old values," competition and an end to paranoia.
His words set the tone at a seminar this week called "Innovation -- Germany's Key to the Future: Which Visions Guide Business and Politics?" organized by several German chambers of commerce in Düsseldorf.
Outgoing EU Internal Market Commissioner Frits Bolkestein
But this elixir is missing from Germany's research community, contended Gerlinde Drache, whose company makes filters for environmental technology. "One accepts healthy competition in sports. It's not accepted in science and learning. And that's what we need," Drache told conference participants.
Universities are a hot issue in any discussion about innovation in Germany. No country can create top international universities and at the same time cling to 19th century structures, stressed Hermann Lübbert, a professor in Bochum and the CEO of biotech and pharmaceutical firm Biofrontera.
"The fact that we don't have any private universities doesn't allow universities to just try out different things as a private university would: to concentrate on certain fields, to increase tuition fees and to finance themselves entirely differently than a public university can," Lübbert said. "One should really consider simply privatizing a few big universities."
Excellent research is possible in Germany without private universities, Lübbert said, but it's not a given at every institute of higher learning. Instead of insisting on Germany's traditional -- and, according to Lübbert, obsolete -- system which combines research with learning, studies could concentrate on core competencies. Important research would then only be done at top universities, which would be better equipped and able to more easily put their developments on the market.
Germany has lost its position as a leader in pharmaceuticals
Lübbert used pharmaceuticals as an example. Twenty years ago, Germany was widely viewed as the "world's pharmacy." Now, however, it's no longer one of the top developers of medication.
Not a panacea for all ills
But it's a different story in other fields. German mechanical engineering continues to stand its ground against the competition and regularly produces top exports. The frequent argument that elite American universities, such as the Massachusetts Institute of Technology (MIT), are far superior to Germany's universities doesn't necessarily hold water in this area.
"When I look at colleagues in my field, they have a fraction of the equipment that we have in Aachen," said Günther Schuh, a professor at Aachen's prestigious institute of technology. "If you gave an MIT production engineer the choice, he would always go to Germany."
Germany has been able to reatain its reputation for excellent engineering
But Schuh was critical of the German mechanical engineering industry, which he said had shifted too much production to Eastern Europe and China to avoid paying higher German wages. He blamed Germany's collective bargaining system that leaves it to management and trade unions to negotiation wages for entire sectors, not just for individual companies.
Changing collective bargaining
Schuh recommended that management dissolve its side of the negotiations so that unions wouldn't have anyone to negotiate with. Alternatively, he suggested, the two parties could accept a third negotiating partner representing unemployed people.
"Our two bargaining parties don't seem to be impressed by the growing numbers of unemployed people," Schuh said. "But they should be. They should look more frequently at the faces of the poor people who, through no fault of their own, have lost their jobs. Then they would find other solutions."
Union members on strike in Germany
Schuh said the result would be a sort of basic salary. Employees would work more or less according to the number of contracts and earn more or less according to their company's success.
The prerequisites for innovation -- private universities, separating research and learning, company-based wage agreements and variable salaries and work hours -- indeed reflected Bolkestein's call for a return to economically liberal values.
Günther Schuh, however, stressed that the state should not withdraw entirely.
"Give the companies space, let them run onto the market. And don't run them off the path with restrictions and sugar-coated subsidies," Schuh advised. "Politicians think that they're better than the market. And there, I have the same opinion as Bolkestein: We don't need that."