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Challenge-driven economic policy: A new framework for Germany

Kattel, Rainer; Mazzucato, Mariana; Haverkamp, Keno; Ryan-Collins, Josh; (2020) Challenge-driven economic policy: A new framework for Germany. (Working Paper 5). UCL Institute for Innovation and Public Purpose: London, UK. Green open access

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Abstract

German government is stepping into a new era with its COVID-19 recovery support measures. It is leaving behind its ordoliberal foundations which see the role of the state as making sure policy conditions enable markets to function properly. In this view, the state should fix market failures and leave the rest to industry. Already before the pandemic, German policymakers were showing increasing appetite to go beyond market-fixing and experiment with a more overt activist state. With the handling of COVID-19, Germany has taken another step in this direction– it is now at the forefront of taking bold policy action to reshape its economy in the face of the pandemic. Yet, this paper argues Germany’s public funding of R&D supports mostly incremental advances and its financial system is largely still funding carbon lock-in and value extraction rather than transforming the economy to deal with 21st-century challenges. Germany needs to build on its recent economic policy initiatives, and successful institutions such as the KfW, and develop a bold new industrial strategy that encompasses science, technology and innovation, financial and procurement policies. The new industrial strategy is not about ‘more state’ or ‘less state’, but a different type of state. One that is able to act as an investor of first resort, catalysing new types of growth, and in so doing crowd in private sector investment and innovation which represent expectations about future growth areas. This requires a new form of collaboration between state and business – more about picking the willing than picking winners.

Type: Working / discussion paper
Title: Challenge-driven economic policy: A new framework for Germany
Open access status: An open access version is available from UCL Discovery
Publisher version: https://www.ucl.ac.uk/bartlett/public-purpose/publ...
Language: English
Additional information: This version is the version of record. For information on re-use, please refer to the publisher’s terms and conditions.
UCL classification: UCL
UCL > Provost and Vice Provost Offices > UCL BEAMS
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of the Built Environment
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of the Built Environment > Inst for Innovation and Public Purpose
URI: https://discovery-pp.ucl.ac.uk/id/eprint/10196908
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