The German economy is in its deepest recession since the founding of the Federal Republic. The government's economic stimulus programmes foresee, among other things, billions in investments in the infrastructure starting with the renovation of schools up to the expansion of the broadband network and also measures such as the scrapping grant for the replacement of older with new motor vehicles. That creates demand in the short term but leads to much more state indebtedness in the long term. Can the state stimulate private-sector investment without fiscal intervention and thus help revive the economy and promote growth without itself falling into a debt trap? The question of how economic stimulus measures can be used in order to strengthen the medium- and long-term economic growth was the topic of this Ifo Conference on "Emerging Strengthened from the Crisis: Growth Potential of Education, Innovation and ICT Infrastructure" that took place on 22 April 2009 in Berlin and that is documented in this issue.
Ludger Wößmann
In his introductory contribution, Ludger Wößmann, Ifo Institute and LMU, stressed that the sources of modern growth in the knowledge society imply particularly investments in the knowledge base of the population (education), generation and marketing of new knowledge (innovation) and communication of knowledge (ICT infrastructure). Knowledge-based macroeconomic growth has important implications for the microeconomic policies in the fields of education, innovation and ICT infrastructure. Recent research studies show that neither government spending nor thorough state regulation in all three areas have the best prospects for long-term success. More promising are general legal conditions that encourage individual initiative and stimulate private-sector investments.
Nina Czernich and Oliver Falck
In ICT infrastructure the expansion of the telecommunications networks in the 1970s and 1980s was carried out by the public sector in most OECD countries. In contrast, the current expansion of the old telecommunications network to a modern digital communications network is taking place in an environment characterised by competition in which the national regulation authorities set out the general conditions. In their contribution Nina Czernich and Oliver Falck, Ifo Institute, discuss the necessity of government regulators taking into account the technological dynamics in the expansion of the ICT infrastructure. They assess the necessity as well as the negative effects of regulations in the area of existing network components, new networks in conurbations and new networks in rural areas and discuss different types of regulation.
Lars-Hendrik Röller
Lars-Hendrik Röller, European School of Management and Technology, Berlin, discusses the impact of regulation in the telecommunications sector on investments in the ICT infrastructure of established and new network operators. New research results indicate that the intensity of regulation in an international comparison has considerable effects on the private-sector investments in the ICT infrastructure. Regulation that does not allow the established network operator to achieve sufficient profits from network investments lowers investment activity. A change in the regulation framework and German regulation practice could lead to considerable private-sector investments in new broad-band ICT infrastructure, which would both create short-term aggregate demand as well as lay the foundations in the long term for dynamic growth.
Ann-Kristin Achleitner, Jutta Allmendinger, Hariolf Grupp, Dietmar Harhoff, Patrick Llerena and Joachim Luther
Dietmar Harhoff, LMU and member of the Expert Commission for Research and Innovation, see the need for action in innovation financing and in knowledge and technology transfer. Since Germany concentrates too much on incremental and not enough on radical innovations, the taxation system should be made "more equity and innovation friendly" and the general conditions for venture capital should be improved. In technology transfer, support for public private partnerships should be expanded, the handling of innovation protection in patent law should be improved and the participation of universities in spin-off companies should be facilitated. Also in innovation policies it has become clear that the state can contribute to improving long-term growth prospects by better general conditions for business start-ups and radical innovations.
Ludger Wößmann argues that basic competences, as registered in international pupil performance tests in mathematics and natural sciences, are key factors that influence the long-term growth of national economies. This educational performance cannot be improved by more spending on education alone but by the institutional conditions of the educational system such as external examinations, school autonomy and competition, which create incentives for knowledge transfer.
Panel discussion with Roland Berger, René Obermann, Lars-Hendrik Röller, Hans-Werner Sinn, Roland Tichy
In the concluding panel discussion on the ICT infrastructure, Roland Berger, René Obermann, Lars-Hendrik Röller, Hans-Werner Sinn and Roland Tichy discussed "how investments in modern broadband networks can be facilitated". The primary question is whether and how changed regulation can stimulate economic activity and how the present investment jam in the German ICT network infrastructure can be eliminated. Many indications suggest that the state, by setting the proper framework conditions, can stimulate private investment in future technologies and itself spend less. In the opinion of the podium participants, the expansion of broadband networks requires no major additional government spending but an "intelligent regulation that stimulates the investment activities of the telecommunications companies". This would lead to more employment and an increase in productivity among the users in all sectors of the economy, and also in particular among small and medium-sized businesses.
Event
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