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Europe Needs a DARPA

Germany needs an industrial revival of the sort it experienced in the late nineteenth century, but this will be possible only if the state offers technological backing to German companies. The US government’s successful Defense Advanced Research Projects Agency should serve as a model for Germany and Europe to follow.

MUNICH – The mood in Germany is bleak, and not just because of the country’s current economic slowdown. Long famed for its engineering know-how and high-quality industrial products, the German economy is now in danger of falling behind as software and data become increasingly crucial to future prosperity. And the recent news that US technology company Apple is now worth more than the entire DAX index of 30 leading German companies has no doubt deepened the gloom among business leaders and policymakers. If German firms don’t adapt quickly, some may struggle to survive.

New digital technologies, including the Internet of Things and artificial intelligence, could profoundly disrupt German companies’ traditional business models – especially in sectors such as machine-building, automobiles, and chemicals. Compounding the problem, German firms face increasingly stiff competition from China, which is climbing the ladder of manufacturing value-added.

To develop self-driving cars, for example, German car manufacturers such as Volkswagen will have to collaborate with software companies in Europe. Currently, Volkswagen has to work with Google or a Chinese partner, because there is no software industry of note in Germany. But tomorrow’s cars will be super-connected supercomputers on four wheels. If Germany and Europe fail to adapt fast enough, Volkswagen and other German carmakers risk facing the same fate as Nokia, which lost its dominant position in the mobile-phone market to Apple.