In the ongoing discussion about Germany’s economic future, industrial policy is often presented as a panacea. However, the Konrad-Adenauer-Stiftung’s analysis cautions against an overly broad use of the term and advocates for a clear conceptual and substantive delineation. Accordingly, industrial policy should refer exclusively to measures that specifically promote individual companies or sectors – such as subsidies, tariffs, or regulatory requirements. General measures like infrastructure investments or tax frameworks, on the other hand, fall under structural or regulatory policy.
The analysis also emphasizes that industrial policy interventions are regularly associated with significant losses in prosperity. They lead to misallocation of resources, hinder innovation, and weaken the long-term competitiveness of the overall economy. Particularly concerning are the emergence of path dependencies and political feedback effects, which make it difficult to reverse such measures later. Companies that rely on government support also tend to become more dependent on lobbying, which can distort political decision-making.
Despite these risks, the analysis acknowledges legitimate reasons for industrial policy – such as protecting young, innovative companies from relocating abroad, ensuring strategic independence in critical raw materials or technologies, and supporting overarching goals like climate protection. In such cases, industrial policy measures should always be market-oriented, time-limited, and transparently justified.
A central argument of the analysis is the importance of competition as a discovery process: only through open competition can the best ideas, products, and business models prevail. Structural change is not a risk but a prerequisite for long-term prosperity. Government interventions that artificially preserve non-competitive structures hinder this transformation and lead to so-called “zombie companies.”
In conclusion, the analysis calls for a narrowly defined concept of industrial policy, transparent criteria for identifying economic threats, and institutionalized oversight of industrial policy measures. Industrial policy must not become a substitute for a functioning competitive order – it should remain the exception. A future-proof economic structure is not created through permanent government support, but through sound framework conditions that foster innovation and competition.
Read the entire analysis: “Industriepolitik klare Grenzen setzen – Wohlstand entsteht im Wettbewerb” here as PDF. Please note, to date the publication is only available in German.
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About this series
The series informs in a concentrated form about important positions of the Konrad-Adenauer-Stiftung on current topics. The individual issues present key findings and recommendations, offer brief analyses, explain the Foundation's further plans and name KAS contact persons.