Making things better requires technological innovations: new or improved products, services and processes or methods of production.
Innovation can provide a way out of the present crisis for cities and regions (Drewe, 2010a). One may question that the environment of big cities makes the residents more innovative than residents of smaller towns (Johnson, 2010), Medium-sized towns like L. can also cope and by joining a regional network can increase their critical mass. The question is really whether cities and regions qualify as innovative environments. In practice one should reconstruct empirically the innovation process at the nitty-gritty of innovative firms: for example at the firm in L. that represents a success story in the field of innovative lighting. Innovation policies at higher national or European levels more often than not rely too much on framework conditions, financial and others, based on theoretical or hypothetical relationships between presumed enabling factors and innovation.
The crucial question is how to promote innovation.But how to define and explain innovation are questions which need to be answered properly before one can hope to manage innovations successfully (Drewe, 2010b).

Let us take a closer look at the German town of L. It is a medium-sized industrial town where a little more than half of the employment is in industry (not counting producer services), L. is endowed with a rich mix of industrial activities: aluminium processing, automobile industry, electrical and lighting, mechanical engineering, and tool manufacturing. Industry is dominated by small and medium-sized companies which, thanks to their innovativeness, jave proved to be competitive internationally. There is, for example, the success story of a family business founded in the crisis years of the thirties. It has moved from the production of lamps to the 'concept of light', applied in museums, galleries, trade fairs and exhibitions around the world.
Over the years the local economy has not been hit by any major crisis. Moreover, the employment situation has fostered the integration of foreign workers even in the absence of an active integration policy.
Recently, a network of five regions has been created, including the region of L. The partners engage in diversified projects. One of them - labeled innovation region - delas with the expansion of the economic structure. As part of this, L. has started a so-called thinking factory.

How sustainable is the 'German model'? Isn't an export-oriented economy alsways to some extent 'other-directed'? The French Coface analyzes regularly the risk per country (see: ). If we look at the strengths and weaknesses of Germany, the industrial base is indeed one of the strong points. But the dominant part of the automobile industry - both as far as production and export are concerned - is seen as a weakness. Will the strengths or the weaknesses prevail in future?
Economists cannot predict (as we have learned the hard way) which does not deter them however from eagerly extrapolating the 'recovery' curve glossing over the losses incurred during the height of the crisis.

Making things (better) German style is at best a temporary route map to be further developed in two directions:
- to sustainit, one needs to stimulate innovation
- and Europe must leave the slow lane of becoming the greater Switzerland of the 21st century (Stevens)

The German model portrays the macroeconomic landscape of the country which is in a certain sense only an abstraction: the real economy rather happens in cities and regions and, above all, in individual companies. Hence for a better understanding it is necessary to zoom in on those lower levels.

Those who emphasize that industry still matters often quote Germany as example because it seems to have resisted the economic crisis better than most other European countries.
'Because it has remained more solid with its industrial mix and has become more future proof than the Anglosaxon model which has set the fashion for the last thirty years and has looked down on Germany with pity and arrogance, Because in Germany chimneys continue smoking and conveyor belts keep on running, and because here real products are packed and not unrecognizable financial products.' (according to Schwennicke, 2011).
Germany's present growth is mainly based on export (to China). Some claim, however, that this is happening at the expense of other (their) countries thanks to a modern version of Keynes' 'beggar thy neighbor policy'. Choosing a country as role model for economic policy is not new. Take for example the Japanese (MITI) model of the eighties and nineties. OTA, the US Office of Technology Assessment (1990) has published a report entitled 'Making things better: competing in manufacturing' in praise of Japan. (Note that Philips has 'borrowed' OTA's slogan in a slightly changed way: 'to make things better'.)

Making things (better): industry still matters

'...in the last thirty years American businesses have shifted their focus from the production of goods (now done elsewhere) to the projection of brands, that is, states of mind in the consumer, and this shift finds its correlate in the production of mentalities in workers. Process becomes more important than product, and is to be optimized through management techniques...'
( Matthew B. Crawford, Shop class as soulcraft, an inquiry into the value of work)

'Invisible hand;
Mother of inflated hope'
Mistress of despair!'
(Haiku on neoclassical economics by Stephen T. Ziliak)

'Europe has become the greater Switzerland of the 21st century: comfortable, complacent and unwilling to venture abroad.'
(Philip Stevens, Europe in the slow lane)

Making things (better): industry still matters

Paul Drewe 


Recently, a growing number of publications focuses on the importance of industry, read manufacturing. This is influenced by the economic crisis and by the success of newcomers like China and India (see e.g. Le Monde, 2011). Without industry, it seems difficult to create jobs, produce economic growth or maintain one's position as an economic power.

   

Industry used to be associated with pollution, social unrest, and strenuous working conditions. Today it means making, maintaining and repairing things. Even if high tech is applied, there is, at core, a manual know how involved. This may be a far cry from 'the art of motorcycle maintenance', but to inquire into the valua of work can still be instructive (Crawford, 2009). Making, maintaining and repairing is about real things, instead of justr juggling paper, clicking on computer keyboards or creating financial bubbles.

According to official statistics, industry creates about less than a third of total employment. However, not counting producer services is to underestimate the weight of manufacturing.
'Producer services are intermediate inputs to further production activities that are sold to other firms, although households are also important consumers in some cases. They typically have a high information content and often reflect a "contracting out" of support services that could be provided in-house. Producer services comprise: business and professional services, financial services, insurance services, and real estate services (OECD).
For a deeper economic analysis of producer services  see Francois & Woerz (2007).