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Friederike Welter is considered one of the most influential German economists.
She is the head of the Institute for SME Research (IfM) in Bonn, has a professorship in Siegen and sits on various committees of the Federal Ministry of Economics and the Federal Ministry of Education and Research.
In the telephone interview, the North Rhine-Westphalian speaks about the role of German medium-sized companies, the risks and opportunities in the corona pandemic and also about a different view of Silicon Valley.
WORLD:
Ms. Welter, before we talk about the consequences of the pandemic for medium-sized businesses: How big are these medium-sized businesses in Germany and what makes them special?
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Friederike Welter:
If you look at the official statistics, in 2018 almost 58 percent of employees with social insurance were employed in small and medium-sized companies with up to 250 employees.
They accounted for 61 percent of the economy's net added value.
The Federal Office will only publish more recent data later this year.
In my opinion, the self-image of medium-sized companies is far more important than the great economic importance.
These entrepreneurs are anchored in society and in their region, and their particular strengths are cohesion and innovation.
I define medium-sized companies as meaning that management and ownership are in one hand.
The entrepreneur's sense of responsibility and values go far beyond economic activity.
WORLD:
We live in a crisis.
Aren't small and medium-sized businesses falling?
Welter:
I'm afraid so, but for the time being the consequences of the corona pandemic cannot be assessed.
One sign is that there were almost 16 percent fewer business start-ups in the first half of last year compared to the same period last year.
Due to the suspension of the filing obligation, we are not yet aware of the effect of the pandemic on the insolvency figures.
But I'm not that pessimistic.
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Many medium-sized companies have managed to adapt quickly.
A typical attitude in medium-sized businesses is to whine once, turn around and move on.
A machine builder from our region suddenly made systems for the construction of protective masks instead of his usual special machines.
Online activities have started successfully in retail and catering.
Usually the solidarity of the customers with the medium-sized companies is very high.
WORLD:
Then you don't expect a wave of bankruptcies?
Welter:
I won't be able to see that until summer at the earliest.
The middle class entered this period with a good financial cushion.
Since the financial crisis of 2008 and 2009, many medium-sized companies have been able to increase their equity ratio.
But after a year of the corona pandemic, this cushion has been used up.
I fear that among the bankruptcies there will also be some healthy companies that were previously doing well and are now failing.
After all, the pandemic is a very different crisis than the financial crisis of the time.
It is much more extensive; companies can be affected several times depending on their regional distribution.
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WORLD:
Will there be mass layoffs in the middle class?
Welter:
I am very optimistic that medium-sized companies will not be made redundant on a large scale.
Medium-sized companies have a high level of social responsibility for their employees and hold on to them for as long as possible.
Many of them absolutely want to keep their skilled workers.
Medium-sized companies do not react like public companies when it comes to staff.
Last year, the federal government received around one million jobs through short-time work benefits, as calculated by the Federal Employment Agency.
These will include many medium-sized jobs.
Friederike Welter heads the Institute for SME Research in Bonn
Source: IFM
WORLD:
Is the federal government's aid enough for SMEs to survive the crisis?
Welter:
I think a lot of it is being talked about right now.
The emergency aid is right and the stimulus packages are also helping small and medium-sized enterprises.
The problem is that politics moves in circles and has to keep providing new aid.
The pressure is great, our government has to make politics in real time.
A lot has happened in our country compared to other EU countries.
It should also not be overlooked that improvements are often necessary after reviews and objections of the EU's state aid policy and lead to delays.
From a regulatory point of view, however, we are calling for state aid to end at some point.
WORLD:
Will the pandemic change the middle class?
Welter:
It will change him, only this happens in different ways.
Structural change is accelerating in some areas, for example the retail sector with the shift to online trading.
In my opinion, we must therefore ensure that the middle class is not emaciated.
For example, I don't want to live in city centers where there are only chains of large retail companies.
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WORLD:
Hasn't medium-sized companies slept through digitization to a large extent so far?
Welter:
Many speak of a digitization gap in medium-sized companies, but I see increasing dynamism in medium-sized companies.
Before the pandemic, according to one of our studies, two thirds of medium-sized companies said they were observing digitization issues and only one third had implemented them proactively.
That is changing significantly right now.
Due to the current crisis, companies definitely see digitization as an opportunity and employees are also experiencing that their jobs are in no way at risk.
WORLD:
Do German medium-sized companies look too seldom to California in Silicon Valley to be inspired by tech companies?
Welter:
For me, these companies are not a viable model.
They are short-term oriented towards maximization and profit.
Most of these tech companies pay little or no taxes in contrast to our medium-sized companies.
As a research subject, Silicon Valley is not important.
Perhaps one percent of the entire corporate landscape sits there.
Nevertheless, 99 percent of the scientific papers deal with them.
The so-called unicorns dominate the research interest.
Personally, I think that is wrong and can only say: You are looking in the wrong direction, you are more concerned with partnerships.
WORLD:
Looking in a different direction and at countries from Eastern Europe up to Russia: Does a strong middle class like in Germany support a democracy and does the reverse also apply?
Welter:
A strong middle class supports a free orientation.
There is an indirect relationship between democracy and the middle class, because they feel responsible for their employees and show solidarity with them.
Our cooperatively oriented economic system has a long tradition.
In Russia, for example, civil society rights are being undermined at all levels.
The social aspect of work has been lost in many companies.
At the same time, it would be wrong to conclude that the lack of a middle class would be a threat to democratic structures.
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WORLD:
Business for medium-sized companies is often difficult in China.
Does the just signed investment agreement between the European Union and the giant country help?
Welter:
The agreement is important for German companies and it helps them.
For medium-sized companies, China is not only important as a sales market.
The Chinese market is very dynamic; medium-sized companies get new ideas through cooperation.
However, they should not get into a one-sided dependency and should stick to Chinese family businesses rather than state-controlled corporations.
WORLD:
Are you actually annoyed that SMEs are sometimes associated with old-fashioned ones and that start-ups dominate interest?
Welter:
Start-ups are nothing more than start-up companies, even if they are considered hip entrepreneurship.
The attraction is great, the structures are often casual and loose.
These young companies do not see themselves as medium-sized companies, even though they are.
They are creative, innovative and often have a lot of self-confidence.
If you look behind the façades, however, the differences to medium-sized companies are no longer that great.
How the German economy is getting through the Corona crisis
The German Institute for Economic Research has already lowered its forecast for the growth of the German economy significantly.
In an interview with WELT, Holger Schmieding, chief economist at Berenberg Bank, assesses the consequences of extending the lockdown.
Source: WELT / Dietmar Deffner