The Challenge

Decaying infrastructure and a lack of investment in education and innovation expose the weaknesses of an overly market-driven paradigm


Two thirds of German companies in 2019 complain about inadequate public infrastructure as the constraint on their inability to increase production. One reason is that for many years the state has invested too little in roads, railways, schools and universities, digital services and the healthcare system. The authorities have also placed too little emphasis on the measures needed to create of a climate-friendly infrastructure, such as a network of charging points to accelerate the shift to electromobility

The Kreditanstalt für Wiederaufbau estimates that the shortfall of investment in the maintenance of bridges, the sewage systems and other local infrastructure now comes to almost €160 billion in the  municipalities alone (Krone and Scheller, 2018). German public investment has stagnated for many years at or just over two percent of gross domestic product (GDP). In the 1970s, it had reached around 4 percent. Meanwhile, public bodies that have been planning for some time to increase investment now lack the necessary capacity within their construction and planning departments or enough appropriately qualified personnel/staff to initiate and manage investment.

What is true of Germany applies to the majority of the rich countries in the West. The US as well as in the UK, Italy and France are suffering from dramatic deficits in their infrastructure. Even more alarming is the situation in those eurozone countries that were especially affected by the euro crisis. In Spain and Ireland, the share of GDP accounted for by public investment dropped by 2.3 and 2.8 percentage points respectively between 2007 and 2015 (OECD, 2017). At 1.7% of GDP Ireland had the EU’s lowest rate of public investment in 2015.



Read Part 2: Redefining the role of the state: What went wrong?

Read Part 3: Redefining the role of the state: New Economy in Progress


  • Alesina, A., & Ardagna, S. (1998). Tales of fiscal adjustment. Economic policy, 13(27), 488-545.
  • Alesina, A., & Ardagna, S. (2010). Large changes in fiscal policy: taxes versus spending. Tax policy and the economy, 24(1), 35-68.
  • Barro, Robert J. (1979). "On the Determination of the Public Debt". Journal of Political Economy. 87 (5): 940–971.
  • Krebs, T., & Scheffel, M. (2016). Quantifizierung der gesamtwirtschaftlichen und fiskalischen Effekte ausgewählter Infrastruktur-und Bildungsinvestitionen in Deutschland (No. 16-13). Working Paper Series.
  • Krone, E., & Scheller, H. (2018). KfW-Kommunalpanel 2018. Hg. v. KfW Bankengruppe. KfW Bankengruppe. Frankfurt am Main.
  • Mazzucato, M. (2015). The entrepreneurial state: Debunking public vs. private sector myths (Vol. 1). Anthem Press.
  • Reagan, R. (1981). Inaugural Address. Available at
  • Statistisches Bundesamt. (2019). Volkswirtschaftliche Gesamtrechnungen – Arbeitsunterlage Investitionen. Wiesbaden.
  • Thatcher, M. (1987). Interview for Woman's Own ("no such thing as society"). Available at
  • Turner, A. (2015, November). The case for monetary finance–An essentially political issue. In 16th Jacques Polak Annual Research Conference (pp. 5-6).

We use cookies to provide you with the best possible service. When you continue browsing the site, you consent to the use of cookies. More info.