In the meantime, it is possible to critically question the defense policy of the last decades. The same applies to migration policy, which is no longer as unreservedly supported today as it was years ago. Also in the area of education - a topic of state policy - performance comparisons with other countries have led to disillusionment. But that's not all: Since the United States launched an economic development policy with a special focus on industry and energy, alert bells have been ringing in the EU. In Brussels, Paris and Berlin, fears are justified that the U.S. has locational advantages to offer which EU countries cannot match. In addition, the European capitals suspect that a subsidy race with the USA would end in defeat. It is by no means only the tax incentives that make the relocation of factories overseas seem possible. Also corporate taxes are significantly lower than in Germany. In contrast, the living standard in material terms is considerably higher (gross domestic product per capita about $70,000 in the U.S. and $59,000 in Germany) and consumption taxes (19% value added tax in Germany, about 10% sales tax in the U.S.) are significantly lower than those in Europe. This is even more true for the wealth balances, which are always in favor of America.
Companies with their employees' welfare in mind will not be able to completely ignore such aspects. Added to this are North America's advantages when it comes to energy. Natural gas and electricity cost significantly less between Los Angeles and New York than between Hamburg and Munich. The U. S. also has advantages in terms of political stability and predictability. Rarely mentioned but nevertheless very important in this context are the capacities of the financial markets. America dominates the standards and opens up access to equity capital for young, innovative companies in particular. It is no coincidence that the great companies of the computer and internet age were born in America. It is to be feared that similar developments will occur in the field of artificial intelligence as well.
Now that Washington wants to set priorities in the production of alternative energies, it must be feared that America's advantages will also come to bear in these fields. It must only not be forgotten that the situation is essentially the consequence of a number of significant wrong decisions in Germany and Europe.
Taking all the above together, one can see how justified the concerns about declining prosperity in real terms are in Europe; especially since Asia has been gaining market share in global economic pie for decades, the demographic development is unfavorable and the European Central Bank has abetted the real loss of prosperity through ultra-cheap money for years. Therefore, it is pressing to critically analyze cherished beliefs, as good companies must do on a regular basis. The German government would do well to study closely the latest corporate announcements on location issues by BASF, Linde, Bayer, Audi, Biontech, Siemens, etc.
Sincerely yours,
Fund managers and co-investors
Dr. Christoph Bruns Ufuk Boydak
Chicago, Frankfurt a.M. on February 28, 2022