How much bureaucracy can the economy take?

By Michael Rothe

A spectre is haunting Germany - the spectre of bureaucracy. There is hardly an event with decision-makers from business and politics in which this monster is not discussed. A perennial topic. As early as the 19th century, Honoré de Balzac said that bureaucracy was "a gigantic mechanism operated by dwarves". But nothing works without it. The Gabler Wirtschaftslexikon emphasizes "the technical superiority over other forms of organization in complex societies": objectivity, consistency, predictability, plannability, reliability. However, it concedes that purpose and objectives "are often difficult to grasp and understand". Bureaucracy is finding it difficult to adapt to a constantly changing environment and its efficiency is declining. Researchers speak of bureaucracy burnout.

That has Saxony's Ministry of Economic Affairs (SMWA) and recently invited the public to a discussion in Radebeul. "How much bureaucracy do we need?" was the title. In view of the ongoing outrage, the response was modest, with barely 30 listeners on site and only a few more watching the live broadcast online.

Bureaucracy costs up to 43 billion euros a year

Estimates of the annual costs of monitoring, reporting and documentation obligations vary. The Normenkontrollrat - an independent body of experts based at the Federal Ministry of Justice - speaks of 17 billion, the Federal Statistical Office of 43 billion euros, around one percent of gross domestic product. According to industry figures, bureaucracy eats up 2.5 to five percent of turnover in the hospitality industry. "That's gigantic," says Reint Gropp, President of the Leibniz Institute for Economic Research Halle. It does not even record which investments are not made due to the expense.

According to a survey by the auditors of KPMG excessive bureaucracy is the biggest obstacle to investment for 61% of companies, ahead of staff shortages. And a World Bank ranking of business friendliness puts Germany in 22nd place out of 190 countries, and in 125th place for start-ups - just behind Mali.

Germany has always been rule-intensive, but the citizens used to get a lot in return, including good roads and infrastructure, says Gropp. Today, there are still countless rules, but the state no longer provides as much. That changes the perception. But why is that? "We don't manage to weigh up rules against each other and set priorities," he says, referring to building safety and monument protection, new factory construction and environmental protection, coronavirus and data protection. "If we don't weigh things up, everything is equally important and there are endless delays." Switzerland has a similar number of rules, but the bureaucracy there sees itself as a service provider that makes things possible.

And the economic researcher has a provocative thesis: "Perhaps the Germans want so much bureaucracy." They don't have to make their own decisions and take responsibility. It is easier to blame the state. Ultimately, politicians do what the majority wants.

"It is done because it has always been done that way"

Dirk Neubauer, District Administrator of Central Saxonypleads for a confidence offensive. "The state cultivates a relationship of mistrust with its citizens and is surprised that they no longer trust it," says the non-party member. There is also a lack of courage to simply do things, to make decisions that can also be wrong. Even his employees say that a lot of things are nonsense, "but they are done because they have always been done that way", says the head of an administration with 1,500 employees for 300,000 inhabitants. "It's absurd, we have to cut at least 300 people," says Neubauer. But the inviting ministry is also in a quandary: according to the job plan, the SMWA has increased its staff by almost 18 percent to 400 permanent employees since 2014. But this is not mentioned in the discussion.

According to district administrator Neubauer, a rethink is needed. He complains that opportunities are being missed when old habits are being cultivated. "If people knew where Saxony wants to go, we would have a different discussion than talking away someone who is getting stronger and stronger without any effort," he says, referring to the AfD's popularity among voters. "A clear, reliable direction could turn a lot of frustration into forward momentum" - not thinking in terms of legislative periods, but with a 20-year perspective.

Andreas Sperl, President of the Dresden Chamber of Industry and Commerce (IHK), speaks of "regulatory frenzy". There are "rooms full of files for just one approval process". A pointless regulation would result in further requirements. The reduction of reporting obligations is therefore one of the most important demands of the 90,000 IHK member companies, according to the former head of the Elbe Aircraft Works in Dresden.

Demand: More trust, sanctions for violations

"Significantly more bureaucracy has been reduced in the last two years, but the perception is different," says Saxony's Minister of Economic Affairs Martin Dulig (SPD) - and earns the shaking heads of his fellow panelists. He refers to the contradiction in the economy of wanting legal certainty and predictability, but also little effort. And Dulig calls for more objectivity instead of a feeling of being permanently nagged. He relies on digitalization, more self-declarations by companies as proof - "more trust and higher sanctions for non-compliance" - and a new management culture in which bosses encourage their employees to make decisions, but also stand behind them if they turn out to be wrong.

In March, Saxony's Interior Minister Armin Schuster (CDU) presented key points according to which the Free State wants to free cities, municipalities and districts from bureaucracy. For example, it is being examined whether to allow local authorities to deviate from obstructive state regulations for a limited period of time. On application, of course. If the procedure proves successful, it will be made permanent.

Recently presented Saxon Standards Control Council its annual report. Among other things, it recommends reducing bureaucracy by 25 percent, introducing a "one in, one out" rule for legislation, accelerating the digitalization of administration and adhering to a consultation period of six weeks for new regulations.

"What to do now" is the title of a series of discussions organized by Saxony's Ministry of Economic Affairs. To stay with the opening image of the Communist Manifesto, the economy has "nothing to lose but its chains". Or does the same apply to bureaucracy reduction as to Karl Marx's ideals: a nice but unattainable utopia?

4th attempt for less paperwork

• The traffic light coalition has promised further measures to reduce bureaucracy.
• In the first reading of the Discharge Act IV, there was also talk in the Bundestag of abolishing the obligation to hand out paper receipts for small amounts.
• According to the draft law, invoices, bank statements and payrolls only have to be kept for eight years instead of ten.
• Germans will no longer be required to register overnight stays in hotels.
• Paperless employment contracts are possible by e-mail.
• The economy is to be relieved by a total of 500 million euros.
• The Ministry of Justice is planning a further 25 measures worth 22.6 million euros.
• The thresholds for reporting capital movements are to be increased.
• Electronic information on food ingredients could also be sufficient in the future. (dpa)