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"I find undiscerning autarky aspirations extremely dangerous"

Researchers contextualise current developments in the Ukraine war. Part 7: Management accounting expert Professor Robert Obermaier on how the economy can protect itself against future shocks.

Prof. Dr. Robert Obermaier, Vizepräsident für Forschung an der Universität Passau

Professor Robert Obermaier

researches controlling, enterprise assessment and Industry 4.0

How can enterprises be steered through a crisis?

How can enterprises be steered through a crisis?

Professor Robert Obermaier is vice-president of research at the University of Passau and holder of the Chair of Accounting and Control. His work is concentrated on the areas of controlling, enterprise assessment, production and decision theory.

"Firstly, shocks like those triggered by the Ukraine war and the Corona epidemic essentially show us one thing: The extent to which we have gotten used to the sunny situation in our economy. For years, we have been spoiled by the circumstances. Now resilience is the order of the day.

Resilience is a company's ability to withstand in times of crisis. It is distinguished by three features.

Firstly: financial resources. They help in our response to demand-side shocks. Anyone whose revenues drop to zero overnight because they've been forced to shut up shop, for example, but who still have to pay their overheads, needs emergency funds stashed away somewhere.

Secondly: material resilience through stock holding. Inventories are essential in the event of supply-side shocks where international supply chains are disrupted or completely cut off. A case in point would be the current shortage in wire harnesses from Ukraine, which has caused some of the assembly lines in the automobile industry to shut down.

Thirdly: strategic resilience through vertical integration. In business economics we use the term vertical integration to describe the degree to which a total product is manufactured by the company itself so as to avoid any dependence on specific precursor products.

Over recent decades, these three areas have been firmly pushed into a very specific direction: The emphasis is on cutting costs. Away from inventories towards just-in-time delivery, away from vertical integration to small-structured international supply chains. But this system can quickly grind to a halt. All it takes is shortfalls at any point along the chain. For Germany's mechanical engineering industry we were able to demonstrate in our research that companies who act against this trend usually manage to successfully weather a crisis. So it's not the companies whose production is driven by absolute cost minimisation but those that have above-average vertical integration and make use of the buffering effect provided by inventories.

However, the pendulum of international networking and division of labour has long looked like it had moved past its outermost limit so that it's now swinging back - a turn of events exacerbated by the crisis.

Professor Robert Obermaier, Universität Passau

We are currently facing a situation marked by supply- and inflation-related shortages. In addition to basic foods like flour and oil, toilet paper is short in supply as well. We Germans faced a similar situation during the Corona pandemic. But that was a demand-side shock: People began to hoard and buy twice the usual amount. Production was unable to keep up and couldn't be ramped up quickly enough. What we have now is a problem on the supply side. Due to rising energy prices, manufacturers are cutting back on production. That's entirely a management decision taken because production no longer pays. This can trigger a bullwhip effect. The situation can whip itself into a frenzy, escalate, like when panicky customers rush to clear the shelves and hoard. Starting with basic materials, this can spread quickly in widely ramified supply chains.

However, the pendulum of international networking and division of labour has long looked like it had moved past its outermost limit so that it's now swinging back - a turn of events exacerbated by the crisis.

Is autarky or a self-sufficient economy something to aspire to in the future? No, quite the contrary. A quick look at economic history will explain why.

At the time of colonialism, the economy had already attained a previously unknown degree of globalisation. But this process came to an abrupt end in World War I. Germany developed a certain degree of self-sufficiency in the years between the two world wars, which gave rise to Adolf Hitler's National Socialist autarky and armament programme known as the four-year plan. The object of the exercise was to make Germany's economy self-sufficient within a period of four years and, ultimately, to put the state on a war footing with all the known consequences.

Autarky is a model of the past. It cuts off international relations and is expensive into the bargain. That's why I find undiscerning autarky aspirations extremely dangerous.

International exchange and cooperation continue to be models for the future. The goal will be to diversify the international procurement risk and keep from becoming dependent on a small number of suppliers and a small number of countries. And it will also be about retaining specific key technologies in one's own, European sphere of influence."

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Unabhängigkeitsdenkmal der Ukraine auf dem Majdan Nesaleschnosti in Kiew. Foto: Adobe Stock

Digital propaganda, Putin's view of history, fake news: All assessments by Passau researchers on the background and current developments in the Ukraine war.

Statement of the President

In a video message, President Ulrich Bartosch is outlining the University's response to the war and explains the aid initiatives and options for action the University Executive is currently exploring.

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