Land of Laptops and Lederhosen

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When a four-man company called Switch Biotech was struggling in 1997, it turned to the Bavarian government for help — and help is what it got. A state-funded investment company called Bayern Kapital gave Switch, a specialist in the treatment of skin diseases, a seed-capital matching loan of €150,000. A state-funded biotech "incubator" offered it subsidized offices and labs. And a state-funded venturecapital firm helped Switch reach other scientists. Today, the firm has 75 employees, €3 million in revenues and a new deal with Denmark's Leo Pharmaceutical to develop an anti-psoriasis drug. That early help from Bavaria, says Stefan Schulze, Switch's chief financial officer, "was definitely crucial to getting started."

No wonder 120 biotech and information-technology firms have set up in Munich since 1994, when Bavaria launched a program of subsidies for high-tech companies. Munich is now the world's fourth-largest biotech center, after Silicon Valley, Boston and London-Oxford. By just about any measure, Bavaria's so-called "Laptops and Lederhosen" program has been a resounding success. The state's jobless rate, 5.9%, is the second-lowest in Germany. And now Edmund Stoiber, Bavaria's premier since 1993, is trying to exploit this success in the race for Chancellor. According to most opinion polls, Stoiber's perceived economic competence is the main reason his party leads Gerhard Schröder's Social Democrats. Stoiber deserves substantial credit for Bavaria's high-tech incubator innovations because he used privatization proceeds to build his state's intellectual capital. But would his interventionist approach to economic stimulus prove equally successful on a national scale?

Stoiber is often described as the conservative candidate in the elections, but his support for activist government would delight a leftist. "In the United States, Stoiber would be labeled a tax-and-spend liberal," says Alfons Weichenreider, a Munich-based researcher at the University of Vienna. Horst Domdey, who heads a biotech venture-capital firm called BioM, says Stoiber's government was crucial to setting up the intellectual infrastructure that has attracted young scientists to Munich. In the mid 1990s, his government began privatizing state-owned insurance and utility firms, raising $4.5 billion for an investment fund. The money was used to set up new campuses for the Max-Planck Institutes for Biochemistry, Neurobiology and Psychiatry, as well as for three other research centers and universities, all in the Munich suburb of Martinsried. "Scientists want to be close by," says Domdey. "Once you have 10, the others will join you."

Would Stoiber's medicine cure what ails Germany? When he took office in 1993, Bavaria wasn't sick: it was already a thriving center of military, automotive, and aviation technology. And where Stoiber's Christian Social Union has had an absolute majority in Bavaria's legislature since 1962, as Chancellor he would preside over a fractured multiparty landscape and thus be less able to impose his will. The federal government has already partially privatized many state firms — Deutsche Post, Deutsche Telekom — so there would be less money for a national investment program like Bavaria's. "I don't believe it will work on the federal level," says Klaus F. Zimmermann, president of the Institute for Economic Research in Berlin. "It's much more complicated to apply this model to Germany as a whole."

In recent months, a string of bankruptcies at well-known Bavarian companies has cast a shadow over Stoiber's economic record. But unemployment is the most important issue in Germany this year. If Stoiber wins, it will be in large measure because voters want to believe that success stories like Switch Biotech can happen where they live.