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Innovation, Investment & International Open Markets One day after US President Barack Obama announced his strategy for cutting deficits and reducing debt, the Bertelsmann Foundation’s 3rd annual conference examines options for sustainable fiscal policies and job growth
Photos by Kaveh Sardari
p Bertelsmann Foundation President and CEO Gunter Thielen, Financial Times Editor Lionel Barber and Bertelsmann Foundation Executive Director Annette Heuser greet US Treasury Secretary Timothy
Geithner (left) before he opens the conference in front of a full audience (center). The Newseum’s Shelby Coffey is greeted by conference hosts Liz Mohn and Gunter Thielen (right).
The Bertelsmann Foundation’s third annual conference took place against the backdrop of rising concern about growing Western fiscal constraints and stubbornly high unemployment rates. The gathering, “Back To Work: Innovation, Investment and International Open Markets”, could hardly have been better timed. It was held on April 14, 2011 at the Newseum in Washington, DC, just one day after US President Barack Obama unveiled his proposal for a tenyear, US$4 trillion reduction in government spending and just one day before the opening of the Spring Meetings of the World Bank and the International Monetary Fund, which has expressed concern about the US fiscal position. The conference was organized, as in past years, with the support of the Foundation’s media partner, the Financial Times.
About 200 high-ranking government officials and business executives as well as representatives of the think-tank, academia and media communities attended. US Treasury Secretary Timothy Geithner opened the event with a one-on-one interview with FT Editor Lionel Barber. That was followed by a one-on-one session with Congressman Henry Waxman (D-CA) and FT US Managing Editor Gillian Tett. Other notable speakers included French Finance Minister Christine Lagarde, National Economic Council Director Gene Sperling, Singaporean Finance Minister Tharman Shanmugaratnam, Harvard University President Emeritus and former US Treasury Secretary Lawrence H Summers, Bank of Israel Governor Stanley Fischer, Citigroup Global Banking Vice Chairman Peter Orszag, JPMorgan Chase International Chairman Jacob Frenkel and World Bank Managing Director and former Nigerian Finance Minister Ngozi Okonjo-Iweala. Portions of the conference were broadcast live on C-SPAN, Bloomberg and Thomson Reuters. Other broadcast media present included CNBC, Channel News Asia and NHK. About 80 journalists were present or following the conference online. The event was livestreamed on bertelsmann-foundation.org and futurechallenges.org. The Bertelsmann Foundation’s annual spring reception, also now a tradition, was held the evening before the conference and attracted more than 400 people to Washington, DC’s National Portrait Gallery.
DCene is the Washington, DC-based Bertelsmann Foundation’s occasional internal newsletter. It’s designed to inform our colleagues in Gütersloh, Brussels and Barcelona of some of the Foundation’s North American activities. ©Copyright 2011, Bertelsmann Foundation. All rights reserved. 1101 New York Avenue, NW, Suite 901 • Washington, DC 20005 USA • Tel: +1.202.384.1980 www.bertelsmann-foundation.org
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SPECIAL CONFERENCE EDITION
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Timothy Geithner, Secretary of the Treasury, United States Mr Geithner expressed confidence that an increase in the US debt ceiling would be approved to prevent Washington from defaulting, a move that could bring about another global financial crisis. He also assured international audiences watching him live via Thomson Reuters, Bloomberg and C-SPAN that the US financial system would re-emerge with integrity and better disclosure, enforcement, constraints and risk-taking as the international standard for efficiently allocating capital to ideas.
Quotes of the Day “…we forced a dramatic restructuring in the basic finances of the United States. If you look at the firms that existed before the crisis… we – with really brutal force – took the weakest out of the system. They no longer exist…” Timothy Geithner, Secretary of the Treasury, United States
Photo by Kaveh Sardari
u For a full report on this session, go to: http://bit.ly/bf2011session1
Congressman Henry Waxman (Democrat – California) The Congressman, who immediately followed Mr Geithner on stage, agreed that the US debt ceiling would be raised. But he expressed doubt about any long-term bipartisan agreement on deficits and predicted that debate on that issue would form part of the 2012 presidential campaign. Congressman Waxman, Ranking Member of the House of Representatives Energy and Commerce Committee, also said that the US needed to develop further its own energy resources Photo by David Hills with more drilling for oil while taking steps to increase efficiency and move toward alternative sources.
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Keynote Speakers
“I have huge trust in the United States of America, let’s put it that way. I’ve read my Alexis de Tocqueville… and I have huge faith in democracy and in the democratic process.” Christine Lagarde, Minister of the Economy, Finance and Industry, France “…the whole fiscal model, particularly in Europe, and to a lesser extent in the US, needs re-making in a way that isn’t so much about marginal changes and tinkering here and there, but a fundamental re-think of the whole social contract.” Tharman Shanmugaratnam, Minister for Finance, Singapore and Chairman, IMF International Monetary and Financial Committee
u For a full report on this session, go to: http://bit.ly/bf2011session2
Christine Lagarde, Minister of the Economy, Finance and Industry, France Mrs Lagarde expressed optimism about the fiscal future of the US and Europe. She cited her trust in democracy and the democratic process, saying that after much debate responsible and accountable people will make the right decisions. As evidence of this in Europe, the Minister pointed to the European Financial Stability Facility as part of an overall European rescue package. She also cited a recent agreement on the need for an economic government with compatible and consensually agreed economic policies.
Gunter Thielen, President and CEO, Bertelsmann Foundation
Photo by Kaveh Sardari
u For a full report on this session, go to: http://bit.ly/bf2011session5
u For a full report on this session, go to: http://bit.ly/bf2011session8
“…the American public knows that there is a long-term fiscal problem in the United States. The difficulty is there is not clarity about specifically what to do to address it and willingness to bear the price of doing that.” Peter Orszag, Vice Chairman, Global Banking, Citigroup “…we know how to reward competition. We haven’t figured out how to reward collaboration.” Rahul Bhardwaj, President and CEO, Toronto Community Foundation
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Gene Sperling, Director, National Economic Council and Assistant to the President for Economic Policy Mr Sperling, whose session ended the conference, echoed the comments of earlier speakers by saying that there is in Congress a broad understanding of the need to raise the US debt ceiling. However, he was similarly optimistic – even if cautiously – about a bipartisan compromise on government spending. He spoke of previous divisions on this issue that were overcome, adding that it is necessary to be prepared for success even when prospects are uncertain.
“Around the world, the crisis has eased, but we have seen too many people who have not found their way back to work.… Economic development that excludes many millions of people is simply unsustainable. We must not allow the hope for social mobility or the pursuit of happiness to become a privilege of the few.”
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Quotes of the Day
Panel 1 - Adding Jobs to the Recovery: What Works?
“…we have about 1,000 people a week emigrating, so we are back to an awful situation. In Ireland, the unemployment has doubled in the last two years. And I saw a figure recently that 50 percent of males under 25 are now out of work. So the social crisis that is being built into the system is horrific.”
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Panels
“…a redistribution of wealth works very well.”
Photo by Kaveh Sardari
In this first panel discussion, business, government and philanthropic leaders debated options for boosting job growth as the economic recovery stabilizes. They offered opposing views on the merits of inter-governmental competition versus collaboration and the future of US deficit-reduction efforts. Some speakers repeatedly expressed concern that political gridlock in Washington is hindering business and perpetuating an unsustainable fiscal predicament that will end in catastrophe. The outlook for Ireland was similarly bleak. PANELISTS: Rahul Bhardwaj, President and CEO, Toronto Community Foundation Stephen Donnelly, Member, Irish Parliament John Engler, President, Business Roundtable Dennis Snower, President, Kiel Institute for the World Economy David Stockman, former Director, Office of Management and Budget, United States Moderator: Tom Braithwaite, Business and Politics Correspondent, Financial Times u For a full report on this session, go to: http://bit.ly/bf2011session3
Stephen Donnelly, Member, Irish Parliament “I don’t think we’re going back to work. I think we’re going back to crisis, a thundering conflagration… that will last for year after year after year…” “…we’re in an era that no one could have predicted – an era of no growth, an era of austerity… we’re in a lost decade.” David Stockman, former Director, Office of Management and Budget, United States “…we’ve reached the conclusion that governments can’t do fiscal policy…” “…the most important lesson that Germany has to offer the United States… is this idea of [a] social market economy.”
Panel 2 - Innovation and Investment: BRICs and Brains
Dennis Snower, President, Kiel Institute for the World Economy “…what we don’t have is… a recognized strategy of innovation, which doesn’t require a government investment. It just requires common sense.”
Photo by Kaveh Sardari
PANELISTS: Shirley Ann Jackson, President, Rensselaer Polytechnic Institute Carlos Ivan Simonsen Leal, President, Fundação Getulio Vargas of Brazil Gary Shapiro, President and CEO, Consumer Electronics Association Wang Huiyao, Vice Chairman, China International Economic Cooperation Society, Ministry of Commerce, China Moderator: Annette Heuser, Executive Director, Bertelsmann Foundation u For a full report on this session, go to: http://bit.ly/bf2011session4
Gary Shapiro, President and CEO, Consumer Electronics Association “…for the next 30 years, for China to develop, we have to shift… from [a] population dividend to [a] talent dividend. That’s really a challenge.” Wang Huiyao, Vice Chairman, China International Economic Cooperation Society, Ministry of Commerce, China
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US panelists spoke of their dismay at the absence of a national innovation strategy that would retain foreign talent. Speakers from Brazil and China acknowledged that their countries’ booming economies and entrepreneurial spirit is successfully luring home highly qualified, American-educated students. There was a call for reform of the American corporate-tax structure and for increasing the capital flow to innovative people and companies to retain foreign talent in the US.
“…my generation has failed essentially to do what every other generation of Americans has done, and that is to sacrifice for the next generation.”
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Quotes of the Day “…without the US economy in the center of the international financial system… the world is very different…. So in this regard, as in many others, the US is the essential nation. And so you worry.” Stanley Fischer, Governor, Bank of Israel
Photo by David Hills
“…there’s just a lack of confidence right now… in Washington’s ability to deal with and solve this [deficit] problem…”
A high degree of uncertainty about the method for measuring inflation and about the longevity of rising energy and food prices have prevented central banks from taking action against increasing inflationary concerns. At the same time, developing countries face a greater inflationary threat, partially due to higher growth rates. Overshadowing all this is the US fiscal position and the threat of political gridlock. There was general agreement that US economic health significantly influences the global economic climate, which, given current circumstances, is a cause for international concern.
Archibald Cox, Jr, Chairman, Barclays Americas
PANELISTS: Archibald Cox, Jr, Chairman, Barclays Americas Stanley Fischer, Governor, Bank of Israel Peter Orszag, Vice Chairman, Global Banking, Citigroup Daniel Tarullo, Member, Board of Governors, US Federal Reserve
Jacob Frenkel, Chairman, JPMorgan Chase International
“No country is likely to do or is expected to… take measures that are against their own interests.”
u For a full report on this session, go to: http://bit.ly/bf2011session6
“…every day you wake up [and] you don’t know what is going to hit you and what contagion is going to spread across the world.”
Panel 4 - Busted: Can We Afford Ourselves?
“…there is no shortage of [poverty] in the world. And this crisis has indeed thrown even more people into poverty.”
Moderator: Robin Harding, US Economics Editor, Financial Times
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Panel 3 - High-wire Act: Balancing Growth and Inflation
Ngozi Okonjo-Iweala, Managing Director, The World Bank and former Minister of Finance, Nigeria “For many years now the world economy has, to some extent, flown on a single American engine. Actually, it has kept going longer than I would have imagined possible…”
Photo by Kaveh Sardari
PANELISTS: Jacob Frenkel, Chairman, JPMorgan Chase International Ngozi Okonjo-Iweala, Managing Director, The World Bank and former Minister of Finance, Nigeria Tharman Shanmugaratnam, Minister for Finance, Singapore and Chairman, IMF International Monetary and Financial Committee Lawrence H Summers, President Emeritus, Harvard University, former Secretary of the Treasury, United States and former Director, National Economic Council Moderator: Bruce Stokes, Senior Transatlantic Fellow for Economics, German Marshall Fund of the United States and Contributing Editor, National Journal u For a full report on this session, go to: http://bit.ly/bf2011session7
Lawrence H Summers, President Emeritus, Harvard University, former Secretary of the Treasury, United States and former Director, National Economic Council “You cannot play chicken with the United States’ fiscal credibility. This has been established since Alexander Hamilton’s time as one of the hallmarks of the US financial regime.” Gene Sperling, Director, National Economic Council and Assistant to the President for Economic Policy
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The final panel of the day wrestled with the sustainability of the Western social contract. One speaker called for fundamental reform, saying marginal changes would not suffice for longterm fiscal health. Other panelists cautioned that a focus on the short term could undermine necessary long-term efforts. There were seemingly contradictory recommendations for increased savings in the US and increased spending on infrastructure, education, and research and development, both suggestions made to ensure sustainable, future growth. At the same time, there was a reminder not to neglect aid to poorer nations, whose problems – especially in an era of increasing food prices – could have a global spillover.
“The risks are that we’re going to cut the deficit too much in the short run and we’re not going to cut it enough in the long run.”
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Innovation, Investment & International Open Markets
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