Inspiring People. Shaping the Future.
Labor-market reform, the ongoing euro crisis and the presentation of INCRA – an international non-profit credit rating agency – are focus of the 4th annual Bertelsmann Foundation – Financial Times conference; China Daily joins as media sponsor of special session on China
Photos by David Hills
IMF Managing Director Christine Lagarde opened the conference as guest of honor at the Foundation’s spring reception.
The 2012 Bertelsmann Foundation conference on 19 April 2012 took place as the US presidential campaign began to shift into high gear. With American unemployment stubbornly hovering above eight percent, speakers and participants discussed the viability of the US economic recovery and ways for spurring job growth. Morning sessions featuring National Economic Council Director Gene Sperling, US Congressman Chris Van Hollen (D-MD), US Labor Secretary Hilda L. Solis and – for an international perspective – German Minister of Labor and Social Affairs Ursula von der Leyen were devoted to these issues. IMF Managing Director Christine Lagarde, who officially opened the conference the evening before at the Foundation’s annual spring reception, also devoted much of her
address to the importance of employment. “Jobs are really the ultimate purpose that we pursue,” she said. Afternoon sessions assumed a broader outlook as global economic trends became the main topic of debate. China Merchants Bank President and CEO Ma Weihua spoke about developments and reform in the world’s most populous country. World Bank Managing Director and former Indonesian Minister for Finance Sri Mulyani Indrawati, Johns Hopkins SAIS Professor and former International Monetary Fund First Deputy Managing Editor Anne Krueger, and Eurasia Group President Ian Bremmer were among those examining the future of large developing economies including China’s and Russia’s. The Foundation’s new concept for sovereign credit ratings, called INCRA, was officially unveiled. And a closing session, featuring European Central Bank Executive Board Member Jörg Asmussen, Canadian Finance Minister James M. Flaherty, National Bank of Poland President Marek Belka, and US Congressman Gregory W. Meeks (D-NY), concentrated on the eurozone developments and their impact worldwide.
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 2012, Bertelsmann Foundation. All rights reserved. 1101 New York Avenue, NW, Suite 901 • Washington, DC 20005 USA • Tel: +1.202.384.1980 www.bfna.org
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SPECIAL CONFERENCE EDITION
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Quotes of the Day
Christine Lagarde, Managing Director, International Monetary Fund Speaking as guest of honor at the Foundation’s spring reception held the evening prior to the conference and two days before the IMF’s spring meeting, Ms Lagarde called for a “Washington moment” that would bring the global community together to share knowledge, understanding and best practices. She said the world was at a defining point in time for countries to work together to “change the course of things”. She warned the future would not be pretty without international cooperation.
“…if I [were] to characterize the situation at the moment, I would say that it is extremely unstable.” Christine Lagarde Managing Director International Monetary Fund
Photo by Kaveh Sardari
For a full report on this session, go to: http://www.bit.ly/bfna2012reception
Gene Sperling, Director, National Economic Council and Assistant to the President for Economic Policy In a one-on-one conversation with Financial Times US Managing Editor Gillian Tett, Mr Sperling said the US economy had improved in recent months and called the recovery “fairly solid”. But he noted that much progress still lies ahead. He identified three factors hindering US growth: higher gas prices, eurozone uncertainty and an “unprecedented global supply-chain disruption” in the aftermath of the tsunami to strike Japan. Mr Sperling expressed optimism about Washington’s ability to deal with its debt and deficits, predicting a bipartisan compromise that would avoid a sequester.
“The Bertelsmann Foundation has long believed that greater Euro-American cooperation is key to solving many of our common social challenges.” Gunter Thielen President and CEO Bertelsmann Foundation “…we have a recovery that’s fairly solid.” “…I hope that the idea that one uses the threat of default as a negotiating tool in budgets died forever last summer.”
Photo by David Hills
For a full report on this session, go to: http://www.bit.ly/bfna2012session1
Gene Sperling Director, National Economic Council and Assistant to the President for Economic Policy “With respect to political gridlock and seeing it resolved in the next few months, I regret to say that I don’t see a lot of progress in the next few months. I do think there’s some hope for a coming together and reaching a compromise after the election.”
Chris Van Hollen, US Congressman (Democrat – Maryland) Contrary to Mr Sperling, the Congressman, also speaking with the Financial Times’ Gillian Tett, voiced little hope that a gridlocked Congress would soon be able to resolve the US’s fiscal challenges. The longer term, however, offers some promise of optimism, and Mr Van Hollen said legislation to boost the economy was possible following November’s presidential election. Regarding entitlements, the Congressman noted that President Obama’s landmark healthcare policy offers significant reform. Mr Van Hollen said he hoped the Supreme Court would uphold the policy.
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Keynote Speakers
Chris Van Hollen US Congressman (D-MD)
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Ma Weihua, President and CEO, China Merchants Bank In a discussion moderated by former US Trade Representative Charlene Barshefsky, Mr Ma acknowledged the China has reached a turning point and must change its development model. He emphasized the importance of shoring up the country’s domestic market to reduce a reliance on exports and to fuel growth. He noted this was already underway due to a profound generational change: Young Chinese are adopting the habits of their Western counterparts and spending more Photo by David Hills than they make. As for currencies, Mr Ma said Beijing was committed to exchange-rate reform and cited a 30 percent appreciation of the renminbi over the past seven years as evidence of this commitment.
“Chinese young people would rather spend more than they make.” Ma Weihua Presidnt and CEO China Merchants Bank
MAKING A COMEBACK SPECIAL EDITION
For a full report on this session, go to: http://www.bit.ly/bfna2012session2
“We definitely have to change our growth pattern. We must focus instead on the domestic market.... We know that the time has come to promote domestic consumption.”
For a full report on this session, go to: http://www.bit.ly/bfna2012session5 2
Quotes of the Day
Panel 1 - On The Job: Working For Reform
“…what you should not do... is understand flexibility only as hire-and-fire flexibility because [in] the long term you lose human capital.” Ursula von der Leyen Minister of Labor and Social Affairs Germany
Photo by David Hills
This premier panel discussion brought together for the first time the US Labor Secretary and her German counterpart. Each spoke of her respect and appreciation for the achievements of the other’s country. Secretary Hilda L. Solis said she was impressed by Germany’s short workingtime program, which kept its workforce employed as the financial crisis struck. Minister Ursula von der Leyen acknowledged work-life-balance efforts in the US. Together, they emphasized the importance of vocational education and matching skills taught to those employers demand.
PANELISTS: Hilda L. Solis, Secretary of Labor, United States Ursula von der Leyen, Federal Minister of Labor and Social Affairs, Germany
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Panels
“…I do look to Germany for what they were able to do in terms of keeping that workforce engaged.” Hilda L. Solis Secretary of Labor United States “…it is not a choice between austerity and growth. If you don’t have growth, you will not survive… If you don’t have growth, you can’t create serious private-sector jobs…” Thomas J. Donohue President and CEO US Chamber of Commerce
Moderator: Edward Luce, Chief US Commentator, Financial Times For a full report on this session, go to: http://www.bit.ly/bfna2012session3
“…the most dominant reason kids drop out is because they don’t know why they’re in school…. The schools have been detached from the market.”
Panel 2 - In The Know: Learning To Create Jobs
Brian Gallagher President and CEO United Way Worldwide
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PANELISTS: Sérgio Silva do Amaral, Chairman, China-Brazil Business Council and former Minister of Trade and Industry, Brazil Thomas J. Donohue, President and CEO, US Chamber of Commerce Brian Gallagher, President and CEO, United Way Worldwide Margrethe Vestager, Minister for Economic Affairs and the Interior, Denmark Moderator: Geoff Dyer, Foreign Policy Correspondent, Financial Times For a full report on this session, go to: http://www.bit.ly/bfna2012session4
“We need China, and we have to learn how to handle China…” Sérgio Silva do Amaral Chairman, China-Brazil Business Council and former Minister of Trade and Industry, Brazil “…we have a combination of easy hire, easy fire, and then a safety net so that when you get fired you don’t have to sell your house… you have the time to find a new job.” Margrethe Vestager Minister for Economic Affairs and the Interior Denmark
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A diverse group of representatives of government, business and non-profits agreed that partnerships among the three sectors were key to job growth. Brian Gallagher said his organization has had much success worldwide with public-private partnerships. The panelists also put a special emphasis on the role of education in preparing students for the working world. Minister Margrethe Vestager warned against a fiscal debate centered solely on cuts and reduced investment in education. Thomas J. Donohue argued that a choice between austerity and growth was unnecessary, citing Germany as a country that has had both. For Ambassador Sérgio Silva do Amaral, finding a way to work with China was key to his country’s – Brazil’s – prospects.
“…how can you compete with a country which has… an artificial currency… and we have an appreciated currency. How is it possible when our real interest [rate] is six, seven percent, and China’s interest rates are negative?”
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Quotes of the Day “The Chinese understand very well, as does the World Bank, that if the Chinese do not fundamentally restructure their [economy] and, probably as a consequence, big parts of their political system, they will fail.” Ian Bremmer President Eurasia Group Photo by Kaveh Sardari
Gauging the future of emerging economies is tricky business, and this session’s speakers noted the poor history of growth forecasts. This, they agreed, made it difficult to determine if the world would experience more evenly spread growth in the future. Ian Bremmer was especially cautious about any forecast for China and Russia, saying both were in need of significant political and economic reform. Anne Krueger noted that rising disposable income worldwide could lead to greater volatility.
PANELISTS: Ian Bremmer, President, Eurasia Group Sri Mulyani Indrawati, Managing Director, World Bank and former Minister of Finance, Indonesia Anne Krueger, Professor of International Economics, Johns Hopkins University School of Advanced International Studies (SAIS) and former First Deputy Managing Director, International Monetary Fund Deven Sharma, former President, Standard and Poor’s Moderator: Moisés Naím, Senior Associate, Carnegie Endowment for International Peace and Chief International Columnist, El País For a full report on this session, go to: http://www.bit.ly/bfna2012session6
Panel 4 - Presentation of “Blueprint for INCRA – An International Non-Profit Credit Rating Agency”
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Panel 3 - Balancing An Unbalanced World: Must Some Sacrifice So That Others Gain?
“…the biggest economy is [the] United States’. [If] anything happens to the United States, it will affect the whole global economy. That’s a looming problem…” Sri Mulyani Indrawati Managing Director, World Bank Former Minister of Finance, Indonesia “Every time something has gone wrong in the world... the dollar appreciates. It appreciates because, as of right now, in terms of large currencies, it is still the safest haven.” Anne Krueger Professor of International Economics, Johns Hopkins University School of Advanced International Studies (SAIS) and former First Deputy Managing Director, International Monetary Fund “We want to trigger a debate on the question of the willingness of [governments] to serve [their] debt.” Rolf Langhammer Vice President Kiel Institute for the World Economy
Moderator: Annette Heuser, Executive Director, Bertelsmann Foundation
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For a full report on this session, go to: http://www.bit.ly/bfna2012session7
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“…what you have done [with INCRA] is perhaps the most significant intellectual step since the crisis of 2008…. I want to congratulate… the Foundation for taking a major step in opening up a new way towards greater stability of the world economy.”
Photo by David Hills
The 2012 conference was the setting for the official unveiling of the Foundation’s report on establishing an alternative model for sovereign credit ratings. The INCRA concept is meant to be a “challenge to the current system”, according to Annette Heuser. INCRA would base its analyses on forward-looking indicators that have been developed by the Foundation’s Transformation Index and Sustainable Governance Indicators. The organizational structure would work to prevent conflicts of interest with countries it rates. Professor Langhammer described INCRA as an attempt “to trigger public debate on… the willingness of [governments] to serve [their] debt”.
PANELISTS: Rolf Langhammer, Vice-President, Kiel Institute for the World Economy Vincent Truglia, Managing Director of Global Economic Research, Granite Springs Asset Management and former Managing Director, Moody’s
Steve Young Global Executive Director Caux Round Table (participant)
Quotes of the Day “…we are still in a very dangerous situation. Europe… is fragile… the banking system is woefully undercapitalized in Europe… the firewall that is being constructed so far is not adequately funded… by the eurozone countries.” “…the best economic policy for a country is a sound fiscal foundation…”
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Panel 5 - Give Us Some Credit: Kick-Starting Economic Growth
James M. Flaherty Minister of Finance, Canada Photo by Kaveh Sardari
Concern about a festering euro crisis dominated this session as Minister James M. Flaherty expressed unease about Europe’s continued fragile state and its undercapitalized banks. Jörg Asmussen responded with an assurance that the Europeans have done what was needed. He called on Europe’s partners around the world to increase their contributions to the IMF and establish a global firewall. Marek Belka also admitted he was worried about a “gray fog” drifting from the west towards his country and its neighbors. Congressman Gregory W. Meeks conceded that the US recovery was threatened by developments across the Atlantic.
PANELISTS:
“…the Europeans have done their work on the firewall…. The Europeans have done their part, and now it’s up to our global partners, and this includes Canada and many other friends, [to] increase the IMF resources in order to build a global firewall…”
Jörg Asmussen, Executive Board Member, European Central Bank and former Deputy Finance Minister, Germany Marek Belka, President, National Bank of Poland and former Prime Minister, Poland James M. Flaherty, Minister of Finance, Canada Gregory W. Meeks, US Congressman (D-NY)
Jörg Asmussen Executive Board Member, European Central Bank and former Deputy Finance Minister, Germany
Moderator: Robin Harding, US Economics Editor, Financial Times
“…the recovery will be long and tepid. So we have to brace ourselves for a protracted period of slower growth.”
For a full report on this session, go to: http://www.bit.ly/bfna2012session8
Marek Belka President, National Bank of Poland and former Prime Minister, Poland
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