A World Out of Balance: A Surplus of Politics, a Deficit of Ideas
6th annual Bertelsmann Foundation-Financial Times conference focuses on steps for stronger and more inclusive global growth
WASHINGTON, DC (April 10, 2014) – The US manufacturing and energy sectors are booming, and the economy is on track for solid growth. In Europe, Greece just raised $4 billion with its first bond sale since the onset of the eurozone crisis. There are signs of recovery on both sides of the Atlantic. But the momentum is uneven as income inequality rises, political cohesion remains lacking, and geopolitical challenges place new burdens on Western societies. At the same time, the Ukraine crisis is a reminder of the swiftness with which significant changes in the political order can emerge. That reminder, coming on the centenary of the outbreak of World War I, has raised questions about a repetition of history that could lead to a breakdown of the international order.
These issues formed the core of debate and discussion at the sixth annual Bertelsmann Foundation-Financial Times conference, held on April 10, 2014, at the Andrew W Mellon Auditorium in Washington, DC. The gathering, entitled “A World Out of Balance: A Surplus of Politics, a Deficit of Ideas”, brought together high-ranking current and former Obama administration advisers and Republican Congressman Charles Boustany, Jr. with senior European and Latin American decision-makers in economy and finance, among them Italian Finance Minister Pier Carlo Padoan, Turkish Deputy Prime Minister Ali Babacan, Bank of Mexico Governor Agustín Carstens and former European Central Bank Executive Board Member and Chief Economist Jürgen Stark.
Participants agreed that political stability depends on economic growth from which broad portions of the population can benefit. But panelists’ views diverged widely on if and how this aim can be achieved.
Charles Dallara, chairman of the Americas at the Partners Group, saw the US economy “better positioned than most” to provide growth. He cited the production of tractors, generators and wind turbines as potential driving forces for a new manufacturing boom in a country whose manufacturing sector was hollowed out in previous decades. Steven Rattner, former US Treasury adviser on the restructuring of the auto industry, however, disagreed. “The manufacturing renaissance is not real,” he said, noting that the US had lost six million jobs in that sector between 2000 and 2009 but regained only 600,000 since then.
Other panelists saw the biggest potential for future growth in the developing world or in mid-tier countries such as Poland or Indonesia. Adam Posen, president of the Peterson Institute for International Economics, praised Japan’s progress in integrating women into the workforce. Henrietta Fore, CEO of the Holsman industrial group and the opening session’s only female panelist, expressed hope for a boom in female entrepreneurship worldwide.
The source of new ideas was also a focus of debate. “Innovation has slowed down,” stated Posen. He added that it remains unclear if novelties like 3D printing can spur a new wave of economic growth as the Internet did.
Rising global levels of income inequality unsettled many of the speakers. White House Council of Economic Advisers Chairman Jason Furman spoke about the Obama administration’s efforts to raise the US minimum wage and efforts to foster closer research collaboration among universities, business and government. That is a model, he noted, that “works extremely well in Germany”.
But domestic policy can have only a limited effect if global developments do not align. Panelists expressed concern about Greece’s lingering fiscal predicament, long-term European unemployment, the US Federal Reserve’s continued tapering and possible interest-rate hikes, the West’s dependence on Russian energy and the consequences of slower Chinese growth.
There was hope, however, that one international deal could help spur the growth that so many seek. Bertelsmann Foundation President and CEO Aart De Geus spoke of the potential of a Transatlantic Trade and Investment Partnership (TTIP).
A majority of Germans, however, does not support a trans-Atlantic deal that harmonizes standards for products and services. On data privacy, the poll showed that most Americans don’t even trust their own country’s standards, a fallout from the NSA scandal.
TTIP’s future, however, faces headwinds. A Bertelsmann Foundation-commissioned survey conducted by the Pew Research Center, which was officially presented at the conference, found general support for TTIP among Americans and Germans. A majority of Germans, however, does not support a trans-Atlantic deal that harmonizes standards for products and services. On data privacy, the poll showed that most Americans don’t even trust their own country’s standards, a fallout from the NSA scandal.
Despite unsettling parallels between today’s world and that of a century ago, historian Christopher Clark, author of “The Sleepwalkers: How Europe Went to War in 1914”, does not see an imminent conflagration today. He said that cooperation and communication within the EU and throughout the trans-Atlantic community are now institutionalized. He also described post-Cold War Russia as weak. In addition, in contrast to 1914, the competing powers are not in equilibrium. Clark warned, though, that Western leaders face the responsibility to react if Russia advances further into Ukraine.
“This time, [the West] hold[s] most of the cards,” Clark said. But its relative strength vis-à-vis Russia does not mean that Europe and the United States have found the right balance for their economic and geopolitical challenges.
Strengthening the trans-Atlantic alliance in the current uncertain global environment is critical. Italian Finance Minister Padoan warned that “a major crisis in Ukraine would have implications not only through trade channels… but financial channels.” Turkish Deputy Prime Minister Babacan echoed the sentiment, calling the situation potentially highly destabilizing. “What is happening in Ukraine is very, very worrying,” he said.