DCene: 2013 Bertelsmann Foundation-Financial Times Conference

Inspiring People. Shaping the Future.

SYSTEMUPGRADE TIME FOR A GLOBAL ECONOMIC RE-BOOT

Jobs, growth and innovation – and how to spur them all for stable and sustainable economic growth – are the center of debate at the 5th annual Bertelsmann FoundationFinancial Times conference; INCRA unveils its US sovereign-debt rating

Photo by Kaveh Sardari

Financial Times Assistant Editor Gillian Tett led a discussion on the eurozone crisis with Turkish Deputy Prime Minister Ali Babacan, French Finance Minister Pierre Moscovici, Swedish Finance Minister Anders Borg, and Dutch Finance Minister and Eurogroup Chairman Jeroen Dijsselbloem.

Slow economic growth in the US and stagnation in Europe formed the background to the 2013 Bertelsmann Foundation conference, held on April 18 in Washington, DC. Discussion delved into paths away from the lackluster performance and towards global economic renewal.

The conference title reflected the main question facing speakers and participants: Do we need a thorough overhaul of the international economic system to end the malaise?

Morning sessions concentrated on the American situation––the political gridlock that continues to paralyze fiscal policymaking and, subsequently, cast a shadow over growth. US congressional representatives Keith Ellison (D-MN) and Colleen Hanabusa (D-HI) were among those sparring with former Minnesota Governor and Republican presidential contender Tim Pawlenty and former HP Chairman and CEO Carly Fiorina over legislative prescriptions.

The inability to reach consensus––in the halls of Congress as well as on the conference stage––laid the basis for INCRA’s AA+ rating of US sovereign debt, officially unveiled during the day.

Giving a global perspective, former US Federal Reserve Chairman Paul Volcker bemoaned the absence of coordination on financial issues that extend well beyond American borders, a concern echoed by World Bank Chief Economist Kaushik Basu in one of the afternoon panels.

Colombian Finance Minister Mauricio Cárdenas Santamaría took countries to task for narrowmindedly placing domestic considerations ahead of international concerns. Optimism, however, was the keyword for Deputy US Trade Representative Miriam Sapiro, who saw great potential for a swift agreement on a Transatlantic Trade and Investment Partnership (TTIP).

A final panel brought the eurozone into view with a stellar line-up of three finance ministers and a deputy prime minister. France’s Pierre Moscovici, The Netherlands’ Jeroen Dijsselbloem and Sweden’s Anders Borg all defended recent action to stabilize the common currency and argued that much progress had been made, although more work lay ahead. Turkey’s Ali Babacan agreed, urging greater effort towards a fiscal union with strong enforcement mechanisms to enforce sensible rules that had previously been ignored.

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 2013, Bertelsmann Foundation. All rights reserved.

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Special Conference Edition

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“…what we really need to be doing is… major investment in our infrastructure, in jobs, in education and workforce development. And that’s exactly what we are not doing through the sequester process.”

Photo by Kaveh Sardari

Keith Ellison, US Congressman (D-MN)

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Quotes of the Day

Panel 1: State of the Economy: A New US Operating System?

General agreement on an improving US economic performance was overshadowed by longer term concerns about debt levels and insufficient investment in infrastructure, education and job training, in part due to the impact of sequestration. Political gridlock was an additional concern, with a Congress paralyzed on most issues seen as evidence of a government that hinders rather than encourages growth and recovery. Added to the toxic mix is a lack of international coordination on crucial financial issues and fiscal policy. Reflecting the debate among Washington officials, stark differences among panelists emerged over the ability to reduce taxes and regulation while simultaneously boosting investment where it is sorely needed.

Panelists: Keith Ellison, US Congressman (D-MN) Carly Fiorina, Chairman, Good360 and former Chairman and CEO, HP Steven Rattner, Chairman, Willett Advisors and former Counselor and Lead Auto Advisor to the US Treasury Secretary Paul Volcker, former Chairman of the Board of Governors, US Federal Reserve Moderator: Robin Harding, US Economics Editor, Financial Times

A full report on this session is available at: www.bfna.org/document/state-of-the-economy-a-new-us-operating-system

The video of this session is available at: www.bfna.org/video/state-of-the-economy-a-new-u-s-operating-system

“ …it’s very hard to get a coherent program when people don’t trust [the government] and what [it’s] doing.”

Paul Volcker, former Chairman of the Board of Governors, US Federal Reserve “…if we can’t get the public to have any confidence, whether it’s in Congress… in themselves and the system… we’re not going to get any kind of growth in the economy.”

Colleen Hanabusa, US Congresswoman (D-HI) “…there’s a correlation between freedom and innovation. And freedom is not just [about] external threats… and national security. It’s also [about] every increment where government comes in…”

Tim Pawlenty, President and CEO, The Financial Services Roundtable and former Governor, Minnesota “…you can’t cut taxes, cut regulation and cut government engagement and then strengthen our educational system, strengthen our workforce training, strengthen our infrastructure.”

Photo by Kaveh Sardari

Panel 2: Awakening From Sleep Mode: Jobs, Growth and Innovation

Panelists: Colleen Hanabusa, US Congresswoman (D-HI) Tim Pawlenty, President and CEO, The Financial Services Roundtable and former Governor, Minnesota James Quigley, Senior Partner, Deloitte LLP and former CEO, Deloitte Touche Tohmatsu Ltd Robert Romasco, President, AARP Moderator: Ed Luce, Chief Washington Commentator, Financial Times

A full report on this session is available at: www.bfna.org/document/awakening-from-sleep-mode-jobs-growth-and-innovation

The video of this session is available at: www.bfna.org/video/awakening-from-sleep-mode-jobs-growth-and-innovation

“You can cut taxes, you can cut regulation, and you can invest in education and infrastructure and all these things.”

Carly Fiorina, Chairman, Good360 and former Chairman and CEO, HP “…twenty percent of us are doing OK. One percent of us are doing really well. Eighty percent of us are worried about how to get to Friday.”

Robert Romasco, President, AARP

S Y S T E M U P G R A D E : spe c i a l ed i t i o n

Concern about US legislative gridlock also permeated this discussion on options for boosting employment, encouraging sustainable economic growth and spurring innovation to secure the first two goals. Panelists conceded that the specter of poor governance hangs over the country, which has led to a deterioration in confidence in the American political structure. This, in turn, hampers spending and investment, and has created a vicious cycle of, at best, mediocre growth.

The degree of uncertainty in fiscal policy continues to prevent businesses and consumers from making decisions. Calls for less government regulation and better education and job skills ran up against the reality of an ossified, gerrymandered electoral system that faces little prospect of reform in the foreseeable future.

Keith Ellison, US Congressman (D-MN)

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“…the world economy is not a zero-sum game. If [the trans-Atlantic partners] would have more trade and more investment, it does not mean that [there] will be less investment and trade in another part of the world.”

Photo by Kaveh Sardari

Panel 3: A Trans-Atlantic Compact: Are We Synching?

The negotiations between the US and the European Union on a Transatlantic Trade and Investment Partnership (TTIP) have yet to begin, but great optimism for an agreement already exists. Momentum on both sides of the ocean provides a solid basis for hope that tariffs and non-tariff barriers will come down while regulatory convergence and product standardization will increase. At the same time, concerns about exclusivity were swept aside. Both panelists agreed that a TTIP would not come at a cost to others. Instead, an accord was seen as a template that could be used to increase trade and, with it, economic growth, employment and investment.

The conclusions were reflected in a recent Bertelsmann Foundation-Atlantic Council survey and report on the TTIP that was officially unveiled during the session.

Panelists:

A full report on this session is available at: www.bfna.org/document/a-trans-atlantic-compact-are-we-synching

The video of this session is available at: www.bfna.org/video/a-trans-atlantic-compact-are-we-synching

“…it’s really not either-or. We can walk and chew gum at the same time…. We can also have very strong partnerships with our European partners and our Asian partners.”

Miriam Sapiro, Deputy US Trade Representative “…domestic policies still dominate: domestic interests, domestic objectives, which are, by nature, political.”

Aart De Geus, President and CEO, Bertelsmann Foundation Miriam Sapiro, Deputy US Trade Representative Moderator: Ed Luce, Chief Washington Commentator, Financial Times

Aart De Geus, President and CEO, Bertelsmann Foundation

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Quotes of the Day

“…if there are more reserve currencies in the world, then there are fewer central banks with the prerogative to design… policies with a domestic perspective…”

Mauricio Cárdenas Santamaría, Minister of Finance and Public Credit, Colombia “…the integration of the global economy, the expansion of global trade, the development of a system of private global finance [have] fueled the rise in standards of living around the world…” “…we’re at the stage where the major countries have increasingly lost the sense of why they should be committed to global coordination, and it may take another crisis to remind them…”

Photo by David Hills

Charles Dallara, Chairman of the Americas, Partners Group

Panel 4: Another Start-up: Global Financial Governance

Panelists: Kaushik Basu, Senior Vice President and Chief Economist, World Bank Mauricio Cárdenas Santamaría, Minister of Finance and Public Credit, Colombia Charles Dallara, Chairman of the Americas, Partners Group Moderator: Robin Harding, US Economics Editor, Financial Times

A full report on this session is available at: www.bfna.org/document/another-start-up-global-financial-governance

The video of this session is available at: www.bfna.org/video/another-start-up-global-financial-governance

“…the biggest need today is coordination among the larger economies…” “…monetary and fiscal policy… are like many other things in economics: Our understanding [of them] is pretty weak.”

Kaushik Basu, Senior Vice President and Chief Economist, World Bank

S Y S T E M U P G R A D E : spe c i a l ed i t i o n

Panelists regretted the absence of international coordination in fiscal and monetary policy and the prevalence of domestic considerations in the formulation of those policies. The Bank of Japan’s monetary easing and the US’s sequestration process were cited as two recent examples of policies implemented without due regard for their global consequences. The future seems to hold little prospect for reform: A less influential G20 is not being replaced with another forceful institution, and the major countries, at least according to one speaker, are likely to need another crisis before they commit to working together for financial stability.

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“…the overall macroeconomic indicators for the US are at the AAA level. However, there are certain weaknesses within that area.”

Photo by Kaveh Sardari

Panel 5: INCRA’s US Sovereign-Debt Rating The recent failings of the US political system overshadowed slow but steady economic growth in INCRA’s determination of a AA+ rating for the country’s sovereign debt. The panel’s two analysts agreed that US economic performance was better than that of most other developed countries, but American political polarization had become an “Achilles’ heel”. Another economic shock may be needed to break through the paralysis of gridlock and implement solutions to the US’s deteriorating medium- and long-term fiscal condition—a worrisome similarity to the conclusion of the previous panel’s discussion on international financial coordination.

Panelists: Michael Mandelbaum, Christian A. Herter Professor and Director, American Foreign Policy Program, The Johns Hopkins University School of Advanced International Studies (SAIS) Vincent Truglia, International Economist and Publisher, clearandcandid.com and former Head, Sovereign Risk Unit, Moody’s Investors Service Moderator: Annette Heuser, Executive Director, Bertelsmann Foundation

A full report on this session is available at: www.bfna.org/document/incra%E2%80%99s-us-sovereign-debt-rating

The video of this session is available at: www.bfna.org/video/incras-u-s-sovereign-debt-rating

“…compared to the rest of the developed world the US is a pretty good bet.”

Vincent Truglia, International Economist and Publisher, clearandcandid.com and former Head, Sovereign Risk Unit, Moody’s Investor Service

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Quotes of the Day

“…the United States finds itself in enviable economic circumstances. But there is an Achilles’ heel…. It is American politics.”

Michael Mandelbaum, Christian A. Herter Professor and Director, American Foreign Policy Program, Johns Hopkins University SAIS “…first of all, we would very much like to be a member of the European Union…. if we have a more completed, mature eurozone, maybe sometime in the future we would like to join [that].

Ali Babacan, Deputy Prime Minister for Economic and Financial Affairs, Turkey “…the euro is a steady force for Europe….

I hope that we could join [the eurozone] before Turkey, but I also hope that Turkey could join both the European Union and the euro.”

Anders Borg, Minister for Finance, Sweden

Photo by Kaveh Sardari

Panel 6: Hotspot Eurozone: Is The Crisis Over?

“There is no more existential crisis in the eurozone. There is an economic crisis in the eurozone. There is a growth crisis in the eurozone.”

Pierre Moscovici, Minister of the Economy and Finances, France

Panelists:

“…thankfully the sense of panic has receded.”

Ali Babacan, Deputy Prime Minister for Economic and Financial Affairs, Turkey Anders Borg, Minister for Finance, Sweden Jeroen Dijsselbloem, Minister of Finance, The Netherlands and Chairman, Eurogroup Pierre Moscovici, Minister of the Economy and Finances, France Moderator: Gillian Tett, Assistant Editor and Columnist, Financial Times

Gillian Tett, Assistant Editor and Columnist, Financial Times

A full report on this session is available at: www.bfna.org/document/hotspot-eurozone-is-the-crisis-over

The video of this session is available at: http://www.bfna.org/video/hotspot-eurozone-is-the-crisis-over

S Y S T E M U P G R A D E : spe c i a l ed i t i o n

European finance ministers agreed that they had made much progress on stabilizing their common currency, in part through movement towards a banking union, but they acknowledged that more work lay ahead. One minister summarized the situation by saying the eurozone had successfully emerged from an existential crisis but remained locked in an economic and growth crisis. For those outside the currency union, however, the view was not quite as rosy. There was a call for better enforcement mechanisms to ensure adherence to sensible rules that foster growth and stability. Reassurance was given that the measures taken to resolve the recent crisis in Cyprus were unique and could not be extended throughout the eurozone.

“…less than a year ago the mention of [a] banking union never existed in the conclusions of any European Council…. we [have] made huge progress towards [a] banking union.”

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Photo by David Hills

Photo by David Hills

Photo by Kaveh Sardari

Photo by Kaveh Sardari

Photo by David Hills

Photo by David Hills

Photo by Kaveh Sardari

Photo by David Hills

Photo by Kaveh Sardari

Photo by Kaveh Sardari

Photo by Kaveh Sardari

SYSTEMUPGRADE TIME FOR A GLOBAL ECONOMIC RE-BOOT

S Y S T E M U P G R A D E : spe c i a l ed i t i o n

Photo by Kaveh Sardari

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