Rede Eröffnung des 10. Deutschen Weltbankforums
Rede des Hessischen Ministerpräsidenten anlässlich der Eröffnung des 10. Deutschen Weltbankforums
„The Asian Century: Challenges in the Economic Crisis“
Messe Frankfurt, 20. November 2008
Ladies and Gentlemen!
On behalf of the Government of the State of Hessen, it is my sincere honor to welcome you to this conference. A very warm welcome to Frankfurt!
The City of Frankfurt has a long tradition as a place where people meet for trade and commerce, but also for open discussion. It is one of the oldest and largest trade fair locations of Europe. And in 1848, Frankfurt was also the place, where Germany’s first national parliament assembled.
I am very pleased that, today, such a prominent event like the 10th German World Bank Forum connects to these historic roots. By gathering people from all over the world in order to exchange ideas and form an opinion, it carries on with the open-mindedness and the traditions of Frankfurt and the State of Hessen.
Frankfurt and the area of Rhine-Main form a location, where the flows of global capital converge and make up the beating heart of our economy. This heartbeat is driven by major financial institutions, such as the European Central Bank, the German Stock Exchange, as well as hundreds of headquarters and representative offices of German and foreign banks, which are located here in Frankfurt.
What has been our strength and pride for decades, has now become a severe cause for concern. As the only German state having such an intense interconnectedness to the international financial markets, the State of Hessen is amongst the first and foremost to be affected by the current financial crisis. Not only are we spotting massive price drops at the Frankfurt stock exchange, but also many of the quarterly reports published these days by renowned banks and financial service providers have just proven to be “horrifying”.
The international financial crisis, which is in fact an escalation of the U.S. subprime crisis, threatens the global economy. It threatens large companies acting in the world market, but also start-up firms as well as small and medium enterprises, whose applications for credits are rejected by their bank. It threatens our industry – not only the automobile industry, which is another main pillar of our Hessian economy, but also many other sectors.
Indicators show a major economic downturn in many developed countries in North America and Europe. Growth rates in emerging markets of Eastern Europe and Asia are flattening from a rather high to a moderate level. Everywhere, unemployment rates may rise drastically. Thus, the international financial crisis threatens each and every citizen of our countries: their income, their retirement provisions and their future prospects of partaking in wealth. No single country will have reason to believe that it could be a safe haven along a stormy ocean’s coast. We are all going to be affected. The financial crisis is a global problem – such as climate change and many other challenges we are facing at the start of the 21st century. And this problem can only be solved together, on the foundations of multilateralism and cooperation.
That is why it is of such importance, that experts and decision-makers from many countries meet at a place like this. I truly hope you will find answers to the burning questions of our time.
Barack Obama, President-elect of the United States of America, has often referred to “Change” as a major idea of his forthcoming presidency. Regarding the outcome of Election Day, some change has already taken place. For my part, I wish Mr. Obama fortune and wisdom to cope with the many challenges that lie ahead of him – and us.
But there is much more change going on all around the globe right now. And this kind of change is not based on a distinct concept or a deliberate decision of voters. As I stand and speak, this change takes places as a consequence of various contrasting developments. What we are experiencing, is a major shift into something that will most likely result into some kind of new world order: There are scholars who say that – and the title of today’s event suggests it, too –, after centuries of European predominance and the 20th century as the “American Century”, we are now living to see the dawn of the “Asian Century”.
Those predictions do not lack plausibility. Global politics have already shifted into a multipolar system since the end of U.S.-Soviet rivalry some 20 years ago. Two Asian countries, India and Pakistan, have officially become nuclear powers. Our global system of market economies, however, remained apparently the same. “G7” became “G8”, but the leading role of the so-called triad (North America, the European Union and Japan) continued to exist – regardless the fact that former planned economies have transformed into market economies and that new players have entered the stage.
The unaltered importance of the triad and the legitimacy of “G8” summits are based on the fact that each of these nations (including the EU as a supranational entity) accounts for a considerable share of the world’s Gross Domestic Product. The sum of all G8-members stands for two thirds of global GDP.
But GDP is only one indicator – which is showing us the status quo. Economic growth rates, instead, show that emerging markets are catching up.
The importance of emerging markets as trade partners has increased significantly in recent years: As an export country, China has even outperformed the United States in 2007 and is eager to win Germany’s title as the world’s leading export nation in a not so distant future.
With the spread of individual prosperity and the access of an increasing part of world population to higher education, the amount of population itself becomes an ever more important factor: on the one hand as customers and consumers, on the other hand as workforce and creative minds. A country with 10 times the amount of inventors and engineers might have a 10 times higher chance to invent and built unique machinery that it sells to the rest of the world. Of course, the truth isn’t as simple as this – but all I want to underline is that population matters.
And the demographic gap between developed and developing countries is, in fact, evident: Out of 6.7 billion humans worldwide, 4 billion live in Asia – but only about 340 million in North America and 500 million in the European Union. Every fifth human is a Chinese, every sixth is an Indian. While population growth in Europe is stagnating, growth figures in Asia, the Middle East and Africa remain high.
Asia holds all cards in its hands – the only question is: What are the rules, by which it is going to play?
In fact, my thesis is: Some rules in world economics are going to change very fundamentally and very soon. And they will have to. Not just as a result of the rise of Asia, but owed to the fact that the current crisis has revealed an elementary lack of transparency in our global financial systems. With its growing importance, Asia will have to play an increasing role in negotiating and formulating new rules for more transparency and stability.
In the international financial crisis, large multinational enterprises have completely underestimated or miscalculated their risks. Those risks leaked from the U.S. subprime sector into other areas of the global financial markets and, finally, spilled over to the real economy. Trillions of US Dollars had to be written off – and governments were forced to intervene with official guarantees.
The obvious “mistakes” – not to mention “carelessness” or “criminal intent” – of economic decision-makers has caused the most severe economic crisis since the Great Depression 80 years ago. Our focus is now on coping with the current crisis, but we also know: We are challenged to act that future crises of such dimension shall never ever happen again.
Having this purpose in their hearts and minds – I hope –, representatives from the world’s 20 leading economies met in Washington D.C. last weekend. They agreed upon strengthening transparency and accountability of the financial markets, upon disclosure of complex financial products, upon reinforcing international cooperation, and – finally – upon reforming the international financial institutions.
All these are very promising approaches and pave the way into the right direction. Yet from my point of view, the most striking evidence that a fundamental change in world financial order has already taken place, lies in the group of participants: America, Europe and Japan have understood that this crisis is indeed a global crisis, which can only be solved by means of global multilateralism. “G8” has become “G20”.
The classic triad is at the brink of a recession: The Organization for Economic Cooperation and Development (OECD) expects that U.S. economy will shrink by (-) 0.9 percent in 2009. Japan’s economy is going to shrink by (-) 0.1 percent. The Euro zone will nearly stagnate at (+) 0.5 percent of economic growth. But all these figures are based on immense uncertainties. The only shining light in all this cloudy darkness comes from developing countries: Asia’s economies are expected to grow – slower than before the crisis, yet they will continue to grow.
Is the 21st century going to be the “Asian Century”? Honestly, I don’t know. But as the Minister-President of the State of Hessen, I truly welcome a greater emphasis of Asian countries in world economy – with all the responsibility it implies.
Our nation and our State of Hessen have very close ties to the Far East – in political terms, and in economic terms. Only a couple of weeks ago, I took part in the opening ceremony of Vietnam’s first international university: The “German Vietnamese University” in Ho-Chi-Minh City is a joint project between our countries, with the German Professor Wolf Rieck being the founding president of this institution.
Our relations to China could not be more intense, either. Hessen has developed vivid partnerships to the Chinese provinces of Hunan and Jiangxi. Many of our companies are engaged in the Chinese market. On the other side, with about 6,000 Chinese citizens and 400 Chinese companies, the area around Frankfurt hosts one of the largest Chinese communities in Germany and Europe.
I believe that Europe and Asia can both benefit from a prospering Asian continent. There is no need to fear each other’s competition – and I am quite confident that Asia is very likely to become a strong competitor; much stronger than it has been so far.
However, I do not want to conceal the fact that there is also some controversy between the European and several Asian countries, which I believe is of rather fundamental nature – and will not be resolved easily. I am talking about the role of human rights, the freedom of speech, and the relationship between individuals and the government in general. I am also talking about the role of governments in market economies, which is – not only in the course of the financial market crisis – always a source of tension. What role does the Chinese government play, for instance, in the global operations of Sovereign Wealth Funds? We know that those funds may help to stabilize the global financial system – but they could also be abused by political intention to infiltrate or affect strategic industries abroad.
These are my concerns. But I have also stated my hopes, expectations and wishes. I would like to address my cordial gratefulness to all of you for being here today. And especially to the World Bank, which has established this forum as a platform for discussion – discussion between developed countries and emerging markets, between businessmen and politicians, between Europeans, Americans and Asians.
Ladies and Gentlemen, this floor is now open for a whole day of intense discussion. Welcome to Frankfurt – and thank you very much for your attention!