Mr Federal President,
Mr Schwab,
Ladies and gentlemen,
Thank you very much for inviting me to deliver the opening address for this Forum. I know that this is a great honour for Germany, and I am pleased to be here.
The title, "The Creative Imperative", will remind many people primarily of Immanuel Kant and his "categorical imperative", which called upon his readers to determine for themselves what is human freedom. Creative imperative - this idea may sound somewhat complicated, but I think of it in these terms: In our time there is the absolute need - we can almost say compulsion - to be creative. This should in fact always be the driving force behind at least reasonable politics, if I may refer to the area for which I am responsible. But I believe that it is true today more than ever that those who succeed in the competition of ideas will be able to shape their own future, and this applies to everyone in this world.
At the moment in Germany, particularly in the run-up to the football World Cup, we talk of Germany as the land of ideas. In view of the problems facing us, first and foremost that of unemployment, some say that "ideas that are merely on paper are all very well, but ...". I feel we cannot live from ideas alone, we must show that we can then translate them into reality - wherever we are, in Germany, Europe and the world as a whole.
In the next ten years I would like to see Germany, if I can speak for my country, back among the top three in Europe in terms of growth, jobs and innovation. This is what we say and this is what we will do. I believe we can succeed, but I also say that it will be vitally important for Europe whether Germany can succeed. Translating ideas into reality sounds good, but of course it is also true, in the cold light of day, that in many fields we suffer from a self-imposed paralysis - a hurdle here, an obstacle there, we can't do this, we can't do that. In other words I have the feeling, when I speak of Germany, that we need greater latitude - to be more exact, more freedom.
Since we really want to be among the leaders in growth, employment and innovation in ten years, I go around the country repeating what is in fact an old saw: Jobs - our main problem in Germany - require growth and growth requires freedom. This means releasing brakes and removing obstacles, it means opening the windows to let in some fresh air, and seeing the opportunities created by development rather than concentrating on the risks. This is freedom with responsibility - not freedom from anything but rather freedom to take action.
This is why, when preparing this address, I thought not only of Immanuel Kant but also of one of my predecessors, the "father of the social market economy", Ludwig Erhard. In 1948 he told us: "The connection between freedom and responsibility requires regulation." In 1957, in his book "Prosperity through Competition", he wrote: "I want to prove myself by my own efforts; I want to meet the risks of life myself; I want to be responsible for my own fate. You, the State, must see to it that I shall be in a position to do so."
One's own efforts and the state as regulator - these are the two poles of the social market economy. For me these quotations from Erhard, although dating from 1948 and 1957, have not lost any of their topicality. On the contrary, they characterize a pioneering idea, which led to the creation of the most successful and most humane economic and societal order ever in my opinion, i.e. the social market economy. This means on the one hand placing trust in the responsible citizen and on the other hand the concept of social justice as the characteristic of that responsible citizen. Its philosophical foundation is the idea of freedom with responsibil¬ity, the conclusion drawn from bitter experience, exploitation, mass unemployment and war. And in Germany it was not just left as an idea but was translated into reality, leading to what we in Germany call the "Wirtschaftswunder", the economic miracle.
What is the situation today? At the moment we are battling on several fronts, for example the shockingly-high unemployment rate in Europe. Many people, precisely those who feel the hot breath of competition and are afraid of losing their jobs and prosperity, but also those afraid of not being able to take part in the development of prosperity, see globalization as a danger, a threat. They are scared.
It is true that the world has changed rapidly, a process that began with the end of the Cold War - which for us in Germany is linked to the fall of the Berlin Wall on 9 November - and which has been continued and accompanied, perhaps even caused, by the development of the Internet and the fact that today capital can travel to every corner of the globe, that information can penetrate all barriers and that therefore freedom is becoming viable. We see that the industrial countries, although comprising 20% of the world's population, use 70% of its energy. We know that over one billion people live on the equivalent of less than a dollar per day. We hear about breathtaking rates of growth in China; just recently the figure of almost 10% was mentioned. All these are signs of upheaval and show that we are living in a time of change.
Around 200 years ago in Europe the quality of life changed markedly through the transition from an agrarian to an industrial society. I think that today we are living in an age where the industrial society is changing into a knowledge-based society, that this change is already well advanced, and that this fact poses new qualitative challenges, above all the challenge of adopting new thinking.
Against this background we must - since we all depend on each other - answer one central question: What regulatory framework does our changed world need? What framework does it need to allow every individual to enjoy the fruits and benefit from the progress provided by our society and our world? This question must be answered by the industrial, emerging and developing countries. If we fail to provide a coherent answer to this question, if we fail to agree, the result will be new, severe social and other upheavals for whose consequences we will be responsible.
I do believe that the creative imperative is the correct response. We must therefore ensure that government recognizes both when it is right to intervene and when it is right to let go again. That is the task we face today. We thus have to find a balance between our own strengths and the potential and requirements of the state, just as we did in the early years of the social mar¬ket economy.
However, I believe this is a fine line to tread. Simply to continue along the same path would be shortsighted. For in my opinion the steps we have to take require the social market economy to move on. I call this a "new social market economy" - a new stage branching off in two directions - considering both the international dimension and the density of the global network as a whole.
My references to a new social market economy always fuel various discussions in Germany, my native country. People ask, "Are we now abandoning the principles of the social market economy?".
Of course we aren't. Rather, we are acknowledging that we have entered a new era in which we face the challenge of defining the form globalization takes - a challenge which politicians must confront. People's fears derive largely from a loss of confidence in government's ability to determine the effects of globalization. I am therefore convinced that government is called to shape policy even in the age of globalization.
It goes without saying that in Germany this requires us to do our homework. In other words, we have to change national policy. As the largest European economy we have to assume responsibility in Europe. Our EU Presidency will give us a specific opportunity to do so, but of course, the task is ongoing. Yet it also requires us to live up to our international responsi¬bility. Mr Schwab, you have just mentioned that Germany will hold the G8 Presidency next year, and we will also do what we can to make a difference in that role.
To understand the social market economy as a new social market economy for the 21st century I believe that we must first reorganize our political priorities from a forward-looking perspec¬tive which takes future generations into consideration.
Our most urgent priority in Germany, for instance, is to resolve our financial troubles, our budget situation. We have a demographic problem. We know that we have too few young people, and at the same time we are living at the expense of the future by constantly accruing debt. We are thus robbing subsequent generations of investment and development potential. This is morally untenable.
We have to invest in the future. In my opinion this chiefly involves investment in research and development, for innovation is the real key. The creative imperative is reflected in our level of innovation, particularly, of course, in countries with high social standards and com¬paratively good wages. We can only maintain this prosperity if we make innovation an abso¬lute priority. In Germany we have now decided specifically to meet the goal of spending three percent of gross domestic product on research and development by 2010. This is a task for government, but it is also a task for business. In turn, this requires government to grant com¬panies the conditions they need to work effectively in innovative fields. The pharmaceutical industry and the area of gene technology are only two examples. In every case the parameters set will decide whether Germany is subsequently able to offer sufficient scope for innovation.
Competition for the best minds is also at stake. This depends on how we organize our edu¬cation system and how attractive we are here. I believe that in a society like Germany the key is to improve the compatibility of career and family. It certainly involves giving precedence to small units and flexible structures. That is why in Germany, for example, we are in the process of radically reorganizing federal structures to facilitate rapid decision-making and implementation. We are concentrating on one issue which I consider to be of prime importance - the reform, or more accurately the reduction, of labour costs in the form of non-wage costs - for I believe that labour will be the deciding factor by which people will gauge our success in enabling them to achieve the level of prosperity to which they aspire.
We have to ask ourselves the question, "What will people in the future spend their money on? Where will their interests lie?" Let me cite one example to emphasize this point. I believe that the whole issue of healthcare is vitally important in this context. We therefore have to develop this area with flexibility in mind. For precisely this reason the reform of the healthcare system will be a focal point for us.
We will have to consider whether Germany's taxation system is fit enough for the future. We have said no, this area is in need of reform, particularly for enterprises. In the wake of this reform - and I am directing this particularly at those who may be toying with the idea of investing in Germany - we need above all consistency so that entrepreneurs who have to take long-term decisions can rely on what has been agreed and do not have to start from scratch every year.
Secondly, of course, we need a world which considers the question of an international competitive order. At this point I would like to express my clear support for international insti¬tutions. I believe that the selective conclusion of bilateral agreements between individual global players will not take us forward. Rather, in a global world we all have to learn to make arrangements with one another. A socialist response with a prescribed central framework of order is therefore not an option. Instead we need to consider new ways of dovetailing private and political activity. We must all devote our attention to this issue, and I think Davos is one of the best places in which to do so.
I believe that the WTO negotiations also play a major role. Commerce and free trade are one of the major prerequisites for enabling all players to participate on equal terms. In Germany, too, many people fear that free trade could disadvantage certain parties. Yet any introduction of more freedom in Germany has generally propelled the country forward. Here, too, we must overcome our fears. There has been slight progress in Hong Kong, but the talks must not end on this note. We have to break down more barriers. We must strive - I for my part intend to do what I can - to establish the WTO as a key player in international arrangements.
Here, of course, we must ensure that the developing countries have fair access to free global trade. I would like to take this opportunity to emphasize that Germany has reiterated its ear¬nest resolve to implement the UN goal of earmarking 0.7 percent of gross domestic product for development aid by 2015 in the context of the EU decisions. I believe we need to engage in strategic dialogue with emerging market economies. The world is in the throes of change in this area, and as Europeans we have an obligation to drive it forward.
We need to coordinate environmental protection and social measures with the World Trade Organization, the International Monetary Fund and the World Bank. We have to pull together. Just as in the context of the social market economy social and economic justice was always part of a worthwhile society - at least, that is our experience - I believe this should also be the case in any future world order.
We need protection for intellectual property. When we talk of the creative imperative, it is of course crucial that we really succeed in protecting intellectual innovation from piracy. Moreover, I am firmly convinced that we need more regulation in this area. Germany will work to achieve this during its G8 Presidency.
We need common technical standards. I consider this another extraordinarily interesting area, because at the end of the day it also opens up markets. In Europe, with Germany paving the way, we have had extremely positive experiences with setting standards for developing mobile phones. Today we can say that this has created a position for a market leader which we have been able to fill. The question of how we should reach agreement on standards has, in my view, not yet acquired the prominence it deserves.
Naturally, we also need to determine the basic values we share. Allow me to cite the European debate on the Constitutional Treaty as an example. In my view the reason why this Treaty is so important for the European Union is because it has helped us to clarify our under¬standing of our common values in a way that transcends the individual regulations. I feel we need to continue this debate both within the transatlantic community and beyond it, throughout the international community. We will never be able to reach economic and political consensus without establishing common ethical ground. Discussion of both issues must therefore go hand in hand.
Thirdly, I believe we need new tools and mechanisms. In Germany we have grown accustomed to working with very rigid laws which have been in force for many decades. We now need to learn to become much more flexible, to search for the best way forward, to participate in benchmarking processes and to share in the experiences of others. We have to open up.
Above all, we need the energy to focus our attention on reducing bureaucracy. I have made this issue my personal priority as part of our Government's work because I believe that at pre¬sent we are wasting a considerable amount of energy in Germany by getting caught up in rules and regulations which seem to provide security. If we in Germany know that small and medium-sized companies spend between four and six per cent of their turnover on bureau¬cratic costs then it really is worthwhile taking time to consider whether it would not be better to invest this energy and this capital in people - in young people and in older employees - rather than always thinking up new rules and regulations which seem to offer security.
I believe we will not make any more progress by looking at individual regulations because each individual regulation has become a lobby for a certain group. Instead we have to learn to quantify the cost of bureaucracy and give ourselves targets on how to reduce it. In doing so, we want to take the experiences of the Dutch as well as the British into consideration. We will establish a regulatory impact unit to monitor this entire process because it is difficult for poli¬ticians to abolish something which they have created. That is generally never very successful.
We will also continue and strengthen this very process during our EU Presidency. Europe has set itself this goal and it can only achieve it with Germany; Europe can achieve this goal but there is much to be done if it is to be the most dynamic continent by 2010. I do not want to commit myself to any particular year at this point in time; I believe we still have a few prob¬lems to solve. But we must not abandon the aspiration to once again be among the innovators in the spirit of the creative imperative, to be among those who determine the pace at which the world moves forward. At any rate, I will not abandon this aspiration and, indeed, intend to promote this concept because our prosperity depends on it.
However, that also means that we have to make the Lisbon Strategy the political priority of European policy. That means that we have to do something which has just been done for the first time in the European Commission, namely to review directives which have been in force for decades and to not simply add to an existing regulation but, rather, to ask: what has to be abolished? Sometimes it is more beneficial to abolish a directive than to continue an old one or to create a new one. However, abolishing a directive is at least as difficult as drawing up new legislation. I will never tire within the European Union of promoting the principle of dis¬continuity or of the finite duration of directives. For today any directive already in the market is valid for eternity; there is no way to abolish it. That is why we have made so little progress in many areas. That has nothing to do with security. On the contrary, I am firmly convinced that Europe is creating insecurity by following this course. We will therefore use the German Presidency to make headway on this issue, thus helping us to really make something of Europe's potential.
We are therefore all faced with major tasks. At present, however, some parts of the world are developing rapidly while other parts are plagued by fears and concerns. I belong to the part of the world which was used to being at the fore. The end of the Cold War allowed us to realize dreams, and brought us sudden freedom. We then became aware that this freedom exposed us to greater competitive pressure. We have - I can say this for Germany at least - tremendous advantages: an established democracy, much experience in resolving conflicts, good social networks, ecological security. We have achieved much. It would be a great mistake not to summon the strength to regard the challenges facing us today as opportunities.
I believe we can succeed if we realize that freedom is an elementary asset for people, that freedom is not arbitrary but, rather, freedom means responsibility and that the new dimension of the social market economy can help us in a global order to find our place in the world. There will be no single problem which we can avoid anymore and that will not have either a direct or an indirect impact on us. However, that is no reason for us to feel we are out of our depth. Rather, it is, in principle, a challenge.
I said in my policy statement to the Bundestag that we will take many small steps. We are working in a grand coalition. However, I am firmly convinced that if we take these steps resolutely then we will have all the energy and opportunities to ensure that Germany lives up to its role in the world: as an engine in Europe, as a responsible member of the G8, as a nation which adheres to the principle that everyone has the same right to improve their standard of living, as a nation aware of the finiteness of resources and as a nation which finally has to succeed in a sphere I regard as a second key point alongside the unleashing of forces: Ger¬many has to say how it is going to deal with its resources and consumption of resources, for example in its energy policy.
At this point in time, we have no conclusive strategic responses and for that very reason the new German Government will draw up an energy strategy which takes into account the various sources of energy and ways of saving energy. I used to be Minister of the Environ¬ment and saw that good technologies can also be a creative imperative for further developing the world as a whole.
Two hundred years ago, James Watt said "There is nothing more foolhardy than the act of inventing. I am 35 years old but I feel as though I've not even contributed 35 pence to the world." Watt had registered a patent two years earlier and 17 years later it was clear that the steam engine had changed the world. The age of industrialization had begun. Notwithstanding the creative imperative, we can therefore see: nothing is possible without the traditional vir¬tues of perseverance, the will to succeed, conviction, diligence, not to mention time.
I believe that today - in the first decades of the information age and the knowledge-based society - we are once more faced with the question: Will we participate? Will we manage to take part in the development of the world? Not many people are aware nowadays that it was a German, Konrad Zuse, who built the first computer, thus launching the information age. When I think of Google, Microsoft and others, without wanting to single out any individual company here, I have to admit that we have not always played an active enough role in the development that followed. It pains me to say so because we in Germany are currently cele¬brating the year of information technology and have to consider where we can use innovations to once more gain our share in the creation of wealth and of development.
I certainly feel that we made mistakes for in certain situations we did not translate ideas into action. However, we in Germany must again believe that we can succeed. And I will do all I can to ensure that the Government works to create a framework within which our country can again profit more from its ideas. Germany and Europe will make their contribution to ensure that we can say in retrospect: those were innovative years for our continent. This is not directed against others because I have observed the skills available in China, India and many other places around the world. Rather, I am saying this to demonstrate our willingness to face competition. We want to face competition because we believe that our way of managing the economy and the success of the social market economy created a humane society which was economically successful. Moreover, we must succeed in this again at global level. And
I believe that we can make a contribution to this discussion.
I would therefore like to quote Ludwig Erhard once more. I quoted him at the beginning of this speech and I would simply like to repeat what I said: "I want to prove myself by my own efforts; I want to meet the risks of life myself; I want to be responsible for my own fate. You, the State, must see to it that I shall be in a position to do so." That is the task for policy-makers - for policy-makers who believe that globalization can be shaped, policy-makers who can reassure people and give them hope, policy-makers who do not have a protectionist approach towards others but, rather, revel in the competition to find the best ideas within the scope of the creative imperative.
