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Address by Federal President Horst Köhler at the opening of the Club of Rome conference on "Policy Changes in the Next Phase of Globalisation"

Bundespräsident Horst Köhler am Konferenztisch Berlin, 6 November 2007 Photo: Guido Bergmann, Presse- und Informationsamt der Bundesregierung (BPA) © Photo: Guido Bergmann, Presse- und Informationsamt der Bundesregierung (BPA)

"Learning to share"

May I first bid you all a very warm welcome to Schloss Bellevue!

There have been many illustrious gatherings within these walls. However, a meeting of the world-renowned Club of Rome is a first even for Schloss Bellevue.

Incidentally, we owe today's venue to the last ice age. For some 20,000 years ago this entire region lay under huge glaciers. When the ice melted, so much sand remained that Brandenburg used to be called "the sandpit of the Holy Roman Empire of the German Nation". The Prussian King Frederick William I (1688 - 1740) had mulberry trees planted here in the Tiergarten in an attempt to breed silkworms and produce silk. However, the trees did not flourish in the sandy ground, so the silkworms had nothing to eat, the project was stopped and the land was reallocated for development.

Silk "made in Prussia": the idea behind this enterprise was the mercantilist concept that a country should produce as many products as possible, import as little as possible and poach trade sectors from other states. For foreign trade was considered to be a zero-sum game in which one party gained what the other lost.

David Ricardo (1772 - 1823) actually put paid to this idea a long time ago. He showed that it is more advantageous for an economy not to produce everything itself but, rather, to specialize in those areas in which it has a clear edge over its competitors. And it is more profitable for a country to open up to international trade because it is anything but a zero-sum game. On the contrary, it stimulates growth and makes the cake bigger for all nations involved. The dramatic growth of the global economy during the last twenty, thirty years provides empirical proof that David Ricardo was right.

Nevertheless - no, in fact for that very reason - it is more important than ever that we do not leave globalization to its own devices or allow the rich industrialized nations to have their own way. For globalization should benefit everyone. I could also say: it must benefit every-one because otherwise it will tear the world apart.
We need a regulatory and development strategy for the entire planet.

I want to name four reasons which I believe are the most important.

First of all, it is true that world trade and competition direct a country's factors of production into areas where they can be used to generate the greatest possible profit. And it is also true that few other countries have benefited as much from globalization as Germany. However, the change this has brought has developed at a pace and with a force last witnessed during the first Industrial Revolution. We in the industrialized nations know that the structural change from outdated to new technologies, products and working methods is the lifeblood of any economy. But here as anywhere else the maxim is: the dose makes the poison. If the pressure to reform becomes too much as a result of successful competitors, the need for greater efficiency or changing consumer demands, this leads to changes and upheaval which can trigger fears of losing one's livelihood and great uncertainty, even among the middle classes. Many people in the West see how suc-cessful emerging economies have become in the export sector, how successful the winners of globalization have been in dramatically increasing their assets and, what is more, they often cannot understand the structural problems of their own country's companies. All of this makes them fear for their jobs and their standard of living. In the Western democracies this has led to a new discussion about social justice and it has presented governments with a twofold challenge. I call it the education challenge. Firstly, this education challenge is about convincing people that the mercantilist view does not hold true because in reality the cake is bigger for everyone thanks to globalization. It is bigger for people in the West, who benefit from cheap imports and a strong export industry, as well as for hundreds of millions of people around the world who have managed to work their way out of extreme poverty thanks to globalization. The second part of this education challenge is recognizing and remembering that in the knowledge society education is the key to answering the questions posed by Ricardo: what can we do to create more added value vis-à-vis others? What should we focus on? The answer is good ideas, intelligent products, as well as quality which meets the highest standards. All of this presupposes a top-notch education system. That is why we Germans are beginning to realize and take to heart once more that ensuring everyone has access to a good education is the sine qua non. And, of course, that is true across the board.

A key question regarding the fair distribution of wealth which in-dustrialized nations have to answer is: how can we create additional sources of income for employees whose working lives are subject to ever more change and flux, whose salaries are no longer increasing as much as they used to but who, after all, have contributed towards their companies' rapidly rising profits and investment? I believe the answer is to give employees a greater stake in their companies, and in their profits.

I am convinced that the peoples of the world are capable of shaping globalization in such a way that it benefits everyone. The level of productive resources is such that it is possible to ensure that adequate health and safety standards in the workplace apply and that people earn more than starvation wages everywhere. And the worldwide potential for creating income and work is so great that every individual can make a living if the right balance is struck between incentives and responsibility and if we learn to share better.

Since the fall of the Berlin Wall we in Germany have said that division can only be overcome by sharing. That is a good principle for the internal development of any nation and an important tenet for relations among peoples in the emerging global community.

That brings me to the second reason why we need a development policy for the entire planet: by no means all nations are currently benefiting from international trade. This is due to various factors. Some have pulled up the drawbridge and will therefore remain poor. Others have nothing with which to trade, neither natural resources nor sought-after products. And yet others are suffering from corrupt rulers and incompetent governments.

All of these countries deserve the respect and assistance of those which are better off. This assistance is not purely altruistic for it helps to prevent migration caused by poverty and hunger as well as armed conflicts, which almost always affect third parties and have a destabilizing impact worldwide. History has shown us time and again what can happen when people have nothing more to lose.

However, any assistance should be linked to clear conditions, for decent government can be quantified and evaluated. It can therefore be demanded and made a prerequisite for help. Many poorer countries have long since been prepared to be judged by such standards. The New Partnership for Africa's Development (NePAD) is a good example of this. It sets the right goals, for example commitment to the rule of law and to the development of rural areas. Help in fighting poverty, injustice and violence means finally agreeing on fair economic and trade relations. And, the natural wealth of developing countries must primarily benefit their own peoples.

That brings me to the third reason for my call for a development policy for the entire planet: international rules and actions have not kept up with the rate at which our world is growing closer together. The actions of states are too often determined by ignorance and one-sided efforts to protect their own interests.

This has also allowed conflicts between ethnic groups and cul-tures to develop although what we need more than anything else is mutual respect and a dialogue based on trust.

And we should all know better by now. The world is globalized. Globalization means interdependence. And this interdependence is in-creasingly intensive. Unilateralism has had its day. Effects are linked back to their source.

A cooperative global policy is better for everyone. This can be substantiated with religion, philosophy or even game theory, as has been demonstrated by the work of Hans Küng's Global Ethic Foundation and philosophers such as Kant, Rawls and Amartya Sen. Unfortunately, however, we have not got that far in many areas, for example in the question as to how the voices of emerging economies and developing countries can be heard in the World Bank and the International Monetary Fund, or the question as to when the many subtle double standards in world trade policy will finally be abandoned. Foreign policy must be regarded as world domestic policy.
However, it is not enough to improve existing international agreements and practices; many new structures have to be put in place to ensure that the forces of change generate stability and prosperity. The natural and legitimate forum for this work is, first and foremost, the United Nations. The UN Charter, the Human Rights Covenant and the Millennium Development Goals provide a good conceptual basis for shaping globalization for the good of everyone. However, I feel that we should also draw on the Universal Declaration of Human Responsibilities formulated by the InterAction Council in this.

We are all aware that the United Nations will have to grow in order to master the challenge of devising a regulatory and development policy for the entire planet. Its actions must be more targeted, more efficient and its work should be coordinated to a much greater extent with that of the international financial and trade organizations. But the United Nations cannot be stronger than the will of its member states to work together. The debate on UN reform initiated by UN Secretary-General Kofi Annan and continued by his successor in office Ban Ki-moon will show how strong this will really is. We need quick and far-reaching progress. This will only happen if the larger states in particular have the will and strength to forge a new, cooperative brand of world politics.

I would be forced to say the following even if I hadn't been Managing Director of the International Monetary Fund: the international financial markets have become independent to a degree which should concern us. Ricardo would almost certainly approve of the speed at which the necessary capital can be mobilized around the world today for good business ideas. However, he would perhaps be troubled by the elaborate and almost virtual paths along which money is channelled nowadays. Even the banks are starting to feel a little uneasy or how else can their extreme reluctance to lend each other money recently be explained? Even central bankers and finance ministers have - and hopefully not just temporarily - begun to reassess the situation. They have to provide answers to the questions as to where the risks lie in the financial markets, who can control them and who will pay the price if that is not possible.

Today, no-one can rule out the possibility that the next crisis on the international financial markets might have an impact on the entire global economy, thus causing massive damage to the work and income of people around the globe. This raises the hitherto unanswered question of political responsibility and accountability. I hope that the International Monetary Fund will seek and find its role in this very area in the 21st century.

I have saved the most pressing argument for why humanity should finally see itself as a community of shared responsibility and act accordingly for last. To put it in a nutshell, my message is: one world - or none.

For we cannot go on like this for ever. Humanity is using up the planet as if it had a second one in reserve. We are still a long way from the principle of sustainability. At the latest when climate change hit the headlines we should all have come to our senses. If we do not reduce CO2 emissions on a massive scale then we will all pay the price of the economic fallout. However, the burden will fall disproportionately on people in the southern hemisphere despite their lower CO2 emissions. Especially in this field, therefore, industrialized nations, emerging economies and developing countries should join forces to better protect the Earth with new technologies and a strategy for the efficient use of our raw materials and energy resources. The opportunities are there for the taking.

I, at least, have learned for example that energy efficiency can be increased fivefold in the long term if the research is done. In the spring Chinese scientists told me full of pride that the President of the Chinese Academy of Science had endorsed the analyses and conclu-sions reached by the IPCC together with his colleagues from the G8 states and other major emerging economies. There is therefore a glo-bal community which can take vigorous action to contain climate change.

Unfortunately, it took a long time for the fundamental concept put forward by the Club of Rome, according to which humanity lives and works in a finite global ecosystem, to enter into the general political consciousness. No-one can take away from the Club of Rome the honour of having articulated this challenge very early on. The Limits to Growth was the title of the study which Dennis Meadows and his team presented on behalf of the Club of Rome thirty-five years ago. It has become a classic - not only in Germany - and had a considerable impact on the political landscape in many countries.

Unfortunately, such a broad impact is rare. In the years after Limits to Growth I can only recall the reports by the North-South Com-mission (1980) headed by Willy Brandt and the Global 2000 Report commissioned by US President Carter and published in 1981.

Not until recent times have there been two other examples with such an impact, both of which were awarded the Nobel Prize for Peace: Al Gore's film and writings An Inconvenient Truth and, above all, the report recently drawn up by the IPCC under the aegis of its long-serving chairman Rajendra Pachauri.

Work such as that done by the Club of Rome and the IPCC create awareness of the problem, put the arguments in favour of using the Earth's resources with care on the front-page of the newspapers and make it a topic of conversation around the dinner table. And that is where this issue belongs. For although we very much need international cooperation in research, technology and politics to protect the environment and climate, there is something we need more: we need to change our lifestyles. For this is not about dictating to our fellow citizens or even restricting our freedom. What we need is a new awareness.

The change begins in the industrialized nations with the question: does a lifestyle geared primarily to quantity really make us happy? Would a little less consumption but of better quality not actually do us good? Our quality of life does not have to suffer - on the contrary. And would it not be very satisfying to know that having less means that other people in need can have a little more and that coming generations have a future? Does this contradict economic theory? I don't think so. Didn't economics use to be a "moral science", are not many of its classical exponents also social philosophers who asked not only about quantities and prices but also about values?

There are many questions which I would like to give you, the members of the Club of Rome, on your way. I wish you fruitful consultations and I look forward to learning of the results. I'm delighted you are here today. Perhaps this meeting at Schloss Bellevue will kick off a groundbreaking process.

Let me conclude by drawing your attention to another meeting which took place in this hall and to a quotation. A few months ago, the Heads of State and Government of the Member States of the European Union gathered here to celebrate the 50th anniversary of the signing of the Treaties of Rome. They marked the start of a success story which can also inspire us to master the challenges facing nations around the world today.

As such celebrations can easily degenerate into meaningless ritual I invited Thomas Reiter, a German astronaut, to attend. He showed us photos of Earth which he had taken from the International Space Station - photos which showed our world in all its beauty and vulnerability.

This reminded me of a quote from another astronaut: Sultan bin Salman Al Saud from Saudi Arabia. After his flight into space in 1984 he said: "On the first day we all pointed to our countries. On the third or fourth day we all pointed to our continents. By the fifth day, we were aware of only one Earth."

Thank you very much.