GES 2013 | At a Glance

Global Economic Symposium (GES)

Redefining Success

Beyond homo economicus5

Designing a stable eurozone7

Reflections from Generation Y9

Transforming jobseekers into job creators 3

– 2 –

Dear Friends of the Global Economic Symposium,

Let me first thank you wholeheartedly for your invaluable contribution to this year’s GES. The feedback so far has been overwhelmingly positive. This is very encouraging and gives us every reason to pursue and expand what makes the event truly unique: its research-based and solutions-oriented nature.

Capturing what comes out of such a rich, dense and at times intricate meeting is a tall order! It therefore gives me great pleasure to share with you some short articles that capture in an impressionistic manner some of the ideas and solutions presented at this year’s GES.

Romesh Vaitilingam has distilled some insights that cut across the four issues around which this year’s program was structured. Harald Czycholl has explored what came out of discussions about the eurozone (one of the core issues at the GES 2013) and, together with Elisabeth Otto, he has reflected on this year’s theme of “redefining success.” And the Young Fellows who joined us this year have prepared an ambi-tious “call-to-action” that will pave the way for their future engagement with the GES. We are proud and delighted to have them on board!

To assist the GES in its mission—formulating research-based and solutions-oriented ideas that will help to mitigate some of today’s most intractable global issues—may I invite you to vote on our collective intelligence platform for those solutions you consider to be the best and most implementable. And if you haven’t already done so, please share your feedback, ideas and suggestions on the next steps for the GES by writing directly to me at: dennis.snower@global-economic-symposium.org

Dennis J. Snower Director, Global Economic Symposium (GES)President, Kiel Institute for the World Economy

Cultural Performance “Fascinating Malaysia” at the GES 2013

The GES team very much looks forward to welcoming you

to Kuala Lumpur on September 6–8, 2014.

Do save the date!

– 3 –

GES | 2013 At a Glance

The GES was born in a time of global crisis: The very first event, held at Plön Castle in Schleswig-Holstein in early September 2008, took place less than two weeks before the collapse of Lehman Brothers plunged the world into a deep financial crisis. Speakers warned then that we stood at the edge of a precipice. This year, at the sixth annual GES, news of the US government shutdown and potential debt default made some wonder if we were back to where we started.

Many other participants worried about an even more fundamental crisis: the scandalously high levels of unemployment among the world’s young people, particularly in North America, Europe, and the Middle East and North Africa. The longer they stay without work and the longer that any skills they have acquired become atrophied, the greater the risk of widening inequality and the greater the threat of future social problems. As US social entre-preneur John Hope Bryant, Founder, Chairman and CEO of Operation Hope, cautioned, “the most dangerous person is someone without hope.”

On the flipside, Bryant added, “aspiration is a transformational force—and it is the key to entre-preneurship, innovation and the creation of things of real value to society.” This positive theme of aspiration and innovation echoed through many GES sessions—and it neatly reflected the orga-nizers’ long-standing ambition to be a platform for new solutions to global challenges.

Education and entrepreneurshipOne constant challenge is providing education that helps young people develop the tools and attitudes they need to lead successful and fulfilling lives. Some participants were concerned that educa-tion too often fails to support a culture of entrepre-neurship—indeed, in the case of Europe, perhaps actively discouraging it. A recent survey suggests

that only a third of young Europeans want to be their own boss.

Several speakers advocated incorporating busi-ness skills into the school curriculum to encour-

age aspiration and inno-vation. John Hope Bryant demanded universal access to financial literacy so that everyone has the oppor-tunity to be an entrepre-

neur. Peter Vogel, Founder and CEO of The Entrepreneurs’ Ship, wanted every young person to attend at least one “action-driven” entrepreneur-ship class during their education. And Ndidi Nnoli-Edozien, President and Founder of the Growing Businesses Foundation in Nigeria, called for a cul-tural shift in which jobseekers want to become job creators.

Educational innovations were also discussed at a session on inequality and human capital. US jour-nalist Ted Fishman described “the Kalamazoo Promise,” a pledge by anonymous donors to fund the university education of any young person who has gone through the city’s public school system. He reported that the incentives that this commitment provides have raised participation and achievement in education at both the secondary and tertiary level—and it is having a positive impact on eco-nomic development in the region.

The Opening Plenary with John Hope Bryant (l.) and Robert Johnson, President of The Institute of New Economic Thinking

Fostering entrepreneurship: Aspiration and innovation

Transforming jobseekers into job creatorsby Romesh Vaitilingam

– 4 –

Transforming jobseekers into job creators

Professor Rachel Kranton, James B. Duke Professor of Economics at Duke University, said that since children are really the key decision-mak-ers in the acquisition of human capital, it is essen-tial to give them the right incentives. Successful programs like the Kalamazoo Promise incorporate what children and teenagers care about, what moti-vates them and how they see themselves in their social world. Investment in norms and community, along with books and computers, can address fun-damental issues of inequality.

Another session, organized by the Institute for New Economic Thinking (INET), focused spe-cifically on economics education in universities. Professor Wendy Carlin, Professor of Economis at University College London, described the INET ini-tiative she is leading that is generating new teach-ing materials to be delivered in the classroom and via the Internet. In response to growing student demands to know “how economics can be used to understand the world and make it a better place,” the initiative is exploring innovative approaches to communicating economic concepts, economic institutions and economic history to provide a con-text for current policy debates.

Lifelong learningInnovation in education can also extend beyond the school or university classroom. For exam-ple, at one of the GES book sessions, Professor Tania Singer, Director of the Department of Social Neuroscience at the Max Planck Institute for Human Cognitive and Brain Sciences in Leipzig, introduced her book on “compassion training.” Bringing together core concepts from psychologi-cal, Buddhist and evolutionary perspectives, the work describes many different forms of compas-sion practice in schools, psychotherapy, coaching and end-of-life care.

A session on workforce management explored aspiration and innovation in organizations. Marion Schick, Chief Human Resources Officer at Deutsche Telekom AG, argued that companies seeking to recruit and retain a committed work-force should focus on “lifelong learning” rather than “lifelong working.” They should seek to support their employees in the improvement and continu-

ous updating of their skills and the qualifications they need in the complex environment facing most companies.

A further INET session looked directly at how inno-vation works in organizations of all kinds. William Janeway, Senior Advisor of Warburg Pincus, emphasized the intrinsically uncertain nature of innovation: from scientific research to identifica-tion of commercial applications of new technolo-gies, progress has been achieved through “trial and error and error.” The strategic technologies that have repeatedly transformed the market economy—from railroads to the Internet—required the construction of networks whose value in use could not be known when they were first deployed. Financial speculation is one key source of funding, he pointed out, as is demand from governments.

Edward Jung, Founder and CTO of Intellectual Ventures, developed this theme, explaining how hubs of innovation are not always borne out of some intrinsic idea but are built instead on state-sponsored demand. Smart governments have backed some of the biggest and riskiest waves of innovation by guaranteeing demand. Policy-makers should focus less on building “the next Silicon Valley,” Jung concluded, and more on offer-ing “Demand Mountains” to encourage entrepre-neurs.

Asia risingThe theme of aspiration and innovation also under-pinned the questioning of the Western model of consumption-led economic growth by a number of participants. For example, at a session on “sustain-able consumption,” Chandran Nair, Founder and CEO of the Hong Kong-based Global Institute for Tomorrow, urged leaders in Asia to recognize that the challenges of population, climate change and resource constraints mean that the West’s model cannot be replicated in the world’s most populous region. With GES 2014 due to be held in Malaysia, Asia’s role in responding to the continuing global crisis will be high on the agenda.

– 5 –

GES | 2013 At a Glance

What does success actually mean? Having a well-paid job? Driving a luxury car? Living in a big house? Or has it to do with happiness and fulfill-ment? With having a family? With seeing one’s children grow up? With enjoying good times with friends? “Gross national product should no longer be the sole measure of success,” said the Buddhist monk Matthieu Ricard. “Social cohesion and inter-personal relationships are the best measure for happiness in a society.”

Values such as justice, human rights and trans-parency need to be given more weight in soci-ety, added Martti Ahtisaari, Former President of Finland and Recipient of the Nobel Prize for Peace. “These values and principles don’t cost a single cent. But implementing them does. The Scandinavian model could be seen as a role model for the world,” he said.

“Redefining success”—indeed, for such a redefini-tion of success, economists need to redefine their image of humanity as well. We all know “homo economicus,” the figurative human who is char-acterized by the infinite ability to make rational decisions. Many economic models have relied on the assumption that humans are rational and will attempt to maximize their utility for monetary as well as nonmonetary gains.

But modern behavioral economists and neuroeconomists have dem-onstrated that human beings often make predictably irrational decisions. Are human beings individualistic and selfish profit-optimizers? Or do inter-personal relationships, compassion and selflessness play a much greater role in decision-making than previ-ously thought? These almost philosophical ques-tions were discussed in several sessions at the GES.

Individuals and interdependence“Our view of the world is about to change radically,” said Professor Dennis J. Snower, President of the Kiel Institute for the World Economy (IfW). “We need a new image of humanity in economics. We are only just about to understand how comprehen-sively we are all linked and how dependent we are on one another.”

That is why economists from around the world have joined forces with psychologists, sociol-ogists, neuroscientists and other scientists to help establish a more realistic image of humanity.

“Individuals do not really act individually. We are all interlinked in many ways, often without know-ing about it,” Snower said. Economic decisions are also always dependent on the environment in which they are made.

“It seems that today we need to move to the next level of cooperation to face the many challenges that our times are confronted with,” said Matthieu Ricard. “There has long been an assumption in psychology, economy and evolution that man is essentially selfish. But during the last 20 years, new insights have increasingly pointed out that altruism can be extended beyond our kin and those who

directly benefit us and be associated with a sense of global concern and responsibility for our fellow human beings and for other species.”

Economists need to redefine their image of humanity

Beyond homo economicusby Harald Czycholl

Matthieu Ricard (l.), Dennis J. Snower and Tania Singer discussing a new image of humanity in economics

– 6 –

Beyond homo economicus

Insights from neuroscience“In contrast to the exaggerated social emphasis on individualism in Western societies, new findings in social neuroscience in contrast paint a very differ-ent picture of a strong interdependence between human beings,” stated Tania Singer, Director of the Department of Social Neuroscience at the Max Planck Institute for Human Cognitive and Brain Sciences in Leipzig. “A vast amount of evidence suggests that our brains are wired for affective res-onance with each other and that we rather auto-matically represent the mental and feeling states of others in our own brains and bodies.”

The new interdisciplinary field of contemplative neurosciences has begun to reveal evidence of plas-ticity in “prosocial” preferences and motivation. “Short-term and long-term mental training studies reveal the potential for the trainability of cognitive as well as socioaffective faculties such as attention, com-passion and prosocial motivation in adults,” said Singer.

“More specifically, secular train-ing programs aimed at enhancing compassion and pro-social motiva-tion have shown that such mental training not only increases activ-ity in brain networks related to positive affect and affiliation when exposed to distress of others, but also reduces stress-relevant hormonal responses, increased immune-markers and prosocial helping behavior towards others.”

Measuring well-beingBut how can one measure nonmonetary values like well-being? “The quest for a single well-being met-ric is a pitfall because the content of our well-being is contextual,” argued Dennis J. Snower. “Different contexts activate different motivational systems in our brains, giving us different sets of objectives.”

We are unable to measure well-being by a single measuring rod. The types of pleasure, happiness and fulfillment that are derived from material things and from nonmaterial experiences are diverse and

cannot be compared with one another through a single, time-invariant unit of measurement. Instead, we seek different types of well-being in different contexts.

But although well-being as well as success cannot be defined in terms of a single metric, defining suc-cess is nevertheless important since it can guide us in the choice of our goals in life. “A good con-ception of success will make us sensitive to goals that could make us happy if we pursue them,” explained Snower.

According to the IfW President, people in both the developed and emerging economies should

press an internal “reset” button, realigning their pursuits with their sources of durable well-being. “We must become open to the possi-bility that the relentless chase after economic growth may obstruct our awareness of where our fulfill-

ment lies,” said Snower. “For humanity to over-come many of its most severe global problems, we need to redefine what we consider to be “suc-cess”.”

Diverse discussion in a Bertelsmann Stiftung session

– 7 –

GES | 2013 At a Glance

Fourteen years after its foundation, Europe’s mon-etary union is facing the greatest challenge of its history thus far. High unemployment in a number of member countries, the need for substantial con-solidation of the budgets of many governments, and distressed banks are symp-toms of economic misalignments and policy failures that threaten not only economic prosperity in Europe, but the European project as a whole. Finding solutions to this challenge was the aim of diverse experts at the GES.

EurobondsThe investor George Soros, Founder and Chairman of Open Society Foundations, strongly advocated Eurobonds: “Structural reforms in Southern Europe are not enough to solve the problem. We need both Eurobonds and structural reforms.” The other option would be to pay trans-fers, turning the eurozone into a transfer union, which nobody really wants. But the German chan-cellor Angela Merkel has declared Eurobonds a taboo as well.

“On the economic front, the austerity policy advo-cated by Germany proved to be counterproduc-tive,” Soros said. “Every euro of reduction in the fiscal deficit caused more than a euro of reduction in GDP. In other words, the fis-cal multiplier turned out to be more than one.” Europe would need a thor-ough analysis of what has happened. “Recognizing the mistakes and identi-fying the misconcep-tions that have cre-ated the current situation is the first step; correcting them is the second. Only Germany can initiate the

process because, as the country with the highest credit standing, it is in the driver’s seat.”

Professor Dennis J. Snower, President of the Kiel Institute for the World Economy (IfW), agreed

with this analysis: “Germany has come through the crisis rela-tively unscathed and is the only country that is in the position to make proposals for the future

of Europe. The time has come for Germany to pres-ent ideas that are in the interest of all eurozone countries.”

Stefan Kooths from the IfW Forecasting Center said Eurobonds would “send the wrong signal to the capital markets.” They could lead to gargan-tuan misallocations, because the interest rate would no longer reflect the credit risk: “We need to take care not to fight the symptoms of the crisis with measures that plunged us into the crisis in the first place.”

Fiscal rulesInstead, the IfW experts argued, there is a case for fiscal rules at a national level that could be imple-mented voluntarily. The rules would have to spec-ify a target for the long-term maximum level of debt

relative to GDP. According to Kooths, this target would be constrained by the Stability and Growth Pact, which stipulates that national debt must not exceed 60% of GDP.

In addition, the rules would have to define the speed at which the long-term level of debt is to be reached and to what extent fiscal policy is allowed to engage in countercyclical policies to reflate the market through additional expenditure in times of cri-sis. The rules should be subject to a

strict enforcement mechanism, enshrined in coun-tries’ constitutions. Compliance would have to be

The next generation preparing for discussing the euro crisis with decision-makers

Eurobonds and national fiscal rules—policy measures to

overcome the crisis

Designing a stable eurozoneby Harald Czycholl and Elisabeth Otto

– 8 –

Designing a stable eurozone

reviewed at the European level and the counter-cyclicality of fiscal policy should be determined by the government and monitored by an independent expert council. To ensure enforcement of the rule, automatic corrective fiscal policy measures should be legislated and binding on a government that fails to observe the fiscal rules it has formulated.

To facilitate swift progress in fiscal adjustments, Kooths proposed establishing a European “inter-est burden equalization scheme” for a period of five years. This temporary program of international redistribution would help to smooth adjustments in the early phase of consolidation without mutualiz-ing the underlying national government debts.

In addition, the IfW proposed a unified set of stan-dards in bank regulation and supervision in the whole cur-rency area. Banks would have to be sta-bilized with “solvency-con-vertible bonds.” Systemical ly, relevant finan-cial institutions should only be able to borrow money in the form of these bonds, which would automatically turn into shares the moment they fell below the minimum capital requirements. Thus, sharehold-ers rather than the state would bear the risks.

OECD expert Eckhard Wurzel, Head of Desk for the European Union and the Euro Area at OECD, agreed that Eurobonds would not solve the cri-sis. He emphasized that Eurobonds would always be transfers, because the creditor states would accept higher interest rates to enable lower inter-est rates for debtor states. This would undermine the strength of the capital markets, the dynamics of which are essential. According to Wurzel, holis-tic structural reforms are necessary in the affected countries. This would include shutting down, restructuring or recapitalizing troubled banks. “But

holistic does not merely mean the banks. That is why fiscal rules are necessary,” Wurzel said.

The corporate viewGerman entrepreneurs criticized Europe’s single currency: “The idea of the euro to contribute to the unification of Europe has turned into the opposite,” said Heinrich Weiss, Chairman of SMS group. Peter Jungen, Chairman of Peter Jungen Holding, added: “The euro does not unite Europe. It is sepa-rating Europe and the eurozone.” The only option would be to return to the criteria defined in the Maastricht treaty. “Members that can’t meet the cri-teria should leave the club. Greece will never make it,” Jungen said.

Ana-Maria Llopis Rivas, Chair of the Spanish firm Distribuidora Internacional de Alimentación, called for more solidarity between the euro-zone countries: “We could con-struct a great continent if we would all sacrifice a little bit of our autonomy and create the United States of Europe,” she proposed.

Panelists discussing the future of central banking warned of a possible bubble and future cri-sis. “The loose monetary policy

of the central banks over the last few years was necessary because the fiscal authorities failed to take action,” said William Rhodes, Senior Advisor of Citigroup. There are crucial questions about “exit strategies,” as a continuation of the current mone-tary policy would lead to the next bubble. Andrew Sheng, President of the Hong Kong-based Fung Global Institute, worried about who will enforce discipline. He demanded a rethink: Central banks should be in charge of monetary policy, whereas ministers of finance should be responsible for fis-cal policy.

Student distilling the hard facts of the session

– 9 –

GES | 2013 At a Glance

If we continue along the same path as today, we will be facing global problems of rising complexity with depleted natural resources, increased environmen-tal crises, social inequality and economic instability. Although some challenges, such as unemployment and lack of growth, are very tangible, others have only just begun to reveal them-selves—and some of their potential implications have even longer-term time horizons.

Unless something is done today, the next genera-tion of leaders—those from Generation Y (GY), born between 1980 and 2000—will be discussing the same challenges, and most will be even more severe. Policy-makers are looking to GY to take a leadership role in identifying and implementing solutions.

Besides being the generation that will inherit the world that the GES is attempting to shape, GY is also best placed to foster the behavior changes that are needed to move to a more sustainable world. Edward Jung, Founder and CTO of Intellectual Ventures, said the younger generation has not been compartmentalized into industries and functions like previous generations. This gives us the opportunity to “take the capability to socially interact and com-

municate with each other and use it for an agent of change.”

GY was represented at the GES by 20 “GES Young Fellows,” who actively took part in discussions and

interviewed more than 25 GES participants. But participation in the GES was just a first step. While the GES publishes solutions that may not always

be welcome, they deserve to be shared and tested through implementation. The GES Young Fellows pledge to enhance the outcomes of GES in three ways.

Sharing GES insightsBoth current and future generations must inte-grate the GES insights into their daily lives. The GES Young Fellows commit to sharing GES rec-ommendations with GY through their work, blogs, speeches, and other channels.

During the GES, we did this by tweeting and blog-ging. We also asked business leaders, researchers and policy-makers to give their recommendations for how GY should deal with society’s challenges. These will be a key component of the message that the GES Young Fellows will take to the rest of GY.

First, leaders of the GES ask GY to assume respon-sibility for solving the challenges we face. In doing so, we must not be afraid of informing decision-makers of what we feel is appropriate. “The younger generation will have to repay the debts and deal with the economic legacies incurred today, thus, their voices must be heard,” said Nemat Shafik, Deputy Managing Director of the IMF.

Second, the leaders ask us to stay informed. We should not blindly trust mainstream media or received doctrines, and education for all is key to developing the skills needed to deal with soci-ety’s challenges. We also need to learn from each other. “In a world of globalized economies, one must think and go outside one’s country’s borders,

Jean-Pierre Lehmann, Founder of the Evian Group, being interviewed by a GES Young Fellow

Representatives of “Generation Y” —individuals aged 20–35—

commit to helping drive solutions

Reflections from Generation Yby the GES Young Fellows of 2013

– 10 –

Reflections from Generation Y

for example, through studying or working abroad’, said Daniel Gonzales, Program Director at AVINA.

Third, solving today’s challenges will take coordi-nated action. Therefore, we must work to coordi-nate efforts across disciplines and geographies.

Fourth, we are asked to maintain our curiosity and imagination to challenge the status quo. GES par-ticipants repeatedly emphasized this: “Your most important asset is real curiosity,” said journalist Conny Czymoch. “We need the younger gen-eration and an empowered younger generation to change our habits and our business as usual,” said Barbara Unmüßig, President of the Heinrich Böll Foundation.

Fifth, we must act on our curiosity and take risks. GES participants emphasized the importance of trial and error, particularly making mistakes so as to build resilience and unlock new ways of doing things. As John Hope Bryant, Founder, Chairman and CEO of Operation Hope, said: “Success means going from failure to failure without a loss of enthusiasm.” We should stay open towards start-ing our own businesses. “Don’t talk about prob-lems, talk about solu-tions. I very often work with Mohammed Yunus, who is promoting social business, and he says whenever I see a prob-lem, I start a business,” commented Fritz Lietsch, Founder and CEO of the ALTOP Publishing House.

Finally, passion will succeed. “Find the thing where there’s the greatest passion and enthusiasm and go all in,” said Cornelius Pietzner, CEO of Alterra Impact Finance. We must ensure that GY develops passion for solving society’s challenges. As John Bryant said, “you can’t compete with passion.”

Taking responsibility for driving solutionsEach year, the GES ends up with a list of recom-mendations for how to address society’s chal-

lenges. The GES Young Fellows commit to help-ing drive solutions by starting to build businesses around solutions, and by ensuring that suggested solutions are tracked and not forgotten.

“When you see a problem, start a business.” Adopting this simple ideology in our own back yards in Europe as well as in the developing countries could catalyze a movement of fresh innovation. Based on the combined list of solutions in the GES report, we must start developing businesses around the challenges faced and solutions suggested.

Besides the GES Young Fellows committing to reviewing their current activities and adapting these to address the solutions suggested to any extent possible, we commit to following up on the solutions suggested and reporting back on the sta-tus of these to GES 2014.

The GES Young Follows would encourage the GES to ensure that each solution is given a sponsor, who takes responsibility for pushing the solution forward to the right decision-makers and spear-heads its implementation. Young people are willing and able to drive this process with some thought leadership, advocacy and financial commitment on the part of older generations.

Challenging the GES status quoThe GES attracts exceptional thinkers with great experience, insights and sound advice. The GES challenges the status quo and values intellectual integrity, so we also see it as our duty to challenge the established GES.

Specifically, to push even further for identifying actionable solutions and ensuring true commitment and action plans, we call for a range of new formats and the inclusion of important themes during future symposia. We hope that GES 2013 was one of many relationships between the GES and the GES Young Fellows. We commit to continuing to support the GES and taking an active part in shaping and improving it.

The GES Young Fellows: G. Ryan Ansin, Laura Carolina Baer, Jonas Borchgrevink, Amisha Ghadiali, Victor Henckel von Donnersmarck, Rikke Krause, Anders Møller, Raphael Olszyna-Marzys, Pan Pan, Christopher Pruijsen, Elianna Sabbag, Anika Saigal, Marco Stephan, Dr. Peter Vogel, Kasper Worm-Petersen, Tenke Zoltani.

Fritz Lietsch moderating “The New Economy of Nature”

Sponsors

Organizer Cooperation Partner

Strategic Partners

Partners

Kiel Institute for the World Economy

Mobility Partner

Knowledge Partners

Sponsors

Power für Ihr Business

Media Partners

Associated Partners

Richard-Hallmann-Schule

Gemeinschaftsschule mit gymnasialer Oberstufe

der Gemeinde Trappenkamp in Trappenkamp

Knowledge Partners

GES 2013 | At a Glance

Kiel Institute for the World EconomyHindenburgufer 66, D-24105 KielPhone: +49(431)8814-1Telefax: +49(431)85853www.ifw-kiel.dewww.global-economic-symposium.orginfo@global-economic-symposium.org

Pictures Cover top f.l.t.r.: © christina kloodt fotografie bottom f.l.t.r.: © christina kloodt fotografie; last picture: © Landes-

hauptstadt Kiel/Insa Matzen Pages 2–10 © christina kloodt fotografie