Globalization and the Creative Imperative

What role do policy makers have in defining the form globalization takes?

January 30, 2006

What role do policy makers have in defining the form globalization takes?

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.

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.

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.

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.

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. This change is already well advanced — and that this fact poses new qualitative challenges, above all the challenge of adopting new
thinking.

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 market economy.

However, I believe this is a fine line to tread. Simply to continue along the same path would be shortsighted. 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. 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.

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 perspective which takes future generations into consideration.

Our most urgent priority in Germany, for instance, is to resolve our financial troubles, our budgetary situation.

We also 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.

Second, of course, we need a world which considers the question of an international competitive order.

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 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.
These are the tasks for policymakers — for policymakers who believe that globalization can be shaped, policymakers 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.

Adapted from Chancellor Merkel’s Speech, "The Creative Imperative" at the World Economic Forum on January 26, 2006.To read the full speech click here