MIL OSI – Source: Bundesministerium der Finanzen –
Headline: Speech by Dr. Wolfgang Schäuble, German Federal Minister of Finance, at the B20 Conference on 1 December 2016 in Berlin
Today marks the start of the German Presidency of the G20. We are taking over from China, which has done a great job during its own presidency, for which we are very grateful. But we are taking over in difficult times. Globalization and digitalization mean that we are more connected and more dependent upon each other today than at any other time in our history. From a policymaker’s point of view, this means that regulatory decisions taken in one country often have immediate and direct consequences for policies in another country.
One of the central political challenges of the twenty-first century has been and remains how to find some way of balancing the sometimes diverging, certainly legitimate interests of the various actors. How do we optimize international cooperation? The G20 has proven to be a good platform for this so far.
But the need to balance the opportunities and risks presented by globalization remains. We will only be able to achieve this – in a world of rapid change, with ever-increasing technological advances and ever-more mobile capital – by increasing and improving our coordination.
Global challenges require global solutions. We were well aware of this fact when we first founded the G20 at the turn of the century – the inaugural meeting was also held here in Berlin, by the way. Back then, we set it up in response to the financial crisis in Asia. During the global economic and financial crisis, the G20 then became the most important and the most effective forum of global economic policy coordination.
The world has certainly not gotten any easier since then. We cannot rewind the clock and reverse globalization, despite what some might think. But we can shape it.
Globalization has lifted hundreds of millions out of poverty and given them the opportunity to take control of their own lives. And yet many feel left behind. There is a growing feeling of injustice worldwide. Many see not the benefits of globalization, but a growing gap between rich and poor, between the haves and the have-nots, between the elite and the rest. If we do nothing to change this, we can expect a rise in populist parties and demagogues, more distrust of policymakers and business leaders, an increase in nationalism and protectionism, and a rise in instability around the world, with all its negative effects for sustainable growth. We are seeing it already in some parts of the world.
So what do we do to prevent this? How do we keep societies from breaking down? How do we address the shortcomings of globalization? I am convinced that we can find the answers within the G20. As the most comprehensive instrument of global governance, we have to.
We have to find a way to address the challenges of globalization, particularly those relating to poverty, and especially in Africa. If not, we will see a further destabilization in many regions. Further millions will flee from poverty, hunger, war and persecution. This is in no-one’s interests.
We have to find a way to make global growth more sustainable, more stable and more inclusive. And this is our shared responsibility – we, as political leaders of the world’s leading industrial nations, and you, as business leaders. If, together, we cannot shape globalization to serve humanity, then I ask you: who can?
To this end, I am very encouraged by the focus of your B20 Presidency on Resilience, Responsibility and Responsiveness. Indeed, this focus fits in well with the priorities we have set ourselves, together with the Bundesbank, for the financial track of our own presidency: Resilience, Investment in Africa and Digitalization.
We are still feeling the effects of the last financial crisis, and we cannot exclude the possibility of further turbulence. It is therefore crucial that we increase the resilience of our economies, and build buffers to absorb any future shocks. While it is true that we have made good progress to date, there is still much to do. Global debt – public and private – has risen to historical highs. We need to gradually reduce levels of indebtedness and stop relying on growth fueled by credit financed consumption. Ultra-loose monetary policy in many regions presents a threat to financial stability and may raise the risk of yet another crisis. And the ability of many countries to respond to any future crisis is severely hampered by high debt levels. Interest rates close to zero and balance sheets loaded up with government paper also undermine their scope to act.
During our presidency, we will propose measures to tackle this problem. Specifically, we will: propose principles to enhance the resilience of G20 members and the global economy, encourage actions to strengthen resilience in our country growth strategies, and ensure an effective and consistent implementation of agreed policy measures and regulatory reforms.
Shaping globalization also means dealing with poverty. We intend to address this by improving investment opportunities, especially in Africa. Together with our African partners, we want to encourage private investment and investment in infrastructure.
This should help make private investment in Africa more attractive by making it more secure, and reducing the barriers to investment. We call this a “Compact with Africa”. The objective is to boost growth and jobs, promote inclusion and give people economic perspectives at home so that they do not have to leave their home country to seek subsistence elsewhere.
We want to improve the information on existing initiatives with Africa and make the environment more conducive to private and infrastructure investment. The focus on Africa is intended to improve the framework conditions. This should encourage investors because the risks involved will become clearer and smaller. I am confident that this can make a real difference. And I would invite all of you here to keep an open mind to the business opportunities on offer to you. If we are to take world poverty on, your initiative, your engagement is needed.
The third focus is on the risks and opportunities to the financial sector from digitalization. Digital innovation can improve efficiency, support growth and enhance global financial inclusion. We can reap huge benefits if we embrace the full potential of digital finance. Of course, we will also have to monitor the implications for financial stability and, where necessary, actively address these.
The portfolios we deal with in the G20 are often complex and lengthy. They cannot be achieved in a single presidency. But the formula for success can be reduced to just two words: Continuity and implementation. We will continue the good work of the Chinese Presidency. We will move forward on the work to strengthen the international financial architecture and the Global Financial Security Net. We will continue to further develop stable financial markets. And we will continue on our march towards a fairer and more transparent international system of taxation.
But all this good work counts for nothing if it is not implemented. We will not be able to regain lost trust, and make globalization something that binds us, rather than divides us, unless we lend actions to our words.
Here, the business community also has an important part to play. Let both of us, politics and industry, support each other in our efforts this year, to make globalization a force for good again, and to ensure economic growth which is more sustainable, more robust and more inclusive. Together, let both of us make our German presidencies a resounding success.
Die deutsche G20-Präsidentschaft