Responsible Growth in a Global World – Opportunities and Threats

1. Prof. Dr. Renate Schubert Responsible Growth in a Global World – Opportunities and Threats

2. Overview • What is Responsible Growth? • Globalization - Strengths/Weaknesses of Switzerland • Globalization - Threats to Responsible Growth • Globalization - Opportunities for Responsible Growth • Globalization - Challenges for Switzerland • Specific Challenges for Industry, Science and Education

3. What is Responsible Growth? • Responsible growth means that an economy is growing such that future generations and other countries/regions have similar growth opportunities • Close relation to the notion of sustainability: to satisfy the needs of today’s generation without endangering the satisfaction of future generations‘ needs

4. Some Determinants of Responsible Growth • Strong and reliable institutional framework • Well educated workforce • Efficient and flexible labor markets • Stable macroeconomic conditions • Technological innovations • Open markets

5. Some Determinants of Responsible Growth • Protection of natural resources and environment • Climate change mitigation • Development assistance • International cooperation

6. Which are the Challenges for Switzerland? – Part I • As we will see, Switzerland‘s current position is not bad • However, threats are significant and increasing • Key areas of action have to be identified

8. Globalization – Strengths of Switzerland Global comparison:Switzerland is well positioned 1) Global Competitiveness Index 2008 (World Economic Forum)  Switzerland ranked 2nd of 134 after the United States for its overall competitiveness  ranked 2nd for its sophisticated business culture and 3rd for its innovation capacity

9. Globalization – Strengths of Switzerland 2) World Competitiveness Yearbook 2008 (IMD Lausanne) Switzerland ranked 4 of 55 after the United States, Singapore and Hong Kong

10. Globalization – Strengths of Switzerland 3) Economic Freedom of the World-Index 2008 (Fraser Institute) Switzerland ranked 4 of 141 after Hong Kong, Singapore and New Zealand for its overall economic freedom

11. Globalization – Strengths of Switzerland • Strengths (GCI 2008) • Quality of research institutions rank 1 • Company spending on R&D rank 1 • University-industry research collaboration rank 2 • Quality of educational system rank 3 Quality of overall infrastructure rank 1 • Financial market sophistication rank 1 • Efficiency of legal framework rank 3

12. Globalization – Weaknesses of Switzerland • Weaknesses (GCI 2008) • University enrollment rate rank 45 • Prevalence of trade barriers rank 80 • Government debt rank 99 • Strength of investor protection rank 113 • Agricultural policy costs rank 118

14. Globalization – Threats to Responsible Growth • Increased sensitivity to external economic volatility • Demographic shift and human resources • Strong competition with emerging economies • Natural resources and environmental depletion • Global climate change • International security problems

15. Globalization – Threats to Responsible Growth 1. Increased sensitivity to external economic volatility • International integration leads to increased sensitivity to disruptions emanating from global markets (e.g. global financial crisis) • Increased dependence of single countries on the world economic situation

16. Globalization – Threats to Responsible Growth 2. Demographic Shift and Human Resources • Swiss population will be declining and getting older • Social insurance schemes will be at risk • New ways to profit from older persons’ work and life experience are needed

17. Human Resources and Demography Population in Switzerland Peak reached in 2025

18. Human Resources and Demography • Population pyramides in Switzerland

19. Globalization – Threats to Responsible Growth 2. Demographic Shift and Human Resources • Longer working lives for all people make sense • A good education for younger people is required to sustain a high GDP level • Until now the university enrolment in Switzerland is relatively low (27% of university degree holders vs. 36% in OECD; 7.7% vs. 9.1% for science + engineering)

20. Globalization – Threats to Responsible Growth 2. Demographic Shift and Human Resources • Qualified immigration may be desired (economic vs. cultural effects) • Current “new” immigration is qualified (20% 60% with bachelor or more) • Fields: R&D, informatics, education, finance and insurance (high value added)

21. Globalization – Threats to Responsible Growth 2. Demographic Shift and Human Resources • Female labor force is not used “adequately” • High female participation in the labor market (60%) • BUT extremely high share of part time work (due to child care and domestic work)

22. Human Resources and Demography Level of employment in Switzerland, 1991 and 2007 Female Male Full time 90-100% Part time 50-89% Part time less than 50%

23. Globalization – Threats to Responsible Growth 3. Strong competition with emerging economies • Competition with emerging economies like India, China or Russia will increase (increased productivity, technological innovations, educated workforce, etc.) • Home markets are contested (labor, products) • Problem of short term vs. long term effects

24. Globalization – Threats to Responsible Growth 3. Stronger competition with emerging economies • Protectionist reactions and increasing trade barriers as potential consequence (e.g. based on environmental protection or intellectual property) • Stronger integration and networks as remedy?

25. Globalization – Threats to Responsible Growth 4. Natural Resources and Environmental Depletion • Switzerland’s wealth is partly depending on natural resources and landscapes • Deterioration of natural resources and environment endangers future wealth • Internalization of (negative externalities) as essential requirement

26. Globalization – Threats to Responsible Growth 5. Global Climate Change Ongoing climate change causes environmental degradation  Consequences for Switzerland: • Glacier melt & reduced snow cover in winter • Changes in the characteristic landscape • Decreasing income from snow tourism  Diversification of tourism sector necessary (e.g. promotion of summer tourism)

27. Globalization – Threats to Responsible Growth 5. Global Climate Change • Increased temperatures & reduced water availability in summer • Species migration / Reduced biodiversity • Decrease in agricultural productivity (long term) • Forest degradation • Reduced productivity of hydroelectric power plants • Glacier melt & warming of permafrost • Increased risk of extreme events (flooding, landslides)

28. Globalization – Threats to Responsible Growth 6. International Security Problems • Distributional inequalities cause security problems • Global climate change causes international security problems due to a deterioration of natural resources’ and environmental quality • Ethical questions involved

30. Globalization – Opportunities for Responsible Growth • Increasing market size  opportunities for Swiss technologies, e.g. environmental technologies • Increasing environmental activities  first mover advantage + innovation incentives • Immigration of highly skilled work force  balancing the decline in Swiss population

31. Globalization – Opportunities for Responsible Growth • Lower importance of industrial production as compared to technologies and services  corresponds to comparative advantages of Switzerland • Political system (democracy) as stabilizing factor and „export product“ • Role of Switzerland at the international level

33. Globalization – Challenges for Switzerland – Part II • Improvement of current opportunities matters (technology, work force quality, political system, environment, international activities) • Fighting against current or potential threats matters • Key areas: increasing competitiveness, improving human resources, mitigating environmental damages

34. Globalization – Challenges for Switzerland: (1) Competition • Reduce agricultural support payments • Remove non-tariff trade barriers • Liberalize network industries (energy, telecommunications, postal services) • Reduce costs of social spending (e.g. for health system) • Warning: competitive elements vs. ethical values

35. Specific Challenges for Industry, Science and Education: (2) Human Resources • Maintain the high overall quality of education • Increase the openness of Swiss education system • Increase activities to form intellectual elites • Increase interdisciplinarity (research/ teaching) • Increase the cooperation between science and industry to enhance technological innovation

36. Specific Challenges for Industry, Science and Education: (2) Human Resources • Increase the permeability between industry, (politics) and academia • Improve the integration of younger and older persons in education and work • Improve the integration of immigrants into the labor market and society • Facilitate women's full-time participation in the labor market

37. Specific Challenges for Industry, Science and Education: (3) Environment, Climate • Introduce measures to reduce consumption of natural resources and energy • Strengthen the cooperation between academia and industry with respect to certification (life cycle assessments, sustainability) • Investigate into ways to overcome myopic behavior/ discounting of consumers and politicians

38. Specific Challenges for Industry, Science and Education: (3) Environment, Climate • Involve students of all ages in interdisciplinary problem solving • With global focus: develop new products within the area of environmental finance • Improve and participate in international GHG mitigation strategies (CDM, emissions trading etc.)

39. Résumé • Current global position of Switzerland is OK • Future threats to Switzerland’s wealth and development as well as to Swiss contributions to global wealth and development are significant • Competitiveness, human resources and natural resources + climate change are the most important areas

40. Résumé • Strong collaboration of industry, science and education can maintain or improve Switzerland‘s position • This cooperation enables Switzerland‘s responsible growth, i.e. a growth which also contributes to an improvement of the welfare conditions within less rich countries worldwide and for future generations