Rüschlikon, 14./15.11. 2008

Responsible Growth in a Global World – Opportunities and Threats

Prof. Dr. Renate Schubert

2Rüschlikon, 14./15.11.2008

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

3Rüschlikon, 14./15.11.2008

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

4Rüschlikon, 14./15.11.2008

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

5Rüschlikon, 14./15.11.2008

Some Determinants of Responsible Growth

Protection of natural resources and environment

Climate change mitigation

Development assistance

International cooperation

6Rüschlikon, 14./15.11.2008

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

7Rüschlikon, 14./15.11.2008

8Rüschlikon, 14./15.11.2008

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

9Rüschlikon, 14./15.11.2008

Globalization – Strengths of Switzerland

2) World Competitiveness Yearbook 2008

(IMD Lausanne)

Switzerland ranked 4 of 55 after the

United States, Singapore and Hong Kong

10Rüschlikon, 14./15.11.2008

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

11Rüschlikon, 14./15.11.2008

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

12Rüschlikon, 14./15.11.2008

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

13Rüschlikon, 14./15.11.2008

14Rüschlikon, 14./15.11.2008

Globalization – Threats to Responsible Growth

1. Increased sensitivity to external economic volatility

2. Demographic shift and human resources

3. Strong competition with emerging economies

4. Natural resources and environmental depletion

5. Global climate change

6. International security problems

15Rüschlikon, 14./15.11.2008

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

16Rüschlikon, 14./15.11.2008

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

17Rüschlikon, 14./15.11.2008

Human Resources and Demography

Population in Switzerland

Peak reached in 2025

2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

0

1000000

2000000

3000000

4000000

5000000

6000000

7000000

8000000

9000000Population in Switzerland - outlook

source: US Census Bureau - international data base

Po

pu

latio

n

18Rüschlikon, 14./15.11.2008

Human Resources and Demography

Population pyramides in Switzerland

19Rüschlikon, 14./15.11.2008

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)

20Rüschlikon, 14./15.11.2008

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)

21Rüschlikon, 14./15.11.2008

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)

22Rüschlikon, 14./15.11.2008

Human Resources and Demography

Female

Male

Level of employment in Switzerland, 1991 and 2007

Full time 90-100% Part time 50-89% Part time less than 50%

23Rüschlikon, 14./15.11.2008

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

24Rüschlikon, 14./15.11.2008

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?

25Rüschlikon, 14./15.11.2008

Globalization – Threats to Responsible Growth4. 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

26Rüschlikon, 14./15.11.2008

Globalization – Threats to Responsible Growth5. 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)

27Rüschlikon, 14./15.11.2008

Globalization – Threats to Responsible Growth5. 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)

28Rüschlikon, 14./15.11.2008

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

29Rüschlikon, 14./15.11.2008

30Rüschlikon, 14./15.11.2008

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

31Rüschlikon, 14./15.11.2008

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

32Rüschlikon, 14./15.11.2008

33Rüschlikon, 14./15.11.2008

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

34Rüschlikon, 14./15.11.2008

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

35Rüschlikon, 14./15.11.2008

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

36Rüschlikon, 14./15.11.2008

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

37Rüschlikon, 14./15.11.2008

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

38Rüschlikon, 14./15.11.2008

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.)

39Rüschlikon, 14./15.11.2008

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

40Rüschlikon, 14./15.11.2008

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