This weekend I had the joy of taking part in the 2nd Next Generation Forum. In this post I’m going to summarize the three presentations and discussions that were most interesting to me.
Europe for a better future
The first panel discussed the state of Europe and the Euro-Zone today, what the current problems are and which policies should be implemented to increase economic prosperity. I found that the most striking idea was Frank Mattern’s reasoning: He said that the core reason for the increasing frustration of European citizens and the inaptitude of policy-makers to solve the on-going Euro-Zone crisis was the lack of emotional goals and values.
Instead of setting clear priorities and addressing the problem at its root, issues are addressed as they arise, without any foresight. Which emotional need does the existence of the European Union serve today? One goal which is often cited in newspapers is peace. But how can peace be a goal if it’s already here since more than 60 years and is already taken as granted today? Peace can’t be a motivator anymore. What about economic prosperity? Well, this goal does indeed fulfill an emotional need. However, the Euro Zone is failing miserably in this regard and hence it’s obvious that this goal is not pursued seriously.
Personally, I strongly agree with this view. There is an apparent lack of values and long-term goals in politics. Today, several years after the beginning of the crisis, there are still no indications of any plans for the key issues (diverging competitiveness, trade balance differences, unsustainable debt, over-regulation of all industries except the financial one, misplaced subsidies) to be addressed in a feasible way. Instead, with regard to the upcoming Bundestagswahl at the end of this year, there are many decisions made that go completely against any reason and seem to have the single motivation of increasing the party’s popularity within the population (Betreuungsgeld etc).
Globalization and its impact on economy and society
Prof. Hans-Olaf Henkel managed to captivate the audience with an incredibly passionate speech about globalization. In his opinion, globalization has almost exclusively positive effects, namely a dramatic increase of productivity and the spread of capitalism, democracy, and human rights. The productivity increase is particularly visible in the software industry, in which some companies have adopted the Follow-the-sun workflow which dramatically reduces project durations and enables global teams to literally work around the clock on the same project parts. Globalization has also boosted the spread of capitalism (since it’s the economic system which led to the most well-being). Capitalism has in turn often transformed the respective states to democracies and granted its citizens fundamental rights.
I liked Prof. Henkel’s speech. However, I think that globalization has also brought new problems which can only be resolved by international cooperation and coordination of law making and policy implementation. And so far it seems that states are unwilling to give up any part of their sovereignty. Global coordination of e.g. environmental, privacy protection and tax policies proves to be extremely difficult.
Smart Risk in Times of Financial Repression
The last presentation, held by Hans-Jörg Naumer, started out very promising. The speaker explained that the Federal Reserve, the European Central Bank and now the Bank of Japan are flooding the markets with liquidity and that they won’t stop this practice in the near future. Some of the official goals of the Fed and the ECB are price stability and low unemployment. However, recent policy decisions point to a shift of priorities: Price stability and unemployment seem to recede into the background, the only important emergent goals are (1) to keep the economy running and (2) to stabilize the financial markets. Thus, new bubbles are being created and the cornerstones for the next financial crisis are being set.
At the same time this monetary policy, especially when combined with new regulations (Basel III), serves the interests of highly-indebted governments: Since the growth of the economy is higher than bond yields, government debt as a portion of GDP gets eroded. How does a smart investment strategy in this environment look like?
Unfortunately, Mr Naumer talked only briefly about solutions after he explained the challenges. But as far as I understood, the solution seems to mostly consist of allocating more capital to risky and real assets, and buying well-managed Allianz products. Or at least this is what Mr Naumer from Allianz recommends.
Concluding Remarks
The 2nd Next Generation Forum was a well-organized event with fantastic speakers, fascinating presentations and panel discussions, and, above all, many amazing participants from all over Europe. I’ve even met some students who have successfully launched their own startups and raised venture capital and this motivated me to look for ideas myself. The time at NGF went by so fast that I wish it lasted more than just two days.