Chancellor Merkel in Davos

Feb 2nd, 2009 6:00 PM UTC
By Andreas.Huebers

As you know, the World Economic Forum was held in Davos last week, and much of it has been widely reported. On Friday, German Chancellor Angela Merkel spoke. As a German I was excited to hear her announcement that Germany will again increase ODA “significantly” in 2010! But let’s have a more systematic look at what she said. In her speech she described the German reaction on the financial and economic crisis. After describing the national approach (mobilization of € 81 billion as economic stimulus) she added that the German reaction includes a strong international prong. As part of this, 5 elements are important to Germany (but also for the international community):

1. Continued support for a market economy: She suggested internationalizing the German model of “social market economy”, which recognizes that the forces of the market are necessary for prosperity, but that these forces need an order, which the government has to guarantee.
2. Reform of international organizations: She added that the G8 will not be able to do the job on their own. The new format of the G20, meeting at the Heads of government/state level, is therefore a “formidable development as we move forward”. This includes the lesson that nation states need to transfer sovereignty in some cases – a lesson that EU member states have learned and even other big nations will have to learn.
3. Open world economy: This includes a successful end to the Doha-round.
4. Sustainable use of natural resources: Especially strong commitments from developed countries in the run up to the Copenhague climate deal.
5. Fight against poverty: just as in 2009 Germany will increase ODA “significantly” in 2010. She sketched three consequences if aid were to lose its importance: political instability, a widening development gap in the world, and diminished hopes in those countries that have received our promises in the forms of the MDGs.

As a way forward, Merkel suggested that a G20 “Charta for sustainable economic activity” could be the departing point to establish the “UN Economic Council”. She will meet with Worldbank, IMF, OECD, WTO and ILO in the week of 2 February to discuss the role of international organizations and their division of labour.

She also mentioned that the German “social market economy” can serve as a role model for a globalized world. The following argumentation shows that this would bring Africa into the picture: the basic idea of the social market economy is that the state enables its citizens to be economically productive. This creates wealth. However, a large percentage of Africans currently lack the preconditions to be productive, as they suffer from malnourishments or diseases or lack access to basic education. African enterprises are held back by a lack of energy and infrastructure. An internationalized “social market economy” must therefore encompass a mechanism to create preconditions for productivity. The three elements of such a mechanism are more and better aid, a trade deal for Africa and maintaining sustainable debt levels.

-Andreas Huebers

TAGS: Germany, Policy News