Davos 2010 Video Transcripts

The issues of environmental and economic sustainability are among the most difficult that we confront right now. The fundamental challenge is that we all recognize that the carbon intensity of growth is a fundamental driver of an unsustainable long term environmental future. But likewise, there are enough doubts about these questions around the genuine causation between human action and agency and global warming that it is almost unconscionable to ask poor countries to arrest development in order that we may have a positive impact on the environment.
First, reduce the global divide on the climate change front. We've recently seen, in Copenhagen, the widely different concerns that countries have around the world. And bridging the gap between those countries is going to be essential to address the sustainability issue.
Environmental and economic sustainability today are increasingly being posed as choices. And that is the most difficult question that we confront, which is, how to find a calculus within which the historical contributions to environmental degradation are balanced against the imperatives for growth and the betterment of people's lives in emerging markets.
The issues here have three fundamental features. They are multilateral, in the sense that they are in the case of environmental sustainability, very, very clearly, the impact of one gram of CO2 is completely the same whether it is emitted in Ghana or in Germany.
They are intergenerational, in the sense that the genuine impact of these issues is going to be felt only in 20 to 30 years time, and an important feature of most negotiations is that, if you're not at the table you don't get represented. And future generations aren't at the table.
And, third, they have another aspect, which is that the are game theoretic in the sense that it is often the case that what is individually right for me is actually collectively bad for all of us.
Another aspect of that sustainability is going to be to o address the long term potential derailleurs of economic growth. So issues such as healthcare reform, pension reform, labor market flexibility are going to be essential components of the sustainability agenda.
In these circumstances, there are only two or three ways a solution is possible.
One is through extraordinary political leadership, and it must be said that that has yet to emerge.
Second, possibly, is through the characteristics of a mass movement, which are only now beginning to emerge, particularly as younger people begin to grapple with the difficulties that these environmental futures pose for their future.
And the final is that something some voices coming out of Copenhagen have called for, which is around both process and institutional reform to ensure vexing and difficult multilateral questions can in fact be solved in an expeditious way.
I would add the need to invest in education. Countries, no matter in what stage of development they find themselves in, will need to massively invest in the education of their citizens.

A perverse consequence of the crisis is that some of the certainties and some of the bedrock assumptions that have guided economic behavior in the last 25 years have come to be challenged. And I will describe these as having being around what some people call the Washington consensus, or the Reagan-Thatcher consensus - essentially one around the notion that most problems are best solved by market forces than otherwise. No one's convincingly proposed an alternative to this position. But that position in itself is today questioned very, very widely across the world.
In the global economy, it seems to me, that there are two areas that I would draw attention in particular. One around the regulation of financial market and activity, and how that works, and the second around trade.
I think we need to guard very, very carefully between the depredations of what has happened in this crisis and the benefits of globalization.
I think it is very, very clear that if you look at the sum total of global activity over the last 30 years, that the steady progress on trade and on financial markets flows around the world has been good for the world at large. And it's actually quite important that there is an attempt to have conversations about ideology as much as there is about the nuts and bolts of trade and financial markets activity and regulation.
Leaders will need to define the message around values and keep hammering it and be consistent around it. But that by itself will not be enough. They will need to also walk the talk. This means establishing proper governance mechanism within their own institutions, enforcing it rigorously, and holding people accountable to it.
In terms of local economies and what might be important in the next few years, we believe that there is today inadequate attention on one important issue, which is evolving demographics in these countries. In many instances the assumptions around which an economy is geared are based on dependency ratios are 40%, where 40% of the population of a country is dependent in one way or the other, either as children, or retired persons, or chronically unemployed, on those that work. By some measure and by some projections in the next 20 years, those dependency ratios will flip precisely around, so that in many European countries, the dependency ratio will rise to 60%.
Clearly the assumptions about how society works, who is compensated and how much, in the event of unemployment or at the time of retirement cannot be sustained when you have that kind of inversion in what is happening with the working age population, and the type of work that is available to them, moving away perhaps from unionized, high benefit manufacturing jobs toward service industry jobs. On the other hand, in the high growth economies, many of which are predicated on highly advantageous demographics in the sense of many young people potentially coming in the work force supporting the elderly or young, there are precisely the reverse in terms of challenges. The challenge of very rapidly bringing into the work force with adequate skills very large numbers of people and generating the jobs that are necessary to make that happen. So in a peculiar way, local economies around the world and some of the most interesting and most important economies around the world face opposite challenges.


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