Kurt Biedenkopf
6th Munich Economic Summit: For the sixth time, some 150 top representatives from 22 countries, mostly from the European Union, gathered for a dialogue among business, academia, politics and the media to discuss Europe’s future. Taking place at the Hotel Bayerischer Hof on 21 and 22 June 2007, the international political and economic forum was once again co-hosted by the BMW Stiftung Herbert Quandt and the Cesifo Group Munich. This year, the summit participants dealt with a topic that increasingly moves to the forefront of the European public’s attention: “Europe and the Demographic Challenge”. Among the summit’s most important speakers were EU Commissioner Vladimir Špidla, Norbert Reithofer und Klaus Kleinfeld, the CEOs of BMW and Siemens, respectively, and former Minister-President of Saxony Kurt Biedenkopf. Against the background of low birth rates and the aging of European society, the summit participants debated the causes, consequences and opportunities of the demographic changes. More specifically, the discussions revolved around the following questions: How will we be able to finance our future pension and health care systems? Which models can be drawn on for comparison, on both the European and international levels? How are business and industry going to adapt to the demographic changes? And, finally, can an active family policy stop the trend of declining fertility? In his opening speech, Jürgen Chrobog, Chairman of the Board of Directors of the BMW Stiftung Herbert Quandt, introduced the scenario of an aging and non-reproducing European population, as it frequently appears in the expert literature: There the assumption is that the number of those 65 years and older is going to rise by 40 million by 2030, while the number of employed people will decline by 21 million. The positive trend towards longer life expectancy here combines with the negative trend of too low birth rates, with the European average standing at 1.5 children per woman (compared to the statistically necessary average of 2.1). Much-debated countermeasures range from compensatory immigration to a more active family policy to re-structuring the social systems. With all due respect for these predictions, Chrobog also noted that one should not forget the opportunities for the social systems deriving from the possibility of the longer employment of an aging yet at the same time healthier population. In his introduction, Professor Hans-Werner Sinn, President of the ifo Institute and co-organiser of the summit, advocated his plan for a “children-based pension scheme”, where parents would be better off financially. After all, said Sinn, they have invested in human capital and thus maintained the pay-as-you-go pension scheme based on the inter-generation contract. Childless adults, on the other hand, would increasingly have to take care of their old age provisions themselves through additional savings, i.e. investments in real capital. This would reduce the “exploitation” of mothers and fathers who “unjustly carry three burdens”: by paying the pension contributions of their parents, by meeting the costs of bringing up their children and by making provisions for their private pension supplement. Illustrating the existing imbalance of the financial burden, Sinn noted that the state cashed in a total of 139,000 Euro per child through future social security payments and taxes, while the childless, who do not secure their pensions through children of their own, receive a “comprehensive coverage” and are thus “free riders” of today’s pension system. In a deliberate departure from the “rhetoric of catastrophe”, the EU Commissioner for Employment, Social Affairs and Equal Opportunities Vladimir Špidla, in his keynote speech, above all emphasised the “success story of the demographic aging” – longer life expectancy coupled with good health. According to Špidla, this development does not constitute a threat, but an opportunity for the European social model. However, the inter-generation contract has to be renewed and stabilised, he said. This includes family- and children-friendly policies designed to better reconcile employment and childrearing, the increased integration of women as well as younger and older people into the working process, the promotion of “our human capital” through life-long learning and, finally, the acceptance and integration of immigrants. In conclusion, the EU Commissioner said that a new inter-generation contract had to be based “on making full use of the potential of older people and on making massive investments in the future of younger people.” Norbert Reithofer, Chairman of the Board of Management of BMW AG, had every reason to view the demographic changes optimistically. In his statement, he expressed his expectation that premium brands such as MINI and BMW are going to profit from the demographic changes. The future generation of the so-called “young old” people will be even more strongly interested in both sporty and comfortable premium automobiles. By 2050, the market for premium cars might even double. As far as its human resources policies are concerned, the BMW Group has already adjusted to the demographic development, said Reithofer: With its programme “Today for Tomorrow”, the company keeps up the productivity of its employees. The programme includes health prevention measures, ergonomic work spaces and a good age balance among working teams, which makes it possible for older employees to pass on their wealth of experience to younger employees, thus enabling life-long learning. The departing CEO of Siemens AG, Klaus Kleinfeld, also emphasised the opportunities offered by the demographic trends: Already today, the health sector is a “job machine” employing 4 million people in Germany alone, and a “highly innovative” sector on top. Given the predicted increase of the elderly population, the demand in this sector is expected to rise even more markedly. If it makes good use of this growth market, Europe could become a highly attractive model for other regions, said Kleinfeld. According to population scholar Reiner Klingholz, Europe is going to face major international problems due to high migration pressure: Here, he refers to the prediction that the EU of 27 will lose 10 percent of its population by 2050, while the southern neighbouring states from Morocco to Afghanistan will double their populations. He saw little cause for more optimism in Germany, where large parts of the former GDR are depopulated and, in particular, the emigration of well-educated young women can be observed. Arij Lans Bovenberg, Scientific Director of the Netspar Institute at Tilburg University, called for the speedy implementation of social reforms: The older generation is soon going to constitute the majority of voters and will not accept cuts in benefits and services for its own generation. He therefore pleaded to create economic conditions such as flexible labour markets to ensure a “working income” for older people. At the same time, pension claims should be calculated depending on the average life span to ease pension coffers. On the second conference day, the question of the resilience of the European social systems in light of the dual aging phenomenon – declining birth rates on the one hand, longer life expectancy on the other hand – was discussed more fully. In his introductory statement, the American insurance economist Edward Palmer stated unequivocally that the European social system was not suited to weather today’s nor tomorrow’s “demographic and economic realities”. What is needed, he said, are family policies that offer positive incentives for giving birth and promote the employment of women. Like Palmer, the General Director of the Social and Cultural Planning Office of the Netherlands, Paul Schnabel, is convinced that a markedly longer working life will be necessary. The co-designer of the Dutch pension system which is strongly based on capital formation, Schnabel proposed a three-tiered system consisting of a basic state pension supplemented by a mandatory pension supplement and a voluntary private pension. After German Federal Minister for Family Affairs, Ursula von der Leyen, had to cancel at short notice because of a debate in the German Bundestag, former Minister-President of Saxony Kurt Biedenkopf gave the introductory speech on European family policies. Warning the summit participants against an excessive fixation on the state, he said: “The more the state intervenes, the less will the population be willing and able to adapt to changing conditions by their own efforts.” Biedenkopf therefore pleaded to strengthen “individual initiative” and “family responsibilities.” Along the same lines, the Italian economist Alessandro Cigno argued for a pension system that focuses less on family policy incentives, and more on the economic capabilities of the children of each pensioner. The existing state pension systems, he said, have a markedly negative influence on the birth rate in Europe, because they do not take into account the child factor. The French population scholar François Héran added that family policy initiatives to increase the fertility rate will never be able to compensate for the inevitable aging of European society. He thus pleaded for an active immigration policy to facilitate immigration into Europe. Regine Stachelhaus, Managing Director of Hewlett-Packard Germany, contributed her personal experiences as a mother and a manager to the expert discussion: She called on German society to take leave of the traditional image of women as full-time mothers and childrearers and instead embrace the modern role of women as working mothers. To support this transformation, it requires both family policy measures and contributions by industry and employers, she said.
All speakers and participants of the 6th Munich Economic Summit agreed
that Europe was getting older, had fewer children and thus as a whole
was shrinking. They also agreed on the dramatic consequences –
such as funding gaps in the social security systems – as well
as the need for radical reforms. Controversial discussions took place
on the different solutions to these problems, which include the extension
of the working life span, a children-based pension system, family policies
that will encourage more births, and compensatory immigration. At the
end, one thing was clear: Only a combination of these proposals can
cushion the impact of the so-called double aging of Europe. While scholars
and academics were more pessimistic in their predictions, the representatives
of business emphasised the opportunities of an aging Europe –
an assessment that was also largely supported by pragmatic politicians.
The novel partnership with The Times of London contributed
to a very active international media response.
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