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Never Waste a Crisis: The European Left Holds the Key to Solving Common Challenges

Speech by the Minister for Trade and Investment, Pia Olsen Dyhr at Stanford University, Palo Alto (California) on February 7, 2013

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Dear guests, faculty members, and - of course - dear students,

Let me start by thanking Stanford University and The Europe Center for the invitation to speak here today. It is a privilege to be invited to one of the world’s most prominent universities.

In the 21st century, we face many common challenges and have many common responsibilities. We will be able to successfully shoulder these only by acting together. That fact - so simple in theory, but not always easy in practice - is a key message from me today.

The present crisis in Europe cannot be seen in isolation. It has to be seen in conjunction with the broader financial crisis that hit the international economic and financial markets in 2008. And it has to be seen in the context of the shift in global economic and political power relations that is taking place.

I will not go into a long discussion of the causes behind the current situation. Professors and prominent economists have undoubtedly given you shrewd insight into the economic and financial dimensions of the crisis.

Instead, I am here to share thoughts on a different dimension of the crisis and from a different perspective. I want to address the political dimension of the crisis. I want to speak candidly from my perspective as a practitioner; as a Danish Minister, a politician, and a European socialist.
       
It is easy to paint a bleak picture: mass unemployment, riots, a rise of the far Right and nationalism. The Euro is dying. The EU is breaking up, split between the haves and have-nots, the lenders and the borrowers.

Many buy in to this narrative or versions of it. Some even draw parallels to a Europe of the 1930s. But I disagree – considerably.

"Never waste a crisis" is an adage for my approach: Yes, we have a difficult situation in Europe. Yes, there is a crisis of confidence in the EU. But the situation also offers opportunities that we must not miss. Hard political decisions that would have been unachievable during "normal times" have now become possible.

As a European socialist and a green socialist, I see glimmer of hope. In fact, I will argue that the European Left holds the key to restoring public trust in the European project. Only the European socialists have the political capital to take the steps necessary to get Europe out of the crisis while maintaining vital public support.

Why? Because the European left has the capacity and the political will to construct a social-political framework that will provide welfare, justice and social security.

You can actually link it to President Nixon’s famous trip to China: Only a perceived foreign policy hawk had the credibility and political capital to make such a bold move abroad while maintaining support at home.

Today, I would argue, only the European Left can make the hard, necessary decisions and keep public support. And it can do so without undermining the social cohesion that is key to the European model.

But it requires that we get it right the next couple of years. "Never waste a crisis" --- especially when it is a tough crisis!

So let me concentrate on the opportunities. And let me give some ideas as to how we move beyond the current stalemate. I would like to focus on four points.

First, I see the crisis as a leadership opportunity for the European Left.

Allow me just a few words about myself. I belong to a European generation that was young in the eighties. I started out in politics in 88'. I started out in strong opposition to the European Union. As a young Danish socialist, I was against the common market. We saw it as a construction for the rich and wealthy. We were strongly anti "capitalist Europe", as we said at the time.

But gradually, we decided to work from the inside rather than the outside. Europe could be changed. In fact, Europe was changing. Europe decided on a path that inspired the world, and that made Europe a truly unique model of cooperation. It provided a more equal and promising future - not only for one but for all.

I am a socialist. Among my heroes of my youth were leaders like Jacques Delors, the President of the European Commission at the time, and – you will be surprised – the conservative German Chancellor, Helmut Kohl - and François Mitterrand.

They created some of the conditions that made all of this possible: They brought about the Single Market; They helped unify Germany; They produced the Maastricht Treaty; and they started the long and cumbersome enlargement process with the countries of Central and Eastern Europe.

They carried out that process according to the common values of solidarity, participation and inclusion.

They built a Europe with a strong social dimension.  And this is why I changed from an anti-European voice to a committed European. To me, the EU became the vehicle that was going to help achieve a greener, cleaner and safer world.

In an era of globalization, where economic and political power is increasingly moving away from Europe, no individual European country - and especially a small country like my one - will have the capacity to influence world affairs. Only a united Europe can do so.

Many nations on the continent were led by center-left parties in the 1990's. Over the following decade, conservative Governments came to dominate most of Europe. Today, only a few of us have center-left Governments. France and Denmark are among the exceptions.

In some European countries, we have seen the right wing on the rise in recent years. While I work hard to counter that trend - I must be frank and say that - analytically I understand why it is happening.

Governments’ legitimacy is weakened by popular discontent generated by economic and social hardship. Increasing unemployment, zero-growth, stringent budget requirements and a sense of disenchantment create the atmosphere that suits right wing politicians.

This is where the left wing needs to offer persuasive answers. We have to assure the European public that we bring long-term solutions to job creation, green growth, an unregulated financial sector, and provide them with the necessary social guarantees.

I am convinced that we can and will do that. And that will allow us to perform much better in the elections to the European Parliament in 2014, as well as in national elections.

As we bring new answers to a new era, the European left will rise again!

Why? Because European socialists hold viable solutions to many of the challenges confronting us today and tomorrow and, critically, the Left is better placed to implement these solutions in today’s crisis-prone political climate.

And solutions are needed indeed. I am confident that we cannot just leave it up to the market forces alone to solve challenges such as climate change, water pollution and obesity - the problems are the same for both our countries. The Government has to make the necessary investments. A new greener economy is one of the foundations – a topic I will return to.

This leads me to my second point. The crisis is an opportunity for the European Union itself.

Today, the optimism of the eighties and nineties are gone. We have a difficult situation within the EU. We have the European debt crisis. Even in Denmark, where the economic fundamentals are still strong, we have seen rising skepticism about the European Union.

The current crisis has put that Union to the test. Europe is threatened by a growing social divide. The countries of the Eurozone have taken on a huge responsibility in securing economic stability in our region. So have the rest of us. Denmark is not part of the Eurozone. The Fiscal Compact will play a key role in stabilizing the Euro.

It is also quite obvious that the crisis is affecting the internal cohesion of the European Union.
But let me be clear: Europe is part of the solution to the current crisis. It is not the problem. The path out of this crisis goes through more common European solutions. The answer is not to roll back the European institutions, to become protectionists, or to revert to nationalist tendencies. 

Communicating this to European audiences and beyond is vital. European socialists have an obligation to put more visionary and far-reaching ideas on the table.

In current conditions, to be inward-looking is to be blind to reality. We will move forward only if we work for an open Europe that promotes a more open world. We - the politicians in Europe - have to demonstrate this to our citizens - and they have to see the benefits.

We are a Union based on cooperation, the rule of law and democracy - you have a Constitution - we have a Union. We have to be able to rely on the strong rules and institutions for decision-making that are already firmly established in our Union. During times of crisis, when tough decisions and compromises need to be made, these fundamentals – our Community Method – are more important than ever.

We have to revisit how Europe works. When there are challenges as fundamental as those facing us now, the institutional setup comes under pressure. We have to keep improving the processes so that decisions regarding common problems and the financial crisis are democratic.

There are huge economic challenges ahead, I'll not lie about that, and the answer is not to give in to those, who just want to let the market and bureaucrats rule and decide. Our answer is to reestablish democratic control.

Handing the reigns to market forces or bureaucrats would only increase the sense of marginalization among those hardest hit by the crisis, many of whom find themselves flirting with populist, nationalist movements on the Right.
 
It is a difficult balance between doing what is necessary, hard and often unpopular, and making sure that people at the demonstrations, demanding jobs and quick results, feel they are being heard and their interests are included.

I strongly believe the European Left, not the Right, can strike the right balance.

The European left will offer a social union that is more than a precondition for re-launching sustainable growth, for providing social cohesion, and for improving the life of our citizens. It is also an important tool to reinforce the support for the EU and those citizens who have been hit hard by the crisis.

Our objectives are the reduction of unemployment: 25 percent in Spain and around 50 percent among the young. poverty and social exclusion, and preventing a competition in the EU for the lowest social standards.

What does this mean in policy terms? I am proud of our single market which has just been celebrating its 20th anniversary. It has become a zone with free movement of goods, services, people and capital. It has boosted trade and productivity. Yet the infrastructure in the single market is still fragmented.

Just imagine the economic and environmental benefits of a fully integrated power supply system that would comprise electricity generated from hydro plants, solar systems, and windmills. The most efficient and low-cost, renewable energy would be supplied to European customers, no matter whether the sun shines in Spain, it rains in Sweden or the wind blows in Denmark – as it always does!

Or take the European railway system. A train from Sweden cannot travel to Italy without changing locomotives and crews three or four times. Few countries give priority to cross-border links. How is it possible to get freight off the roads, when our railway system still is not working on a European scale?

I am in favor of the necessary public investments so that Europe's rail system becomes a homogenous network. We have to ensure that technical standards and legislation transcend borders. It does not make sense only to have national standards.

Yes, integrating such infra-structure systems across Europe is a painstaking task of removing physical and regulatory barriers. But it is worth the efforts. It will not only create more jobs and boost the economy; it would also take traffic off our roads to the advantage of the environment.

We have to act now. Otherwise, we will miss the train!
 
This brings me to my third point, which is not only about Europe, but also about you and the rest of the global community.

In this economic crisis, we have an obligation to maintain the fundamentals of our global economic architecture. Protectionism and isolationism cannot and should not be the answer.

Contrary to what some may believe, this is very much an agenda for the left. Job creation in a global economy is all about setting the right international framework for our companies to reap the full advantages of globalized value chains. Fending off competitors by imposing new barriers is not going to help – either now or in the long run.

Unfortunately, these four years of crisis have led a number of countries to turn away from multilateralism and free trade. While the formal rhetoric may call for greater economic cooperation, the number of trade-restrictive measures has increased. We need to counter such tendencies.

The best way to do this is through the WTO and a new global deal. Yet the Doha Round is stuck, for a number of reasons.  Among these are the changes in power relations between developed and developing countries: We in the rich part of the world cannot any longer simply ignore the demands of the developing countries.

After all, we should remember that trade should not be only about buying and selling, but also about fairness in wealth creation.
I am, however, hopeful that the upcoming WTO ministerial meeting in December will deliver some progress based on a mini package on trade facilitation and agriculture. This would deliver some needed new momentum to the multilateral track, to the benefit of the developing countries.
 
The impasse over the Doha round has forced us to look for new approaches to further trade liberalization. In 2013 - as was the case in 2012 - the main focus is going to be on bilateral free trade agreements. This is necessary in the absence of progress on a global, multilateral agreement.

Potentially the most significant of all bilateral free trade agreements is one between the US and the EU. Our trade and investment relationship is by far the strongest and the biggest in the world.

Each of us has a strong foundation. Tariffs on both sides of the Atlantic are low. But if the EU and the US could agree to eliminate tariffs and in particular non-tariff barriers, the gains would be huge on both sides of the Atlantic.

According to research by the European Centre for International Political Economy, eliminating tariffs on imported goods would increase exports between the United States and Europe by 17 percent in the coming years. And that is only tariffs.

Gains from removing these barriers would be substantial due to the huge volume of transatlantic trade - already at a value of more than 550 billion dollars a year.

The impact of such an agreement would go beyond the US and the EU. The economic benefits to both sides would have positive spill-over effects to other regions. The agreement would act as a global regulatory standard setter. And it would send a very important political message to the rest of the world that the two biggest economies stand together for free trade and job creation.
 
An agreement between the US and the EU should not be a replacement for a broader multilateral trade framework. Rather, I see the launching of US-EU negotiations as an icebreaker for new momentum in the multilateral negotiations.

Every time I meet my US counterparts, I strongly encourage them to show more flexibility and work diligently on the long-term first priority which is still a strong and rules-based multilateral trading system that also includes the developing countries.

I want to emphasize that, from the standpoint of the left, free trade should also promote more sustainable green growth. To do this we need to focus more attention on liberalizing trade in green goods and services.

The US was part of a rather significant step taken last year in the framework of the Asia Pacific Economic Community – APEC. At its meeting in Vladivostok, APEC leaders decided to lower the tariffs on 54 green goods to 5% or less before the end of 2015.

I want the EU to build on this initiative in order to reach a multilateral or plurilateral agreement that extends to more products, and also to services.

And this has brought me to my fourth, and last, point, which is the European left's responsibility to combat climate change.
 
In his inauguration speech on January 21, President Obama stated that "some may still deny the overwhelming judgment of science, but none can avoid the devastating impact of raging fires, and crippling drought, and more powerful storms". I agree with president Obama.

He also said that America cannot resist this transition towards sustainable energy sources, and that America must lead this transition. I must be honest with you: I would welcome much stronger American leadership.

I am aware that in this country, it is still a widely held view that more fossil fuels will solve all the world’s energy problems – despite the fact that the world’s population will increase 50 percent by 2050 and global energy demand is conservatively projected to increase by 30 percent over 25 years. That doesn’t add up!

Demark has decided that reliance on fossil fuels means risking price fluctuations that negatively affect business and the economy. Reliance on fossil fuels also means depending on many of the most unstable regions of the world for ever increasing amounts of oil. 

Denmark sees the threat of climate change as a real crisis: so we have two crises in fact. We also understand that it is more expensive to respond after the crisis hits, rather than preparing and planning ahead.

As the former chief economist at the World Bank, Lord Stern, showed conclusively in his landmark review of the economics of climate change: it is much cheaper to act now on emissions than pay the costs later.

At the time of writing, in 2006, the Stern report concluded that the overall costs of climate change will be equivalent to losing at least 5 percent of global gross domestic product each year - "now and forever".

Later, Stern has made clear that they had "underestimated the risks", "underestimated the damage associated with temperature increases", and "underestimated the probabilities of temperature increases”. Because climate change is happening faster than predicted, the cost to reduce carbon would be twice as high as estimated in the report, he clarified.

But we also see a plus side: that is, the opportunity for a new economy based on renewable energy and sustainable solutions. This is where our solutions to climate change are directly linked to our efforts to transcend the current economic crisis. Further, by involving business early, the costs are more equitably shared.

Climate change can be the vehicle for an economic revolution that will change our lives for the better and build a new economy for the 21st century.

It would not only help save the world from the foreseeable disasters. It would also have positive economic effects.  In recent decades, the prices on nonrenewable natural resources have spiked.
Transitioning to renewable resources would not only help alleviate climate change.  It would also have a positive impact on the environment and save billions of dollars that can be invested in other and much more productive areas such as education, health, and better care for the elderly in a world that is aging rapidly.

For all of those reasons, Denmark is making investments and improving regulations to prepare our cities for a one to two-meter sea level rise.  We have also enacted a law to make us a carbon free society by 2050. We aim to reduce greenhouse gasses by 40 per cent by 2020.

To achieve this goal, the Danish Government supports the wind industry by setting up ambitious goals for wind power in our country. We have a vision for a doubling our power supply from wind from 25% to 50% over the next 8 years.

Again, Danish business is partnering with the Danish government to find new and innovative ways to meet the challenges of climate, water and energy.

The partnership between government and business is making Denmark an incubator for innovation and our companies will be ready with solutions just as they were in the energy sector. 

Clean tech is now the fastest growing part of Danish exports – accounting for about 15% of the total. And looking to the future, we are positioning ourselves to also lead in water and climate solutions.
 
Thank you for the opportunity to talk to you today. I have tried to provide you with a framework of a European socialist.

We need to see the economic crisis not only for the problems it has caused us, but for the opportunities it has presented us.  The time to make the difficult decisions is not ten years from now, or five years from now – but now.

In my time at Stanford, I look forward to sharing ideas on how the EU and the US can work together on issues such as promoting free trade, and making climate change a vehicle for building a new economy for the 21st century.

And right now, I look forward to hearing your questions.

Thank you very much.