Five key challenges of our times

The world we live in seems to have become more complicated. Technology is making great leaps. Our economies are being rapidly transformed. In politics, principles and understandings that have been rock-solid for decades can no longer be taken for granted. And societies that have never done better than now are starting to question "the system" and cast doubts on the future.

In some areas, it’s not only that we’re not making any progress; we’re actually going backwards. So we're in for rapid change. Some say it’s revolutionary, others (still) believe it will be evolutionary. While I have my views, the jury is still out. But, as always, change comes with both, challenges and opportunities. So the question is: What will matter the most in the time ahead of us? While specific topics may vary, I see five factors that are materially affecting the world and its society, the economy, and the company I work for.

1. A rapid rise in populism

This development, which we see mostly growing in the political landscape, is leading to reinvigorated nationalism and subsequently to protectionism. Populist forces are mostly inward-oriented, dividing our societies and poisoning the atmosphere for proponents of a global view. At the international level, they’re hindering free trade and international cooperation. As a result, these movements are hampering global growth and will subsequently move people back into poverty. Paradoxically, nationalism is also on the rise in countries that have reaped a disproportionally large portion of the benefits of globalization by becoming significant net exporters and by accruing positive trade balances. Ironically, these economies will be affected twice by the growing nationalism – by their own behavior as well as by the nationalists in other countries who are no longer willing to deal with trade deficits.

At Siemens, we’re watching these developments with deep concern. For a company like ours, which is active in more than 200 countries, openness and tolerance for people, as well as trade agreements between economies and multilateral trade organizations are essential. In our view, free and fair trade is also the foundation of a better world. Unfair trade practices need to be addressed; however, they should not be confused with a lack of competitiveness. Here, investments in innovation and productivity are the proper answers. Therefore, I support the notion that leaders in all areas should take a stand against misguided populists and nationalists – for the sake of the societies that they’re part of and for the sake of the institutions and countries they lead.

2. Global migration

For a long time, we in Germany and in many other European countries thought that globalization was a one-way street – a one-way street on which we and other export nations were always in the fast lane. In the meantime, we’ve learned that this freeway can be traveled in both directions. And traffic has become heavy. Today, there are over 68 million refugees worldwide– more than ever before. Most economies were caught unprepared by the acceleration of migration, when real-time connectivity showed its other side – what transparency and speed can do. In many countries, governments’ real or perceived lack of control over migration has fueled further right-wing agitation and nationalism. The recent debate in Germany is an embarrassing example of what can happen when serious multilateral immigration issues meet populist actions designed to achieve different goals. And the struggle continues.

Our societies expect leadership from policymakers, and they expect public authorities to maintain control. And rightfully so. Yet leadership is about more than merely eliminating shortcomings. It’s about solving an issue and providing orientation. Rather than just closing off national borders, Europe needs to find its way in this crucial task. The Brexit vote was bad for the UK and for Europe. It originated primarily in the poorly managed refugee matter. One European exit of this magnitude is enough – we do not need another one. Thus, intelligent immigration legislation and management are two of Europe’s biggest tasks at hand.

In our times, more than ever, true leadership is about showing paths to greater understanding, tolerance, and inclusion. Nationalism and exclusion, on the other hand, are the beginning of societal and economic decline.

3. Climate change

Global warming is real, the facts are known, and the effects are already dramatic. In fact, climate change has been one of the drivers of global migration. If we want to leave future generations a viable basis for life and prosperity, we have to diligently and rigorously decarbonize the global economy. At the 2015 United Nations Climate Change Conference (COP21) in Paris, the global community backed a binding agreement on climate protection for the first time. It would be fatal for future generations if today’s global leadership were to depart from this historic course. While it is not that simple to accommodate all interests and stakeholders, fighting climate change is a decisive task of our time.

4. The Fourth Industrial Revolution

Technology-driven transformations as such are nothing new in economic history. This time, however, digitalization and a global network of real-time connectivity are sharply accelerating the pace of change.

In recent years, for example, the global energy system has been moving from centralized, fossil power generation to renewable sources and thus, to a more decentralized, flexible setup. This ongoing transformation has been very challenging for all stakeholders in the conventional power generation industries. There are also structural changes to come in other major industries. Just think of the automotive industry and the shift to electric drives as well as a sharing economy of mobility.

With Industrie 4.0, we’re experiencing the full impact of digitalization in the industrial world – a sector that accounts for 70 percent of the global exchange of goods. In a recent study, McKinsey concluded that, in the advanced economies, one out of three employees may have to change occupations by 2030.

We need to proactively find answers to how we can best manage these structural changes. All of us – governments, companies, labor representatives, and society – have to actively shape this transformation by creating the framework conditions, by investing in innovation and in the continuing education of employees, as well as by taking a realistic approach to factual evidence in a globally connected world. We owe this to the next generation and our country. At Siemens, we invest almost US$7 billion in R&D and more than US$600 million in training and education each year. Also, over the next four years, we will make an additional investment of up to US$120 million available for a Future Fund. This fund should offer perspectives to those whose jobs may no longer exist in the future. And this is only a start. Why not set up such a Future Fund on a larger scale, let’s say at the national or even European level? I know a "European Fund" sounds farfetched. Yet, Europe needs joint foreign and economic policies anyway to play in the same league as China, the U.S., and maybe India. So why not start shaping our own future now?

5. Short-term thinking and opportunism

In financial markets – and not only there, a lot of players seek quick profits. The "casino" is wide open again – yet, bigger, smarter, and more ruthless than in the years before the financial crisis. And analytics technology intensifies that trend. We need to find more sustainable and long-term approaches to managing companies, national economies, and political life. We need to think deeply about what a truly inclusive society should look like today. And there is a growing need to better understand what businesses do for societies and what they don’t do.

Werner von Siemens once said, "I won’t sell the future for short-term gain." This philosophy is still worth following. In my view, the purpose of every organization, of every business, is to make a positive and sustainable contribution to society, to a better future. To achieve this, companies have to work hard on their adaptability and competitiveness every day – in the short term and with the long-term benefit in mind. Only those who are strong will be able to help others and make a positive contribution to society in the long run.

Conclusions: Europe can lead by taking action together and thinking big

In these complex times, in which volatility seems to be the "new normal," Europe can and should play a leading global role. How? We can make a difference with regard to the five challenges above if we develop a healthy portion of self-confidence – if we use our capabilities and stick to the fundamental conviction that our 27 or 28 countries are stronger when they act together than any of them could ever be on their own.

As a geographic region that’s home to more than 500 million people, Europe should establish itself as a strong third power alongside America and Asia. Of course, this change can only work if we pursue greater unity – for example, with joint foreign and defense policies as well as with a unified approach to economic and trade issues.

I just came back from China, where Siemens hosted an event on the Belt and Road Initiative. The atmosphere there is charged with excitement. There’s a strong sentiment that China can shape the 21st century – also in global economic leadership. Firstly, because it can leverage the massive scale of its population; secondly, because the incumbent seems to have vacated this position.

Belt and Road is a landmark project that represents a €1 trillion investment in infrastructure in about 90 countries and beyond and has the potential to touch the lives of 70 percent of the world population. It’s another concrete sign of the shift of economic and geopolitical weight toward Asia – and I’m not sure whether Europeans are paying enough attention to this development and its potential consequences.

Therefore, time is of the essence. What could a mutually beneficial relationship with the U.S. and China, as well as with key neighbors such as Turkey and Russia, look like in the future? We need to find convincing answers to this question. And pursuing joint foreign and economic policies is certainly only one of the elements that we’ll require.

We should also back projects that enable us to shape the future. Europe has to think big and act even bigger! There is no reason why this cannot be done.

Europe is the leader in the industrial world and is in an excellent position to defend this lead – also in the digital industrial space. Here, we can set the pace and the direction – in terms of technology and know-how, and in terms of industrial cybersecurity, including the protection of physical assets.

We also need to look at the strategic side of it: teaming up to form global champions:

Siemens has done this in the area of renewable energy by creating the worlds’ leading renewable energy company Siemens Gamesa. The planned merger of Siemens’ mobility business with Alstom is another example of a European champion. We also help start-up visions in new areas become reality. Siemens and the Swedish company Northvolt have formed a partnership to build a battery factory and so help shape the future of e-mobility in Europe. A project like this could be "the next big thing" for Europe.

Europe has a rich history. There are a lot of stories to tell – of great accomplishments, but also of great failures, especially in Germany. We should always be mindful of the failures, but we can also be proud of the achievements of previous generations. One of these achievements is Europe's industrial strength. The clear task today is to shape the "New Industrial Europe." This is not so much about the fact that if we don’t do it, someone else will do it for us. No, it is more about what we owe those who built Europe and what we owe future generations.  

I am in. Are you?