Remembering Berthold Beitz

German industrialist and philanthropist Berthold Beitz died on Tuesday at 99. For the New York Times story, see here. He is rightly most remembered for his heroic actions during World War II, when stationed as a Nazi supervisor overseeing oil fields in Poland, he was responsible for ensuring that hundreds of Jews and Poles were saved from deportation and death camps.

After the war, his unsullied past led to being asked to take over the German industrial conglomerate, Krupp. This allowed him to set up the Krupp Foundation with proceeds from the estate of Alfried Krupp, the steel magnate and industrial war criminal. The Foundation under Beitz overcame its history to become one of the most important philanthropic institutions in Germany and Europe.

While much of its focus is on the arts, it is worth remembering the importance the Foundation placed on transatlantic understanding. Under Beitz's leadership, it created, for example, the Krupp Foundation Fellowship, housed at Harvard's Center for European Studies (CES) that since 1975 has funded hundreds of graduate students and undergraduates to conduct research in Europe. Many of those fellows have gone on to become among the prominent academics and teachers of Europe across the world. It is not an exaggeration to say that the Krupp Fellowship has singularly advanced the cause of Europe for several generations of scholars.

I had the pleasure of meeting Mr. Beitz five or six years ago when as CES's executive director, I visited him at the Foundation to thank him and update him on how the Center was preparing students with an interest in Europe.  Already in his mid-90s, he was still running the Foundation and was an incredibly elegant figure. He had a keen intellect, amazing stories and a profound desire to see Europe and the US remain strong allies.  In a splendid office filled with photos of him and virtually every important global leader of the 2nd part of the 20th Century, he brushed those aside to talk about the importance of giving young people opportunities to experience the world so that they would understand it and thereby lessen the misunderstandings and nationalism that give rise to conflict. An astounding life and an astounding man.

Diplomatic Fallout from Boston

Photo: flickr/hahatango

The Boston Marathon is a joyous local event, signaling to a winter weary city that Spring, if not actually here, is not far away.  It is held on the 3rd Monday of April on Patriots' Day, an equally local holiday that is only celebrated in Massachusetts and Maine (which was once part of Massachusetts). But the Marathon is also the most international of events.  As the most prestigious road race in the world and the hardest marathon to qualify for, it is the dream of runners all over the world to come to run Boston.

And they do.  This year, athletes from 96 countries participated. And that meant that when the tragic bombings took place, those visitors, many of whom were unfamiliar with the city or even the country needed somewhere to turn, to find their friends, compatriots, or family members in the chaos or to find a place to stay when their hotels were cordoned off as crime scenes.  

As it happens, Boston is home to many Consuls General so that the citizens of countries with diplomatic representation can turn to those offices and get assistance and information. Not apparently the 91 Spanish runners who had registered for the race or those traveling with them.  The Spanish Consulate in Boston closed two hours after the bombing because 'that's the closing time.' No information, no hotlines to call, nothing was on offer.

One would think of all countries, the Spanish would be particularly attuned to the needs of a stunned and disoriented population following a deadly terrorist attack in a crowded city.  The twittersphere reacted with outrage.  Not just the visitors from Spain but many of the nearly 4,000 Spaniards living in Boston erupted in anger. One tweet coined a new saying for sloth: 'you work less than a Consul in Boston.' The resentment rebounded back to Spain, where in a country with epic levels of unemployment, there is little sympathy for highly paid public functionaries who exert little effort.

In the end, it was too much and Spain's Foreign Minister, Jose Manuel Garcia-Margallo, made the decision to fire Boston's Consul General, Pablo Sanchez-Teran. Another victim, though hardly blameless, of the Boston bombings.

Exodus of Immigrants

Yesterday’s article in the FT on the departure of Chinese migrants from Italy as the Italian economy grinds to a halt is an important wake-up call about the limits to solutions to one of the most vexing demographic problems faced by the developed world. As countries get richer, they tend to have fewer children, which in the absence of mitigating forces, means that populations age. With fewer people in the labor force relative to the elderly, the dependency ratio grows and puts social welfare systems under enormous pressure. Southern Europe and East Asia are among the places with the lowest birth rates and most rapidly aging populations on the planet.

One of the typical policy prescriptions for such countries is that they need to embrace immigration to bolster their shrinking population numbers. Japan, Europe, just about everybody with their demographics falling off a cliff, are urged to get over their historical aversion to outsiders and advised that their last, best hope is a wave of newcomers.

In spite of the unease with foreigners that many attribute to the citizens of Southern Europe, countries like Spain, Italy and Greece have relatively high proportions of immigrants as part of their total populations. 12% of the Spanish population is comprised of immigrants, 8 % of Italy’s and while Greek data collection is flawed, reliable estimates put it at perhaps 10%, though it is likely that more immigrants to Greece are there in the hope of eventual transit to more prosperous economies farther north. Even assuming away a xenophobia that characterizes many of these countries, it turns out that they may not be able to continue to attract immigrants even if they wanted them.  With weak economies, immigrants are pulling up stakes and going home or moving on.

While an outflow of immigrants may in some very small measure ease the short term crush of unemployment, the situation highlights another of the ways in which the crisis has such long-term consequences. Southern Europe, without the resource of a dynamic economy of say, a Hong Kong or Singapore, to attract new workers, is likely to find that its economic problems exacerbated by its demographic ones.

Go East, junge Mann

Last night I attended a reception at the beautiful residence of the German Ambassador to Singapore to mark the ties between Germany and Singapore in the life sciences. It gave the recent THE world rankings of universities some real world context, in the sense of showing the rise of Asia in some of the new growth sectors and the link to higher education.  One of the speakers was Dr. Andreas Schmidt, the CEO of Ayoxxa, a biotech firm based in Cologne and Singapore that just raised a round of investments to develop and bring to market its chip-based protein analysis technology.  That technology was developed by Dieter Trau, a German bioengineering professor at the National University of Singapore. NUS, which didn’t break the top 50 best schools for the life sciences as recently as two years ago, is now ranked 33^rd in the world.

Other speakers talked about ‘Singapore as the new US’ and ‘the East as the new West’, highlighting, if in a slightly hyperbolic way, the ease of doing business in Asia and the growing talent pool in the region. Singapore and Germany were touted as bridges on their respective continents, given their central location, and thus natural partners to bring these two zones together. 

Is there a new era dawning where Asia represents a new frontier for European entrepreneurship? It’s hard to say.  The Economist’s recent coverage of the difficulty of starting businesses in Europe laments the continent’s lack of entrepreneurs, thus migration elsewhere where the conditions are better makes sense, though Berlin, London and Stockholm are seen as hubs of innovation.  Asian investment in creating leading universities is also an important factor: young scientists are being attracted because the quality of the labs surpasses what they are offered in Europe and North America.

On the other hand, start-ups need capital and there is still a tendency for capital to invest locally. The global slowdown isn’t helping matters with financing being tighter and in the case of Singapore, there is some grumbling that money that could be going in to investing in innovations is instead being plowed into an overheated property market where returns have been high with relatively little perceived risk. Still, as Asia continues its ascent to become a knowledge based economic center and source of innovation, it is good to see European entrepreneurs present.

Shifting Borders of the Global Education Map

The sun is setting on parts of the West

The highly anticipated Times Higher Education global rankings of universities were released last night at 9:00 GMT, with the twittersphere counting down the hours in a slightly overwrought display of nationalist angst.  Though not headline news in the US, the rankings are in much of the world, particularly in Asia, where I now live.

 Higher education is one of the areas where Asia is seen as a rising power, eclipsing the West and certainly, one of the big trends this year’s results confirm is the rapid ascent of the East, especially the fast growing economies.  Asia, including Australia and New Zealand, hold 27 of the top 200 spots but more importantly, institutions there are making great leaps forward. The West? Not so much.

The US still dominates, by a long shot – a third of the top 200 places are US institutions. Also, the UK alone has 31 and those two countries together have a lock on the top 10. But there are sign of faltering.  A leading story at the THE has an interesting graphic showing the average ranking per school per country.  The old order is diminished – it’s not just the US and the UK that are slipping but, tellingly Japan, which is surrounded by far more dynamic countries.

What about Europe? It is not a uniform declinist narrative of institutions slowly slipping below their peers to the east.  Fully a quarter of the top 200 universities are in continental Europe and some countries are showing very strong upward momentum.  The northern half of Europe on the whole in fact is doing fairly well.  The Netherlands is not only the third ranking country in terms of top ranked universities but is the second (after Singapore) most improved in terms of positioning.  Belgium, Germany, Sweden and Denmark are doing well. France, even if the THE’s calculations show the average place to have slipped (likely an artifact of a sharp drop by ENS-Lyon), gained 2 universities in the top 200 for a total of 7 and most French institutions moved up.

But what of course is notable is the absence of Southern Europe. Spain, Italy, Greece and Portugal are absent from the top 200 and the severe budget cuts as a result of the crisis in that region means they are unlikely to recover ground as other parts of the world race ahead. The positioning of the southern European universities is of course not an outcome of the crisis; they suffered from low rankings prior to it. But the global university rankings point to another realm where the north south divide in Europe is real and growing.

Finally, it’s interesting to consider where the BRICs are in all this.  With the exception of China, the developing powerhouses are not very well represented at the top: Russia and India are shut out of the top 200 although Brazil’s sole candidate is moving up. Russia’s showing is particularly miserable, given its history; its top ranked university is behind those of Greece and Spain and despite the legendarily low and stringent admission rates to India’s leading institutions, none makes the cut. More evidence perhaps that we are moving, though perhaps slowly, towards the (East) Asian century.

You've Got to Move

 
The collision of demography and politics in the current crisis should push EU policy makers to move quickly on some of the unfinished business of European integration. In response to my recent post on the outmigration of qualified young people from the parts of Europe undergoing the worst of the recession, Steven Hill asked why that is a bad thing - isn't that what labor mobility is supposed to mean?

Yes, in the US, at least before the housing collapse meant that many people are stuck with homes they can't sell, people in areas with high unemployment moved to places where jobs were more plentiful. And that is how labor markets should work.  In Europe, though, even beyond the difficulties imposed by factors like language and culture, there are impediments to labor mobility that need policy action.  The portability of pensions is an issue that has to be solved.

While state pensions are relatively straightforward and EU workers who retire in a different EU country than the one(s) where they were employed can apply for the accumulated pensions.  However, in the case of private supplementary pensions, which are not covered under current EU regulations, many people face the loss of significant contributions when they move across borders, which is an obvious disincentive for mobility. 

One thing we know from the crisis is that state pensions in the future will be wholly inadequate to support the elderly. Lower state revenues and aging populations will put tremendous pressure on pension systems. Dependency ratios (the proportion of the very young plus the old to the working population), already high in Europe, are expected to double by 2060 in low birthrate countries, which also in large part are the countries in the worst financial shape. This makes it imperative to put incentives into place for additional savings beyond state schemes, to ensure that retirees are able keep accumulated private funds wherever they live and to sort out how they are to be taxed.

Recently, Benoît Cœuré, a member of the Executive Board of the ECB, noted that the European Council has taken measures to increase mobility and pension portability.  With this shift in thinking, he claims, European policy makers "are acknowledging that the smooth operation of the single currency requires flexible markets for goods, services, and labour."

Still, it has been close to a decade (2005) since the Commission published its first proposal for a directive covering supplementary pensions. Little progress has been made in that time. This year, the Commission is supposed to restart work on a pensions portability directive. Although exact figures are hard to come by, it is clear that the number of young and talented Europeans leaving home to find work is exploding - last year 1.7% of the Irish population, mostly in their 20s and 30s, left and between 2001 and 2010, the percentage of Italians with college degrees who were living abroad doubled from 8.3% to 15.9%. 

These trends highlight how critical it is that the Commission move on a new directive and push member states to come to an agreement. 

Members of the Club

All the drama surrounding Europe’s debt crisis has prompted a great deal of discussion about which countries are fit for membership in the club –should Greece stay, should it go from the Eurozone., etc. But the economic crisis has both overshadowed and exacerbated problems of another sort in Europe - whether countries meet the minimum requirements of a democracy to belong to Europe.

Yesterday a referendum was held in Romania to try to oust center-right President Traian Basescu, organized by his rival, the center-left Prime Minister, Victor Ponta. It failed only because it was unable to attract 50% of the voters but 80% of those who did vote were in favor of recall, at least in part because of unhappiness of the dire economic situation in Romania which has seen tax increases, a currency losing value against the Euro, and a 2009 bailout by the IMF with heavy conditionality.

The political turmoil has in turn exacerbated the economic situation since the uncertainty over governance has frightened international and domestic investors in a country where investments depend on the backing of the state. More important, however, is the way in which politics are being conducted. The political machinations that have undermined the Constitutional Court, intimidated the judiciary, and led to emergency decrees to place the recall on the ballot, have called into question the rule of law in Romania.

In a scathing report by the EU published 10 days ago, the Commission noted:

"[T]his report is adopted at a time when important questions are raised with regard to respect for rule of law and the independence of the judiciary in Romania. Overall progress [in terms of judicial reform and anti-corruption] has to be assessed in the context of a wider social recognition of key principles such as the rule of law, and the independence of the judicial process as part of the checks and balances of a well-functioning democracy. A well functioning, independent judicial system, and respect for democratic institutions are indispensible for mutual trust within the European Union, and for gaining the confidence of citizens and investors.

The Commission considers that recent steps by the Romanian Government raise serious concerns about the respect of these fundamental principles. These steps took place in an overly polarised political system where mistrust between political entities and accusations are a common pattern; however this political context cannot explain the systematic nature of several actions. While certain actions may be partly explained by this political polarisation, they raised serious doubts about the commitment to the respect of the rule of law or the understanding of the meaning of the rule of law in a pluralist democratic system… The Commission is in particular extremely concerned by the indications of manipulations and pressure which affect institutions, members of the judiciary, and eventually have a serious impact on society as a whole. [T]he current controversies pose a serious threat to the progress achieved so far and raise serious questions as to the future of the reforms already launched."

Romania is the second country (after Hungary) where alarm bells have gone off about a recent entrant's commitment to democratic principles that in theory are part of the admission price to the EU club.  Calls for increased monitoring and report writing by Brussels only serve to highlight the fact that as with EMU, the EU lacks any real mechanisms for persuading countries to follow the rules of a club to which they were admitted prematurely in the first place.