The big job for the G20 leaders, meeting among the millionaires’ yachts in Cannes, is to produce jobs. Not growth strategies, not euro-crisis management plans, not bank bailouts. All of these have been tried and failed.
Of course, the G20 will start by ganging up on Greece and rightly so. The behaviour of George Papandreou, the Greek prime minister, has been disgraceful. Like Papageno, the bird-catcher in Mozart’s The Magic Flute, he enchanted European leaders into believing he could be trusted to deliver his side of the bargain which would save the Greek economy. But less than a week later he has thrown everything into turmoil again by using the politician’s get-out card, a referendum.
Ask the Greeks if they want more austerity and they are bound to say No. Just as the Icelanders did. At that point, it would be best to cut Greece loose from the euro and let the drachma float away downstream. Yes, the banks, including the Royal Bank of Scotland, would lose a lot of the money they unwisely invested. RBS shares have already plunged 8 per cent in anticipation of this unhappy event.
Having disposed of Greece, the G20 leaders will hopefully move on to saving the rest of the planet. China will be asked to allow its currency to float upwards and to invest in the euro-crisis fighting fund, the European Financial Stability Facility. All countries will be urged to ease their austerity measures and get their economies back into growth. There will be talk of reducing trade barriers, of action against tax havens and even the introduction of an international transactions tax.
But much of this will be just talk, unless the leaders can be shaken out of their millionaires’ malaise by the dire warnings from the professional analysts that the world stands on the edge of another great recession. The Organisation for Economic Co-operation and Development this week warned of a “gloomy outlook” of low growth over the next two years, with growth in the euro area falling to 0.3 per cent next year, for instance.
But even more to the point was the prediction from the International Labour Organization that it will take five years for employment in the advanced economies to return to pre-crash levels. It suggested that in 45 of the 118 countries studied there was a risk of civic unrest because of the lack of jobs. It is estimated that 80 million jobs are needed over the next two years just to get back to where we were in 2007. Overall, there are 200 million people registered as unemployed in the “industrial” world, not to mention the millions flooding into the cities in the Third World.
What is needed is not so much a growth strategy as a jobs strategy. They are not the same thing, no matter what the politicians say. There is the all-too-common phenomenon of jobless growth seen in the 1930s, and again the 1970s and the 1990s. In fact, there is a strong argument for making growth in employment, not growth in GDP (gross domestic product), the main measure of economic prosperity.
There is a danger of course that in our enthusiasm for creating jobs we create non-jobs – clerks in the Indian Civil Service in the 1930s spring to mind, or collective-farm workers in Soviet Russia, or security police in Arab countries before the Spring. These may have been inefficient systems, but at least they kept wages churning round in the economy.
A certain amount of economic growth is necessary if everyone is to be fed and housed and clothed and educated. We were reminded this week that the world’s population has reached seven billion. But a mature economy does not need to grow at 3 per cent or 5 per cent or 8 per cent as the politicians would like. Wealth can be redistributed and worthwhile jobs created with growth running at 2 per cent, as it has for the last 30 years in Britain. Low growth is not only an option, it forces us to think about how we apply our resources – and, of course, it is kinder to the planet.
Nor is manufacturing the only route to growth and employment. At least 70 per cent of all economies are dependent on other things – service industries, the public services, retail, agriculture, etc. In Britain, manufacturing represents just 11 per cent of our economy, the same as in the USA. Even in Germany, the powerhouse of the European Union, manufacturing only accounts for 29 per cent of the economy.
The G20 leaders, in my view, need to think of ways of producing jobs in all areas of their economies – energy, education, social services, sport, the arts, as well as in manufacturing. And they need to target jobs, not growth.
It seems to me that much of the restlessness in the world today – from the anti-capitalist protests, to the Arab Spring, and even to the worries among the middle classes about employment for their well-educated children and income in their later years – stems from the lack of decent jobs. Eight per cent unemployment in the UK, and one in five young people without first jobs, is just not good enough.
The political leaders in Cannes need to do something radical over the next few days. Even if that means frightening the diplomats and the financial markets. As one poster in the George Square protest in Glasgow put it this week: “Sorry for the inconvenience caused, we’re just trying to change the world.”