Brown’s EU growth strategy must be Keynesian
The Prime Minister’s speech to the CBI on Monday was right to emphasise the importance of Europe to the British economy. The EU has been criticised (most trenchantly – or at least frequently – by the Financial Times’ commentator Wolfgang Munchau) for not having stepped up to the plate during the global economic crisis. This is perhaps unfair – there is serious work going on to re-regulate the financial sector in the aftermath of the crisis, and the EU did struggle to put money on the table by way of fiscal stimulus. But at present, the EU’s economic strategy (determined in 2000 in Lisbon – so it’s called “the Lisbon strategy” – and revised in 2005) has left it unable to intervene sufficiently to create jobs. That strategy is due to be replaced in 2010 – the focus of the PM’s speech – and we need to make sure that the next strategy is fit for purpose: it must, for example, abandon supply-side neo-liberal deregulation and put in place a 21st century, European Keynesianism.
Keynes even got a name check in Gordon Brown’s text (“in the 1930s JM Keynes said we can either fail conventionally or succeed unconventionally”). But more important was the passage on a new European growth strategy:
“Europe needs to think about how we create the growth for the 10 million new jobs the continent needs. And higher levels of European growth would mean thousands of new jobs in Britain. Just 1 percentage point higher European GDP growth for a decade means £15 billion a year net benefit to UK businesses. Which is why I am calling on European leaders for a renewed focus on delivering European growth. And I am pleased to report that under Prime Minister Zapatero of Spain’s leadership growth and jobs will be the priority for the next Spanish presidency of the European Council. And I will publish our British proposals for a new European growth strategy.”
The original Lisbon strategy was a ten year roadmap for making Europe the most competitive economy on the planet. The global economic crisis left that goal in tatters, not just because of the recession, but because EU leaders had restricted themselves to a small range of tools – monetary policy under the control of the European Central Bank, and supply side economics. The original three pillars of the 2000 Lisbon strategy (economic, social and environmental) were slimmed down in the 2005 review to concentrate on the economy, and the supply side in particular. Climate change forced the environment back onto the agenda, and the economic crisis might – but not necessarily – restore the social aspect.
But critically, we need a new strategy to have a more Keynesian edge: creating not just new skills but new jobs. This is, at last, the sort of thinking that Lord Mandelson has been doing at BIS, and the TUC has welcomed it. It would involve a new strategy for broadband, better infrastructure and transport links around the continent, and possibly more expenditure on care for children and the elderly, not least to enable women’s participation rates to grow (they’re high in the UK and other northern EU member states, but still low elsewhere).
The European Trade Union Confederation will be developing its proposals for the new European growth strategy at its Executive Committee in December – watch this space.