World leaders’ advisers know global economy is heading for the rocks but fail to demand a change of course
The leaders of eleven global economic institutions – like the IMF, World Bank, OECD and ILO – have published a pre-Davos statement which draws attention to the need for growth above all else. Much of their analysis echoes what trade unions and pundits like Martin Wolf and Paul Krugman have been arguing, and many of their prescriptions are the same too. But their sometimes coded language still gives succour to the deficit doom-mongers, and they cannot bring themselves to advocate a change of course away from the austerity they implicitly condemn (Larry Elliott was rather kind to them in the Guardian), or the policy changes that would deliver fairer societies by redistributing wealth from the rich to working people.
The statement is described as representing the personal views of the institutions’ leaders – no doubt because it is so far removed from the views of the Governments whose consent would be needed to make these views the official policy of the institutions.
It stresses the danger of ‘decelerating growth’ (by which we are presumably meant to read ‘imminent recession’ but without them copping the blame for talking down the economy), high unemployment (especially among young people), and the possible resort to protectionism. It calls for green growth, and explicitly supports “the work of the International Labour Organisation and others in assisting governments” to develop policies to tackle high levels of unemployment.
But there is no grand call for the Governments of the European Union, Canada or the legislature in the USA, to change course by abandoning austerity. And there is no call for the redistributive policies which even the OECD recognises would be needed to address the growing inequality in developed economies. That would require the rewards of productivity growth over the last ten to thirty years (depending on whether you are in Europe or the USA) to be passed on to the working people who delivered that growth, and a concomitant reduction in the wages, bonuses and dividends paid to the people who own and run multinational businesses – especially in the finance sector. Such a redistribution would allow personal debt to fall without damaging demand, and increasing wages could fuel the recovery that the developed world so badly needs.
Instead, there are circumlocutory calls that suggest measures to reduce public sector deficits should continue, the usual coded calls for labour market reform and efficient public sectors and the obligatory attacks on “growth-destroying protectionism”, regardless of the lack of evidence that any such trend has emerged. The closest they come to charging the UK and other Governments with cutting too far or too fast, or in an unfair way, is to say that countries must “Manage fiscal consolidation to promote rather than reduce prospects for growth and employment. It should be applied in a socially responsible manner.”
This message, sadly, will not get through even though it was printed as a full page advert in Friday’s Financial Times. It needs repeating hour after hour at the meetings and cocktail parties in Davos this week, and it needs to become much more explicit.
Here’s a summary of what they should actually be telling world leaders, as brief as I can make it:
“Government austerity measures are destroying the prospects of growth, throwing millions on the dole – including a generation of young people – and adding to global poverty and inequality. Change course now to boost greener growth by investing in infrastructure, boosting quality public services and redistributing wealth by increasing taxes on the rich and raising wages for the working and middle classes.”