The World Economic Forum began earlier this week. Delegations of the worlds richest and most powerful people have travelled to the Swiss Alps to discuss the issues that face the economy and hopefully come up with solutions. Davos, briefly holding the highest concentration of billionaires in the world, of course drew a number of our own politicians looking to preen and posture during their speeches and court the world markets in the backrooms of the conference centre.
By all accounts this years forum has been a rather subdued, nervous affair. The fifth since the 2008 financial crash, it has become clear the the problems arising from the struggling banks have seeped into nearly every aspect of the economy. When the first talk at a conference catering for 70 billionaires begins with a debate on whether 20th century Capitalism is working for the 21st century, and 40% of those attending say that it is not, then there is clearly some appetite for change. The right questions might be being asked, but few seem ready to answer them.
The Eurozone crisis drags on, although the ECB has been able to provide liquidity to many of the struggling banks, the structural problems inherent in the north south divide, Greek insolvency and the long term viability of many governments borrowing with such high interest rates remain. There are even rumblings that Hungary may be the next domino to topple.
Alongside these problems, rising inequality and high unemployment are being suffered by every economy of the West. Nouriel Roubini, nicknamed Dr Doom after he correctly predicted the 2008 crash and hasn’t revised his sceptical outlook on our economic future, warned that these issues were a political powder keg. Social unrest stemming from austerity programmes has the power to topple governments if allowed to get out of hand, especially concerning to the semi-illegitimate unelected technocrat governments of Greece and Italy.
David Cameron and George Osborne were very keen to show that they have all the answers, despite the UK GDP dropping by 0.2% in the last quarter of 2011. They both repeated the theme of prescribing one thing while doing, or achieving something very different. A cynical person might suggest that they were simply telling business leaders exactly what they wanted to hear, regardless of their statement’s validity or their political fallout. Not an awful lot of difference to how they act at home then.
Cameron launched a scathing attackon European leaders, criticising them for not solving the Eurozone crisis sooner and permitting British recovery. “Tinkering here and there and hoping we’ll drift to a solution simply won’t cut it any more.” The solution, apparently is boldness, he mentioned it no less than 15 times in his speech. It made his lecturing rather difficult to swallow for many EU leaders considering that Cameron’s own display of “boldness”, vetoing the last EU treaty, sent the summit spiralling into chaos.
The financial transaction tax, the sticking point of the veto, was singled out as “madness”. Cameron suggested that the tax “could reduce the GDP of the EU by 200 billion euros cost nearly 500 thousand jobs and force as much as 90 per cent of some markets away from the EU.” Suddenly it seems that Cameron is less willing to act boldly to reign in the finance sector, unite the EU as a single political bloc and lead the way for a global financial transactions tax.
Continuing on the theme of Euro bashing, and implicitly offering the UK as a viable alternative for businesses, Cameron told us: “five EU Member States are now less competitive than even sclerotic Iran.” He suggests de-regulation and “red tape cutting” as solutuons, offering the “Agency Workers Directive, the Pregnant Workers Directive, the Working Time Directive.” as examples of job destroying burdens firms face. Phillip Jennings, general secretary of the UNI global union, told the Guardian the PM's championing of deregulation was based on a "big, bold lie". That actually the most competitive economies, like those of Germany and France, are actually those with the highest levels of worker protection.
Throughout the speech Cameron boasts of his austerity credentials, including going so far as to announce a successful re-negotiation of public sector pensions, which may come as a surprise to the unions still bitterly fighting the government. Seemingly blind to the damage it is causing austerity is recommended to the rest of Europe, and the world. He seems to have forgotten that without a large export market the UK’s economy is hugely dependent on domestic spending, cutting British people’s incomes only damages the economy. If he wasn’t willing to listen to us, you’d at least hope that he might listen to the supposedly pro-business IMF or ratings agencies who have both said that austerity policy is flawed.
Cameron says “let me be clear: we want Europe to be a success.” but seems both unwilling and unable to lend a hand in making it one. It seems that the UK’s “privileged” position outside the EU caucus is limited to making snide remarks on the sidelines. For a leader that is going to struggle even getting int the same room as the action at the next EU summit, one would have thought that he might be a little more forgiving of our neighbors and our best chance at a relatively painless recovery.
Photo by Flickr user World Economic Forum.