Putting faith in small things to deliver job growth and boost economy
Austerity has morphed into one of those weird cults whose proponents stick to their crazed beliefs, notwithstanding the absence of a single shred of evidence that supports them
Chris Johns. Photograph: Alan Betson / THE IRISH TIMES
Where will the new jobs come from? Branch closures at Ulster Bank and loss of a call centre contract for Hewlett Packard could lead to over 1,000 job losses over the next 18 months. These announced losses serve as a reminder, if one were needed, that unemployment may have shown signs of stabilising but it is still at crisis levels.
What hope is there for significant job creation? Is enough being done to get us back to anything like full employment?
The short answers are mostly negative. Austerity has failed to deliver the growth, any growth, that its promoters promised. It is worse than a failed doctrine: having no plan B, the designers of failed austerity are sticking to their guns.
Austerity has morphed into one of those weird cults whose proponents stick to their crazed beliefs, notwithstanding the absence of a single shred of evidence that supports them. Europe, as a result, is stuck in recession. This looks unlikely to change. The macro policy levers that used to deal with these things have rusted away and are beyond repair.
Others have written extensively about this colossal policy failure, Paul Krugman and Martin Wolf in this newspaper; Simon Wren-Lewis most prominently amongst UK academics. They long for the repair of the traditional policy apparatus: an understandable if rather futile aspiration. Others have pinned their hopes, in Europe at least, on a change of course following this summer’s German elections.
But if the need for rather dramatic change is obvious, the likelihood of it occurring seems utterly remote.
The powerful head of the Bundesbank still seeks to slay the inflation dragon though actual inflation seems to be as mythical as that ancient beast. So not much hope of achieving even British or US growth rates, which although faltering and not much to write home about are positive and largely the creation of central bank policies; the ECB may have promised to “do what it takes” but these words have yet to be tested in open combat.
Without something turning up (namely growth, of a spontaneous kind), the best analysts are convinced that the worst of the euro crisis is yet to come. It is hard to disagree.
Europe without growth will ultimately fail. Growth might emerge out of nowhere but this seems to be one of the less likely outcomes. So the current path looks completely unsustainable. Where and when the next crisis occurs is less obvious. That’s the nature of these things.
Can we do anything? Not much, particularly in the short term. But, whatever happens next, we are most unlikely to be given back our macroeconomic toys; we have no exchange or interest rate to play with and the grown-ups are not inclined to release their grip on pretty much anything else. Our only flexibility, such as it is, is on how fast spending is cut and taxes further raised.
An audit of what is still open for us choose for ourselves reveals a rather sparse set of instruments. My suggestions, in my previous column, around better corporate governance and ethics met with some interesting responses. Some people thought they could identify the drugs I must have been taking: most were sceptical. We have such poor governance structures, that are still so deeply ingrained, that we cannot even aspire to do better. But if we don’t change, things naturally will stay the same.
More generally, we need of necessity to look at the list of micro instruments still available to us – and to use them. Micro, by it’s very nature, means small, and probably with an impact that occurs over time. But if we do enough of these small things, the cumulative impact should, eventually, be significant.
Jobs growth, in most economies, usually come from small to medium sized firms. We have to make the environment better for these companies; we need more of these businesses to be formed.
My arguments around governance are based on a view that the operating environment should be as simple and as strict as the rules of the road. And it’s not just about the rules: lots more can be done.
An eminent professor was asked, a long time ago, what he thought the euro would mean for Ireland. He argued that this country would, in time, come to resemble his home state, Montana, the point being that Montana is mostly empty.
At this stage I would try anything, no matter how small. The nature of unsustainable situations is that they are precisely that.