For Cameron big bridges are sexier than real jobs
Conservative economic policy is still spellbound by supply-side glamour, so the market has no part to play in creating growth
Simon Jenkins
guardian.co.uk, Tuesday 1 November 2011 21.30 GMT
The worst evil economics can inflict on humans is unemployment. Not lower pay, poor working conditions, costly housing or enforced migration; just the lack of a job. To be able-bodied and out of work is debilitating to an individual and a waste to society.
Figures todayfrom the Office for National Statistics and earlier ones from the OECD and the International Labour Organisation all point in the same direction. The British and other European economies are running on empty. Only public sector borrowing seems to prevent renewed downturn. Today's unemployment rate of 8%, or 21% of under-24s, is a scandal. An unprecedented one million young Britons are jobless. This squandering of labour and loss of wealth is stupefying.
With luck, Greece's decision to hold a referendum on whether to endure further austerity is a blessing. It could jolt world leaders about to meet (yet again) in Cannes into much-needed panic. They have believed too long that bailing out banks is all recovery needs. They have ignored any stimulus to demand. Without demand, no one lends and no one borrows. Nothing moves and the money dies.
The credit crunch was the result of a massive policy failure for which the economics profession has yet to muster a "truth and reconciliation" commission. There is no point in merely abusing Americans for the housing bubble or Britons for the borrowing spree or Greeks or Italians for their self-indulgence. It is like abusing Germans in the 1920s for the first world war. Blame is one thing. We are where we are.
What matters is to learn lessons. The 1930s depression was in large part the result of a similar policy failure, of strangling money supply at the bottom of an economic cycle. Recovery then was heavily reliant on rearmament, from rising public expenditure on the guns, ships, planes, steel and coal of mighty armies. That spending was not productive, indeed it was appallingly destructive. But it did the trick. It fuelled demand and thus jobs. It conformed to Keynes's model of burying bags of silver and letting people dig it up.
There are some parallels today. American and British budgets are in thrall to the military-industrial complex. America's integrity as a nation is not under the slightest threat: yet this year it spent $500bn on defence and billions more on "wars of choice". Britain, while cutting back domestic spending, finds a billion pounds to fight wars in Afghanistan and Libya, countries which pose no conceivable threat. This particular stimulus to demand, through building aircraft carriers, nuclear missiles and fighter bombers, went through parliament on the nod.
The economist Paul Krugman writes in this week's New York Times on the phenomenon of "weaponised Keynesianism". He points to the eccentricity of large defence programmes being considered acceptable, not as value for money, but from some vague criterion of patriotism and national prestige. They are like Olympic Games. Other forms of civilian job creation are required to prove a "business case", which in recession they often fail to do.
I doubt if any western government sees total war as a path to recovery, though the eagerness with which leaders prepare for future wars of choice remains alarming. Yet what other stimulus to growth is on the horizon? George Osborne stated last year that his proposed cut of half a million public sector jobs by 2015 would be replaced by equivalent jobs in the private sector. He did nothing to stimulate those jobs, and they have not appeared in strength.
The cabinet has so far a one-club policy: quantitative easing. It has printed £200bn for banks. It will bail out bankers but not shopkeepers, manufacturers or local services, public and private. It is against raising benefits (or cutting taxes) to stimulate demand, as that might infringe budgetary austerity. It sets its face against such short-term cash injections as high-street vouchers or consumer goods scrappage schemes to give buoyancy to markets in the depth of recession. Scrappage rescued the US car industry from bankruptcy and doom.
Instead there are signs of a different sort of panic, to create growth from grand projects, if only ones taken down from the old shelf, to make it seem that someone cares. The reported list recalls the dam-building obsession of the World Bank at its worst: toll roads, bridges, high-speed railways, turbine parks, power stations. These are projects as far from the high street and as close to the headline-grabbers of Whitehall as possible. They include "making Aberdeen a Saudi Arabia of wind", building an Oxford to Cambridge motorway, erecting a Severn barrage, a railway through the Chilterns and an airport in the Thames. Most are poor value for money and damage the environment in ways that would normally be unacceptable.
Nick Clegg last week offered £1.4bn to Airbus, Pirelli, Lotus, JCB, pharmaceuticals, universities and local councils, much of it "for promotion". A full £36m is to go, in the style of an American pork barrel, to a foundry near Clegg's Sheffield constituency. Initially such money is spent not on taking workers off the dole but on consultants, accountants and fee-earners without whom Whitehall will not disburse money. Projects are rarely "spade ready", and have a low job-creation multiplier. In the short term they are "middle-class welfare", subsidising those hardly in need and more inclined to save than spend.
The contracters of big projects, like bankers, sit comfortably in the laps of politicians. When Cameron printed the equivalent of £3,300 for every man, woman and child in the country, I am sure it never occurred to him to give it to every man, woman and child, as opposed to the few he liked and knew. Yet if he had given it to every individual, there can be no shred of doubt that the economy would be better off now. Fewer shops would be closing, more reordering, more hiring and fewer firing. More banks would be lending more money to businesses because order books would be longer and collateral more reliable.
British economic policy remains spellbound by supply-side glamour. Big projects, like bank bailouts, are sexy. Leaving money in the pockets of consumers is not. Deep in the psychology of power lurks a yearning for the embrace of prestige, for life in a newly built Zil lane to a perpetual Olympics. Policy is essentially elitist. It distrusts the marketplace and the decisions of ordinary people. It strives to look after its own.
For David Cameron big bridges aresexier than real jobs | Simon Jenkins | Comment is free | The Guardian
For Cameron big bridges are sexier than real jobs
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