“Somebody must do something to sort this out” say world leaders

Summary

The lack of leadership shown by the top politicians of today is inversely proportional to the number of books and articles written about leadership.

I’ve moaned about this in previous articles – Are our senior politicians fit for purpose?, The failure of the global political elite, and Has the media helped dumb down our politicians?

The European political establishment’s response to the crises has been woeful. If it was anything but, we wouldn’t be in this mess. But the fudging of the rules for political expediency while turning a blind eye to things that needed big spotlights on them are now coming back to bite with big chomps.

The UK’s reaction hasn’t been been helpful either. Political expediency means ministers can get away with “This is a problem the Eurozone countries need to sort out” – while at the same time blaming the UK’s miserable economic and employment figures on “problems in the Eurozone”. My take? They can’t have it both ways. If ministers are right on the latter – then surely that justifies far stronger involvement in trying to sort out problems in the Eurozone rather than the carping from the sides we’ve seen. If ministers are wrong on the UK’s economic problems being primarily due to Europe, then saying “This is a problem the Eurozone countries need to sort out” is fine – but it means they need to look a little bit closer to home as to the source of the UK’s economic problems – which they cannot do because of political expediency.

“Is ‘Plan B’ a rapper who has recently gone solo after leaving the urban music collective “Big Society”?

Paul Krugman recently did the rounds of the UK studios – here on Newsnight and here on his website. Essentially he’s saying that austerity isn’t working. Bill Clinton said something similar in what is known as a fallacy of composition. It may make sense for an individual to do a given action, but when everyone else does it, it doesn’t work and can end up making things worse.

This paragraph is heavy, but explains the above.

This is what happened on the back of the debt crises of the early 1980s – when the World Bank and the IMF imposed ‘structural adjustment packages’ on developing countries that had a devastating impact on the people of those countries. It was this impact that led to the rise of the Jubilee 2000 ‘drop the debt’ movement. Policies that were imposed included widespread privatisation of public utilities and the encouragement of ‘export-oriented’ economies – in particular through the devaluation of currencies. The problem with both is that the former restricted people’s access to essentials – such as water, while the latter led to huge price hikes for the very goods that were essential for economic development which needed to be imported. As these goods (capital goods) tended to be price inelastic – that is small changes to the amount of goods imported leads to proportionally greater changes in the price. Sending the price of these goods up due to a currency devaluation won’t make much of a dent in reducing imports. All that happens is the value of imports rises – making balance of payments worse, potentially exacerbating the debt crisis the policy was intended to solve. Encouraging lots of developing countries to increase production of commodities might make sense for one country, but when they all do it at the same time, world prices fall and the total value of exports fall, even though total volumes of exports may have risen.

Comprendez?

Well…this is what we face with austerity. It may make sense for one country to cut spending and boost exports in the face of such a crisis – assuming that there are other countries willing to invest in said country and purchase their exports. But the whole world seems to be cutting public spending, focusing on exports and claiming that they are world leaders in green technology. Any UK politician claiming the UK is such a leader in the last clearly hasn’t been to Scandinavia or Germany. They are light-years ahead of us.

If everyone cuts their spending, you have a massive reduction in demand. If there is no demand, no firm is willing to invest because they worry that no one will buy the goods or services concerned. It’s not as if there’s a shortage of cash in corporate accounts. It’s not as if the rich are struggling either – they are getting wealthier. But I guess there is only so much you can spend on opulent parties and luxury goods to keep others in jobs.

Widespread economic inequality is not good.

Joseph Stiglitz said so. Nick Clegg did too – but the latter (as with many politicians) are hamstrung by their own political ideologies to do anything radical about it. Nick Clegg made a speech about inequality here. That a technocratic measure (the publication of social indicators) was one of the highlights of the speech for me spoke volumes. In 1945: Widespread health problems? Let’s have an NHS. In 1945: Widespread homelessness as a result of bombing during the war? Let’s have a massive house-building programme and build lots of homes. Today: Widespread economic and social inequalities? Have some indicators. Today: House and rent prices massively out of sync with people’s wages? Let’s scrap HIPs!

It’s tinkering at the edges. No one at the top of mainstream politics seems to want to do anything radical about the problems of today. Is it because the filtering processes in political parties mean we have dumbed-down ‘on message’ politicians? Is it because too many people with genuine talent, competence and ability don’t want to put them through the hell of life in the goldfish bowl of a feral media?

With all of the political parties I struggle to see where the future political titans are going to come from: People who are competent, capable, cerebral, can inspire and can achieve in the face of fearful odds and incredible opposition.

It is in this global economic context that makes the outlook for those of us under or unemployed so utterly bleak.

 

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