The G20 summit should commit to growth
By Gordon Brown The views expressed are his own.
The build-up to the G20 summit has been dominated by the euro’s failings. With Europe now the epicenter of the global crisis, its continued weakness will dominate the G20 discussions. Even now, uncertainties about Greece’s future — and about the real strength of Europe’s commitment to its new stability fund — has left little opportunity for a focus on the global economy as a whole.
But even if the state of the world economy has featured less than the euro in the preparatory work for the summit, the decisions world leaders will make on the global economy will dictate the mood of the coming two years. President Sarkozy has major global initiatives he will unveil to improve global food security, and may even force his plan for a global financial levy on the agenda. But there is a big choice the G20 must make. Either the world will come together and agree on a coordinated growth plan — or we will retreat into a new, more acrimonious protectionism.
Already the head of the World Trade Organization is warning of a return to protectionism, and every day we find yet another new country following Brazil, Switzerland, Indian, Korea, and Japan in introducing either new tariffs, currency controls, or capital controls. In response, the draft G20 communiqué assumes a free trade world where each continent steps up what it is doing in order to achieve sustained growth.
But a G20 that was really working would take countries far beyond the current draft communiqué — which is a set of bland statements about what each country is doing on its own to foster growth. Instead it would focus on coordinated measures under which countries would agree to support and complement each other’s contribution. If , under an agreed growth pact, China increased consumer spending and Asia opened its markets, and if this was balanced by America and Europe investing more in infrastructure, then over a three year period — as the IMF has suggested — there could be 5 percent more growth and 25-50 million more jobs, with 100 million people taken out of poverty.
A ccordinated approach is desirable because under current policies every country wants to export its way to growth and no one wants to import. But cooperation is not just an option; it is, in my view, a necessity because the world is precariously balanced between a west that consumes the most, and the rest of the world which now produces the most. For 150 years until now, Europe and America monopolized the world’s output, exports, manufacturing, investment and consumption. But in 2010 for the first time America and Europe were out-produced, out-exported, out-manufactured and out-invested by the rest of the world. Today they account for just 41 percent of output, 43 percent of manufactured goods, 47 percent of trade, and 40 percent of investment. But they account for 55 percent of consumption and, if we added other advanced economies, the figure would be 70 percent.
A better understanding between the consumer countries and the producer countries would make for more balanced and more sustainable growth. Indeed, if China was confident its export market could be sustained then it might be more willing to increase domestic consumption, and if America was confident its export markets could flourish then we would have a more confident American consumer and more private investment at home. This was what was envisaged by the April 2009 summit of the G2O and then in the detail of the growth pact agreed to at the Pittsburgh summit in autumn 2009. Unfortunately in 2010 the growth pact has descended into a dispute over currencies, with the American senate now calling China a currency manipulator. A brave attempt by Korea to break from the currency dispute and accelerate growth by putting ceilings on surpluses and deficits failed.
from The Great Debate UK:
Heather Rogers on fixing “Green Gone Wrong”
How can human production be transformed and harnessed to save the planet? Can the market economy really help solve the environmental crisis?
Author Heather Rogers argues in a new book that current efforts to green the planet need to be reconsidered.
The growth-based economy can't help but add to the problems the planet faces, Rogers writes in "Green Gone Wrong" published by Verso.
"I think we can have an economy that supports environmental health, but we have to differentiate between growth and development."
"It's not about feeling guilty, it's not about sacrifice and suffering, it's about understanding how we can have a healthy economy, good standards of living and wellbeing -- within that is protecting the environment."
Rogers, who will speak the Institute of Contemporary Arts on Wednesday, set out her argument for Reuters after a talk in London at the New Economics Foundation.
Sluggish investment will hamper recovery
– John Kemp is a Reuters columnist. The views expressed are his own –
Unable to rely on the wounded consumer, the outlook for U.S. growth in the next three years depends on business investment and exports to take up the slack when stimulus programmes wind down. Ultra-low interest rates will help. But with the economy struggling to work off a huge overhang of unused real estate assets, and not much sign of investment elsewhere, investment spending is set to remain sluggish, condemning the economy to a weak recovery in the medium term.
Federal Reserve Chairman Ben Bernanke and other senior U.S. officials have already warned the rest of the world can no longer rely on over-indebted U.S. consumers as the principal source of global growth. There is no choice but to rely on investment and exports to take up more of the burden.
But investment spending outside real estate has been very depressed over the last cycle; there is no reason to expect it to accelerate much before 2013 at the earliest. So despite signs of a significant cyclical improvement in manufacturing in the past couple of months, the medium-’term outlook looks weaker.
MANUFACTURING BASE STAGNATES Between 2004 and 2008, private sector fixed-investment averaged $2.125 trillion per year (16 percent of GDP), split evenly between spending on equipment and software ($1.025 trillion) and buildings and structures ($1.102 trillion), according to the Bureau of Economic Analysis.
Manufacturers accounted for just $188 billion (8.8 percent of the total), with a higher share of spending on software and equipment (15.8 percent) but only a tiny fraction of spending on structures (2.4 percent).
Their investment simply replaced the loss of asset values due to deprecation ($187 billion) as a result of wear and tear, loss of efficiency with aging, and technological obsolescence. There was no net increase in the manufacturing sector’s capital stock.
Quality early education: Good for kids and the economy
– Joan Wasser Gish is a consultant in the Boston area. A former senior policy adviser to Senator John Kerry, she recently testified before the U.S. Senate Committee on Small Business & Entrepreneurship. The views expressed are her own. –
When the toys are put away and the last youngster is picked up for the day, early childhood education providers like all other entrepreneurs sit down to assess their revenues, account for expenses and make difficult business decisions. And though their services are rife with hugs and games and songs, their work has serious implications for the economy. The child-care sector is a critical driver of economic growth and workforce development. That is why financial leaders and policymakers should do more to support providers as both educators and small-business entrepreneurs.
There are more than 400,000 licensed child-care facilities across the country. They span the economic sectors, with the majority run as sole proprietorship home-based businesses, and the rest split between for-profit and non-profit centers offering early education and care. Most are run by women, and a significant proportion are owned and operated by members of minority groups. Because of the early education and care services they provide, they contribute to both short- and long-term economic growth.
Quality early childhood education is associated with improved worker availability and productivity. Early childhood education enables parents to participate in the labor force. Studies have shown that availability of good early childhood education can reduce employee turnover by 37 to 60 percent.
Conversely, breakdowns in child-care availability are associated with absenteeism, tardiness, and reduced concentration at work. One study estimates that unstable care arrangements leading to absences cost American businesses $3 billion annually.
Early childhood education establishments also contribute to the economy as employers and catalysts of community development. The Oakland-based Insight Center for Community Economic Development estimates that the child-care industry generates more than $50.6 billion in annual gross receipts and 1.85 million full-time equivalent jobs nationwide. When centers locate in low-income urban and rural communities, which many non-profits and some for-profits do, they hire from the local community, enable low- and moderate-income families to participate in the labor force, and purchase and renovate facilities.
But the greatest economic impact of high-quality early childhood education is its beneficial effect on enrolled children. Nobel Laureate economist James Heckman argues that high-quality early education provides “the advantage of an early start to their skill development improving their chances of successfully participating in the job market in later years.”
Early childhood control of the child by the state will lead to state contol of the child’s future as well as of the child’s parents. State sponored humanism will more easily florish and the de-establishment religous values.
Checksbalances
For the UK economy to serve the interests of the UK population then Government control as you set it out would only work if we had impartial politicians(to the banks/finacial sectors, fuel cartels, Brussels and the like) and these politicians would have to operate in accordance with their election manifestos. I do not see a lot of evidence for this now or indeed over the last 30 years. The UK political system has intrinsic problems of corrupted values and a total lack of honesty when addressing peoples concerns. They are only interested in one thing, their own ambitions. People need some protection against rampant capitalism, for this to be so, we must then constrain market capitalism within limits that give a sufficient level of protection.
The constant attack on pensions, salaries and working conditions driving down of the ordinary persons ambitions can only lead to strife.