So hooray Osbornomics is working; we have an incredible growth in GDP of 0.3%. Lets all celebrate. The sad truth of this fact is that it will be taken as evidence of fiscal policy being effective in assuring the future of our nation’s economy.
Unfortunately no fiscal policy can be truly effective until politicians confront the reality that we have fundamental structural problems with the way our economy works. Too much emphasis has been placed on the debt to income ratio of the government and consequently the underlying problems are not even debated, let alone resolved.
If we are to truly improve our faltering economy then we need to democratize the market economy and organize socially inclusive growth.
USA, the and other developed nations have encouraged a mass market economy based on mass consumption. When this mass market economy first arose, during the Bretton Woods era, mass consumption was fueled through the popularization of purchasing power. This occurred initially through a progressive redistribution of wealth and income. Following this initial bout of progressive redistribution in the aftermath of the Second World War there then came several decades of regressive distribution. UK
The developed world prolonged the mass consumption market economy by permitting a massive rise in household debt. This debt has accrued mainly through a massive overvaluation of housing stock. “A fake credit democracy has come to stand in the place of a property owning democracy”. Roberto Unger
This situation cannot be resolved by fiscal stimulus alone or even by robust regulation of finance. History tells us that economic depression is resolved only by an expansion of industry; by an increase in production.
The most significant step that any government can take is therefore to resolve the flawed relationship between finance and production. The retained wealth in the stock markets and in transnational corporations is, in theory, used to finance production. In actuality very little of financial activity relates to production. Consequently rather than acting as a motor to power production, finance is more like the wind, variable and erratic. At one time the wind was integral to world trade, the power behind the fleets of the world. Now the wind is largely incidental, mechanized transport has superseded sail and shrunk the world. However when the weather turns stormy the power of the wind poses a very real danger to the stability of vessels on which we depend. If the ship is blown over then the cargo is lost and the safety of the people who work on the ship is also in peril.
The disjoint between finance and the productive economy has been allowed to persist because of the massive structural imbalance between developed and emerging economies. Nations such as
China and India are awash with commercial and capital surpluses and nations such as the USA and the are living off foreign money. UK
This financial paradox has exempted these societies from the need to face their own problems. As a consequence
China has failed to develop a deep internal market on the basis of redistribution and the USA and have failed to develop the inclusive strategy for growth that they need. UK
Periods of sustained economic development almost always occur at times of industrial development. Hitherto this economic development has, with one notable exception, resulted in a regressive distribution of wealth. If our economy is to continue to provide sustenance to human endeavor then the 21st century Captains of Industry must not only harness the force of the wind to propel innovation but must also facilitate social change.
Structural reforms that promote social growth alongside economic growth are vital to facilitate sustained and sustainable development. The world we live in is volatile, uncertain, complex and ambiguous and as such we need robustness embedded into everyday life. Strong foundations to resist the storms that threaten to blow us over.
Sustainable development has been defined various ways; one of the best and best known was in the Brundtland Report."Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs. It contains within it two key concepts:
· the concept of needs, in particular the essential needs of the world's poor, to which overriding priority should be given; and
· the idea of limitations imposed by the state of technology and social organization on the environment's ability to meet present and future needs."
Unilever, Nike and other global names are recognizing the importance of inclusive growth. Even Primark are recognizing that they have a responsibility for the people who produce their cheap clothing ranges. It is not enough for governments simply to attend summits and set targets; they need to actively lead the creation of a new market economy that puts the interests of people, their children and their grand-children first.
Unless we adopt a model of socially inclusive growth then we cannot hope to leave a better world for our children's children.
The Reckoning - Steve Tilston
Here’s to all the grand children,
Yet to be born great grand children.
All your sons and daughters,
And your own grand children too.
I offer you my hand.
Out across the age’s span.
A misbegotten plan
To leave the reckoning to you
I must apologise,
if it’s written in the troubled skies.
We’ve been peddling lies,
Somehow forgotten what is true.
Though it’s buried deep.
Poison never sleeps.
Through the ages seeps,
To leave a reckoning for you.
We hang on to misguided dreams,
sleepwalk to the brink.
Hey ho, rue the day.
We’re going down in drink.
I have planted seed.
In vain to raise an apple tree.
To entice the bees
to sip the blossom on the bough.
But the bees don’t toil.
Around the tree a serpent coils,
Spits venom in the soil,
And leaves the reckoning to you
I raise to you a toast.
Should trouble come to roost.
For we ate the golden goose,And left the reckoning to you.