by Jonathan Todd
In the summer between the Arab Spring and the European Autumn, my wife and I were naturally delighted about the birth of our first child, Stanley, which helped push the world’s population over 7 billion.
It is autumn in Europe because, notwithstanding the UK’s estrangement under David Cameron, the comparisons between the euro and the titanic continue to hold water. And they will continue to unless the euro is fundamentally reformed.
Cameron has swallowed the City of London’s line on a financial transactions tax. This tax would not be the end of the universe. Indeed, it could contribute towards a rebalancing of the UK economy. However, the move towards this tax seems driven by a determination to punish “Anglo-Saxon capitalism” for the euro’s failings, rather than correct the structural flaws within the currency union, which remain largely in place.
In spite of the persistence of repression in Egypt, Syria and elsewhere, spring continues in the Arab world, as democratic flowerings have begun that seem to have an irresistible force. These flowerings were never going to be quick and painless, but the drawn-out process of moving from the left to the right of Ian Bremmer’s J Curve.
Stanley is named after his great-grandfather, who remains as optimistic about America as he did when he emigrated there from Poland over 70 years ago. Hope carried him across the Atlantic. Now hope moves eastwards. Hope powered the Arab Spring, the protests in Russia and the rise of the BRICs. In the decade since the term BRIC was invented these countries have contributed seven UKs (2001 vintage) to the global economy.
These youthful, networked societies believe that they can build better futures. In contrast, across America and Europe, there is a profound sense, almost unprecedented in the hundreds of years since the enlightenment, that our children may not enjoy a better tomorrow. As we stare down the barrel of a decade of lost growth and a lost generation of unfulfilled talents, the economic advance of the BRICs continues, where they speak not of a global recession but of the north Atlantic recession.
The east is as hopeful as the west is hopeless. Does this mean that the J Curve needs a third axis? The west might be to its right, as a consequence of our security (the y-axis) and our openness (the x-axis), but do we need a z-axis that captures the declining hope and rising fear of the west? The fear index of the west outstrips that of the BRICs?
There is no inevitability to this, however. The challenge for politicians in the west is to build institutions and grow markets such that the hope of the east can be mirrored in the west. “Asians want to replicate the west, not dominate it”, according to Kishore Mahbubani, author of The New Asian Hemisphere. “They want to create the same comfortable middle-class societies that the west has had”.
While the relative economic position of the west will decline as these societies are built, the absolute economic position of the west will increasingly depend upon the ability of the west to sell to these emerging middle classes. Tremendous opportunities for British business exist in this but we presently export more to Ireland than we do the whole of the BRICs combined.
Nick Clegg made much on the Andrew Marr Show of British influence in Washington DC running through Brussels. But, given that the UK’s economic prospects depend as never before upon tapping into the growth poles of the east, should we not also be concerned with the extent to which British influence in Beijing and Delhi runs through Brussels?
The marginalisation of the UK in Brussels reduces our capacity to influence the single market rules applied within the EU and to shape the external actions of the EU. The biggest carrot that we can offer emerging economies is access to a single market that will now be shaped with less reference to British perspectives.
It is population growth in these emerging economies that does much to explain another observation made on the Andrew Marr Show. Sir David Attenborough’s that there are three times as many people on earth as when he started making TV programmes. As Tim Congdon has noted, resource depletion, driven by this rising population, will impact the economic prospects for our grandchildren in ways that would not have seemed credible when Keynes was writing on the same subject in 1930.
Sadly, deleveraging, rather than decarbonising and resource efficiency, seems likely to be the west’s central economic reality for the next decade or so. Chris Huhne, unsurprisingly, didn’t change this at the UN conference in Durban and nor does the UK’s reduced position in Brussels bode well for our ability to improve environmental policies like the EU-ETS.
For Stanley’s generation to have the same hope and confidence as his namesake requires that the west grasp the opportunities afforded by the emergence of the BRICs and humanity better respond to resource depletion and climate change. These causes have not been advanced by the government in the past week.
Jonathan Todd is Labour Uncut’s economic columnist.