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Heavy hitters fail to see the real threats
- INEQUALITY:
- Technological advance and globalisation mean skills matter more and more. But it is not as though governments have been ignoring these issues over the past decade or more, a period when inequality has increased markedly in many countries.
- The evidence is that inequality is lowest in countries where there is solid growth, strong collective bargaining and supply-side interventions. The high-tax Scandinavian model, in other words.
- JOBs:
- There was a failure to acknowledge the real cause of the global unemployment crisis: a lack of effective demand. Growth in the developed west is depressed, partly as a result of the legacy of debt and partly because of self-defeating austerity programmes.
- The United States, where unemployment is coming down, is the notable exception to this rule, but even in the world's biggest economy the recovery from the slump of 2008-09 has been patchy and slow in historic terms.
- Sooner or later, policymakers will understand that the real threats are mass unemployment and deflation, not inflation and the size of budget deficits.
- EUROPE:
- Finally there's Europe, where — ostensibly at least — there does appear to have been some progress.
- However, Greece's problem is not going to be resolved simply by forcing private sector creditors to take a big ‘haircut'. Avoiding a Greek default will require public sector creditors to accept losses too.
- Sovereign debt is a symptom of a deeper problem: the gap in economic performance between the rich north and the poor south of the eurozone.
- Fixing that problem requires more than just austerity, it requires closer political integration and the floating of Europe-wide bonds in order to transfer resources from north to south.
