Author Bill Emmott Our economies may be in recovery, but they are far from healthy, warns Bill Emmott, who writes with the authority and assurance of a former editor-in-chief of The Economist.
He believes that the most insidious of the ‘enemies that lie within’ is the swollen, still largely unregulated financial services sector, that was responsible for the recent recession.
Ten years on regulators still have ‘no real idea’ about what is going on in areas of international financial services. A thoroughgoing overhaul of a ‘socially useless’ industry would strengthen confidence in the world economy.
Governments should withdraw their commitments to intervene to save investment banks – safety-nets only encourage risk-taking – and look at banning certain forms of trading.
The lack of serious reform in the years since 2008 is attributable to the lobbying power of the banks and finance houses.
They, like the tech industry, buy themselves freedom from scrutiny by generously funding politicians, who are reluctant to move against these important (even essential) donors to their electoral campaigns.
Internal threat
Another grave internal threat to the West is debt. Emmott considers the examples of France and Italy, two important countries with stagnant economies and generous pension provision.
A state with a growing, dynamic economy largely funds pensions from taxation, but a state with a struggling economy has to borrow:
Public debt is the most pressing economic problem facing these two countries, and it will not become manageable until both undergo what Emmott would call a ‘shake-up’: they need to reform their employment laws, so that hiring – and laying off – workers becomes easier and cheaper for employers.
The more people in employment, the greater the tax take and the more affordable benefits such as pensions become.
Emmott also makes the good point that pensions and the welfare state would also become less of a burden on the state if people extended their working, tax-paying lives.
He disputes the notion that pushing back the age of retirement would make it more difficult for younger people to enter the workforce: if the state’s income from taxation is healthy it will have more money to invest in the creation of employment for the young.
Emmott isn’t terribly exercised by the challenges posed by Russia and China. Yes, these powers have taken advantage of western preoccupation with economic and financial matters in recent times to exert themselves militarily, Russia in Ukraine, Syria and Georgia, China in the South China Sea, but both lack the reach of the United States, and probably always will.
Russia is in economic and demographic decline, a power but not a rising power. China is in better shape, for now, but lacks allies, unless you count North Korea.
The United States, on the other hand, has military bases and friends around the world. It is demographically healthy, annually absorbing large numbers of young educated migrants from around the world, and it’s in better economic shape than President Trump would have you believe.
A fascinating, commendably clear book reminds us time and again that many of the woes of the West are attributable to the greed and under-regulation that caused the recent crash.
Since then many people in the West have been living resentful, diminished lives. Politicians have spent a good deal of their time dousing financial fires or devising ways to reduce spending.
They have not properly attended to pressing matters such as growing disenchantment with the EU, concern about the effects of globalisation, and rising opposition to immigration.
The populists with their pat solutions have seized their opportunity, deepening our uncertainty about the future.