This year has already begun with a rare left to right consensus that the financial system as we know it is not just undermined by its own inherent injustice and inequity but is actually in a crisis as great as that caused by the banking collapse of 2008.
The highly reputable “bankers’ bible” the Financial Times kicked off the year with a major series to that effect – although within its pages there appears to be pragmatic scepticism as to just what Prime Minister David Cameron or even Opposition leader Ed Miliband can actually do to stop so-called “crony capitalism”.
At the end of this month, the elites of the financial world will meet for their annual jamboree at the World Economic Forum in the rarefied atmosphere of Davos, within days many EU heads of government and finance ministers will make their way from it to the latest emergency summit to tackle the eurozone crisis.
So endemic has the crisis of confidence become – or modish, depending on your perspective – that those who would hold our economic fate in their hands at Davos have even put the scourge of rising inequality on the agenda for discussion.
Perhaps, more tellingly, the discussion will be about the potential threats posed by a perceived growing backlash against such inequality – either as a result of the Arab Spring or the Occupy movement – and how to respond.
A major pre-conference report published this week, to form the key-note discussions at the event, warns that, among 50 listed threats to financial stability, the gap between the haves and have-nots and the debt burdens faced by many developed economies most threaten to undermine the perceived gains of globalisation in recent decades.
At both ends of society – rising youth unemployment at one and the inability to pay retired workers’ pensions at the other, set against soaraway rising wealth of the few at the top of society – are sowing the “seeds of dystopia”, according to the report drawing on opinions from 469 experts and industry leaders.
“For the first time in generations, many people no longer believe that their children will grow up to enjoy a higher standard of living than theirs. This new malaise is particularly acute in the industrialised countries that historically have been a source of great confidence and bold ideas,” says the WEF Global Risks Report:?Sowing the Seeds of Dystopia.
As individuals are being driven to assume the costs and risks of their own healthcare and retirements earlier hopes that globalisation would mean higher living standards for all are being met by the reality that ever growing numbers of ordinary working people are fearful for their futures, it warns.
In Britain, the Government is pinning its hopes on avoiding a double-dip recession with ordinarily pro-Conservative business groups seeking to instil confidence – against a backdrop of unprepossessing statistics – that a further recession this year does not have to be a foregone conclusion.
Equally, London and other EU capitals are hoping that the German economy – while falling in output compared to recent years – will be sufficient to save that all-important market the eurozone, from which German exporters benefit
Critics of Chancellor George Osborne and Prime Minister David Cameron have been quick to deride what they call this Government’s “not much bread but plenty of circuses” – the London Olympics and the royal jubilee –?policy to distract from the slower than hoped for recovery.
As the loss of pubic sector jobs is set to continue through this year in what government and Bank of England economists continue to call a “rebalancing” or “correction” of the Tony Blair and Gordon Brown years the hoped for substitution by the private sector has yet to happen.
Figures this month show that companies are cutting back on temporary hires for the first time since 2009 and that the private sector has been creating one job for every thirteen lost in the public sector. At least 120,000 more public sector jobs are expected to be lost this year.
The Office of Budget Responsibility, whose forecasting has often been as disappointing as that of the Bank of England, hopes that there will be cause for cautious cheer this year as last year’s ever-rising fuel and food costs, and last year’s VAT increase, fall out of the inflation statistics. It also hopes joblessness will peak at 8.7 per cent by the end of this year.
But bodies such as the Chartered Institute of Personnel Development, whose own projections dating back to the 2010 general election have been shown to be more robustly accurate than the Treasury’s, think that by next year joblessness
will edge above even the gloomiest official forecasts.
In human terms, that means 2.85 million people without work, of whom, more than a third or just over a million are accounted for by youth unemployment.
Ministers point to an increase in the number of jobs advertised but a prominent recruitment agency said that while it had seen a jump of eight per cent in newly posted jobs it also saw an increase in applications of 42 per cent.
To put it into context, in London – which has a healthier employment turnover than many parts of the United Kingdom which face the prospect of becoming employment black spots – there are 60 applicants for every single secretarial or customer service post that comes up.
To add insult to injury, National Audit Office figures published by The Times and endorsed by the Public Accounts Committee chair Margaret Hodge suggest that since 2009 Whitehall departments wasted £31.8 billion on items such as shelved, unusable IT systems, uncollected taxes and poor value for money among 700 Private Finance Initiative projects for schools, prisons and hospitals and which many NHS trusts say are “unaffordable”.
This figure is twice the amount Chancellor George Osborne is committed to cutting from public spending this year and more than a third of the cuts planned between now and 2015.
Ms Hodge and her fellow committee members have singled out many individual PFI contracts as “outrageously dreadful value for money”.
She said: “[It is] blindingly obvious that frontline services could be saved by tackling the waste in the system. It’s very difficult to put a figure on it but there are tens of billions of pounds of waste. This amount destroys confidence in the value of public services. If successive governments had got a better handle on getting best value, we wouldn’t have to face some of the horrendous cuts people are facing today.”
The World Economic Forum Global Risks 2012 Report: Sowing the Seeds of Distopia is available at www.reports. weforum.org/global-risks-2012 l
