In the age bracket of 16 to 25 years of age, Germany scored the lowest unemployment of 8 % among the 27 EU-countries in the first quarter of 2012, whereas Spain and Greece had the worst positions, with more than 50 % out of work. The United Kingdom ended up somewhere in between with 22 % unemployed, slightly better off than Sweden. Despite often many years of advanced studies, much of which arranged by governmental educational programmes, the jobs just are not there. Life that was just about to get started is replaced by dependency on family and friends, local authorities and social security.
An economy running empty
A flashback throws light over the
scenario. Large parts of the European industry has emigrated, a
movement that took off many decades ago. An ever-increasing urge for
pay-rises and higher social benefits resulted in industrial wages,
social security fees and taxes rising well beyond productivity. Hence
western industry had to fight a gradually growing competion from the
rest of the world. As many industries either closed for good or moved
to brighter horizons e.g. in South-eastern Asia, China, the Indian
peninsula and Brazil, the industry jobs in the West were too few and
often regarded as too unattractive for the younger generations.
Meanwhile, in the absence of industrial jobs on a larger scale,
public bureaucracy grew and thus gave the pay-checks that people in
the West demanded to keep up with their expectations of the high
standards of living.
Nowadays few in the West have their
income from production and refining. On the other hand has the
publicly funded sector expanded enormously, with a flora of jobs,
“job-creating measures” and projects for the unemployed in order
to give the earnings requested. However, most of these schemes lack
support in economical reality as they are publicly funded. This means
that funds from taxes are being moved from one part of the economy to
another, a game without revenue.
Too late the apparatus of politicians,
bureaucracy and economists have started to realise that the West no
longer is the King of the Hill, and we do no longer create the
economical resources that the western welfare states demand. Despite
growth in international trade, we borrow for our living and leave
mountains of debts to future generations. It should have become
obvious in the past years, but it seems as if many politicians in the
West still have not woken up from dreams of unearned luxury as they
hope to boost the economies with non-existent funds.
Widening knowledge gaps
Contemporary politics is dominated by
naive wishing lists, paid for by the revenue granted from a high-tech
industry. Blind for the fact that such very research and development
to a large extent takes place in close cooperation with the
production lines – which have emigrated. Another solution often put
forward is the growth of a service sector, which may succeed in
employing quite a few, but how it will manage to produce revenue in
order to pay for expensive welfare is still left unclear.
Moreover, the countries we compete with
also boast strongly motivated and clever students, and a youth who
expect to work hard in order to accomplish what many in the West take
for granted. Besides, it should be obvious for any thinking person
with the least of life experience, that the bulk of the workforce
just will not match the requirements of the high-tech
“knowledge-intensive” industry.
Re-industrialisation employ the many
Unemployment in general and among young
people in particular is a serious problem for the West. Some talk
about a lost generation, meaning youth out of work and unable to
become productive citizens saving up for their own future. So far no
cure has proven to work. The good intention to create jobs by means
of public funds seldom comes with revenue, and if it continues, the
West will be left far behind and unable to finance what should be
expected from the state.
In order to turn the situation right we
need tough structural reforms and create conditions for
re-industrialisation. To accomplish this, the West needs considerable
re-thinking and to achieve a private business climate that attracts
new industrial ventures. Of course this is not done over night, but
through purposeful and stable long-term policies. A competitive
industry is a necessary prerequisite to keep at least some of the
welfare state, which should be paid for by the many rather than the
few. Contrary to high-tech industry and a service sector, basis
industry knocks down unemployment. With a growing and diversified
industrial sector not only the necessary new jobs will be created,
but it will also reduce the dependency on a few larger companies.
Strategies to save a core of welfare
Through identifying the primary
undertakings by the state, the necessary financial resources can be
prioritised: Schools, Civil contingencies, Police and Judicial
systems, Infrastructure and Defence. The goal for the welfare tasks
should be: All means to actual production of welfare – such as
essential medical services, brief and basic income in between jobs,
protection for children faring badly and similar morally obligatory
frameworks of social security for those unable to make their own
decisions – but nothing to unnecessary administration, many a time
with metastasising layers of bureaucracy on top of another. After
this slimming cure there should be a small but strong and clearly
defined core of publicly funded welfare, where no doubts should
remain as to what ends the fees should serve.
Insurances in excess to those included
in a sharply delimited and thus a lot more durable welfare state,
should be up to the individuals to decide upon and theirs to finance
for themselves. The long term, sustainable, direction will be that
human brotherhood should not be shovelled out with taxes. The civil
society, you and me, families and communities, will have to take more
responsibility.
Adjustment to reality – no
bursting credit bubbles
As none of the new industrial
superpowers stand in line to pay for the high standards of living of
the West, our salaries will have to become subordinated to
international competition and relative productivity. It is
self-evident that this means reductions of the cost of labour, i.e.
wages, salaries and the social bills on top.
With lower taxes, as a consequence of a
smaller public sector and matching the reduction in labour costs, it
will become possible to reduce price levels and make the individual
able to live on his own income. Moreover will he become unable keep
up bursting bubbles of loaning bonanzas. This in turn also forces the
financial systems off the dependence of cheap, newly printed, money
and will give both governments and the people a cold turkey realising
that savings comes first if you wish to invest.
In order for the West to establish hope
for a bright future it takes re-industrialisation. The path comes
only with sweat and tears and a good portion of common sense.
Politics will no longer be about listening to theoretically schooled
oracles, competing with one another of what sounds good, but of what
actually works.
The article above is written together with economist and entrepreneur Carl Anders Breitholtz and is a to some extent modified version of the Swedish text Återindustrialisering ger framtidstro and the Danish commentary article Genindustrialisering giver fremtidstro published in Jyllands-Posten in October 2012.
