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World economy: all in this together | Editorial

As predictable calamity slowly befalls the global economy again, world leaders ought to dwell on how their own stock will stand in a few decades’ time

For many years after the second world war, the generation who had held the reins before it were regarded with withering contempt. They were the Guilty Men, who had lacked the courage to grip the political tensions and the great slump of their day. As predictable calamity slowly befalls the global economy again, world leaders ought to dwell on how their own stock will stand in a few decades’ time.

The new IMF boss, Christine Lagarde, is refreshingly frank in describing the perils that were yesterday spooking markets by pushing the planet towards the precipice of a fresh recession. Europe’s banks have still not come clean about the battering of their books, and American property continues its uncontrolled slide. Meanwhile, the export-paved road to recovery is blocked, because the governments, families and corporates of the rich world are all stampeding to clear debts at the same time, leaving no one to do the spending.

What is needed is for the world’s treasuries to come together and co-ordinate plans, with deficit reductions being carefully paced so recoveries are not snuffed out. But today’s politicians, like those of the 30s, are too preoccupied with parochial concerns to take the global view. The machinery of paralysis is no longer the gold standard, it is Europe’s single currency and Washington’s divided government; but the failure of imagination is the same. National leaders talk about responsibility, but act recklessly, indulging in a global game of beggar-thy-neighbour which nobody can win.

Few are as resigned to the notion that there is nothing to do but cut as George Osborne is. A few days after dismal UK manufacturing figures bore out the collapse of export markets, yesterday’s Markit/CIPS figures registered the growth in British services falling away even more sharply than after Lehman Brothers’ demise. And yet every fresh battery of data is met with a world-weary shrug, and hints that meddling would only make things worse. Just how much worse might well be asked, in the light of new Cambridge Centre for Business Research numbers which reveal we have calmly succumbed to the longest and cumulatively costliest depression in over a century.

In Osbornomics, the sole demon is debt – exorcise it, and demand takes care of itself. But it ain’t necessarily so. It is defeatist to treat every dire figure as confirming how far we were living beyond our means; the world is not merely suffering from past profligacy but from a present failure to see to it that somebody spends. Mr Osborne should raise his ambition and, as Labour suggests, summon the world to hammer out a plan B, rooted in a reality that he has often described: that we’re all in it together. © Guardian News & Media Limited 2011 | Use of this content is subject to our Terms & Conditions | More Feeds