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Why protect BAE jobs when you can convert them to the green economy? | Andrew Simms

The arms industry doesn’t lead to additional productive economic activity. Those engineering skills are needed elsewhere

If the International Monetary Fund tells you that your austerity programme has gone too far, don’t be surprised if, next, the ghost of Stalin calls to complain about your cruel treatment of political opponents.

In times of crisis austerity is pretty much the only medicine the IMF ever prescribes. Its economic mono-vision is famous. When the only tool you have is a hammer, it’s said, all problems look like nails. The IMF distils a faith in the power of deregulated market economics and a suspicion of collective public action. So much so that Nobel prize winning economist Joseph Stiglitz once branded the IMF an enemy of democracy.

That puts into context the UK’s current economic course, and its colourful belief in the neoliberal sub cult of “expansionary fiscal contraction”. Whatever your political persuasion, the economics remain the same if you want to reduce the deficit. You have to generate employment so that people and businesses can earn and pay taxes.

And, when even heavily protected sectors like the arms industry, which can pull favours at the highest political levels to get contracts, subsidies and beneficial treatment by the legal system, begin to suffer, you know you have a problem.

In the wake of BAE announcing the loss of 3,000 jobs in the middle of party conference season, and in spite of the nature of its business, there have been calls from across the political spectrum to protect the jobs.

But why protect when you can convert? The arms industry is notoriously capital, not labour, intensive. In spite of its supposed importance to the UK economy, the arms sector represents just 0.7% of total UK employment. A study by the University of Massachusetts looked at employment creation in various sectors for every dollar spent. Compared with arms manufacture, building houses and work on energy efficiency generated 50% more jobs, the figure for investing in public transport 131%, health 50% and education 107%.

More than that, of course, spending on arms is politely referred to as “unproductive expenditure” by economists, partly because the products, rather than laying the foundations or providing the infrastructure for additional productive economic activity, do exactly the opposite.

Yet, engineering skills are very much needed, precisely in the areas that are vital to building a modern, low-carbon economy. It’s time to retrain for the green-collar economy. And now provides an ideal opportunity, as even the IMF suggests the government rethink its economic strategy in a more progressive direction. A second phase of so-called quantitative easing (QE) is one of the few options open to breathe life into the economy, and now seems imminent. But the official rationale for QE is to lower the cost of borrowing, and interest rates already cannot go much lower. It also suffers the unattractive quality that the banks that caused the crisis cream off millions in fees just by sitting there and mediating the bond trades through which QE operates.

Already there are calls, even from some voices in the financial press, that this time the money could simply be spent directly into the economy by government to create jobs. Right now, it is hard to imagine a sixth form economics student doing a worse job of allocating resources than the financial markets, let alone the state. If government spending added to the UK’s productive capacity it also needn’t be inflationary.

We are, once again, back in that slightly delirious world in which vast sums of money are being earmarked to rescue unreformed banking systems. The reluctance of governments to call the bluff of financial systems, whose anti-social character was so brilliantly exposed by the trader Alessio Rastani in a BBC interview.

Last time around, the Bank of England bought a mix of corporate and government bonds from the banks to inject money into the economy. This time, why not simply have them buy bonds issued by an expanded green investment bank, making resources available for the roll-out of green energy, sustainable transport systems, the energy efficient renovation of buildings, and on and on. It would create jobs, reducing the deficit, help do what we have to do for climate change, and strengthen the UK’s energy independence. It would also demonstrate, unequivocally, that the public sphere can make more intelligent, socially and economically useful decisions about allocating financial resources than Rastani and his kind. © 2011 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds