Progressive Governance Conference
3rd Plenary Session on “Future jobs and growth: how can the center-left governments to make a difference?”
The Prime Minister, George A. Papandreou attended a panel discussion on “Future jobs and growth: how can the center-left governments to make a difference?” in the Conference on Progressive Governance, which was carried out in Oslo.
The debate attended by the Prime Minister, George A. Papandreou, Prime Minister of Norway, Jens Stoltenberg, the Serbian President, Boris Tadić, the Deputy Prime Minister of Ireland, Eamon Gilmore, the Director General of World Trade Organization (WTO), Pascal Lamy and U.S. Ambassador to the OECD, Karen Kornbluh.
Coordinator, Peter Mandelson (President of Policy Network)
The full text of the debate:
Peter Mandelson: Right. Ladies and gentlemen, if you can take your seats, there are some more places just at the front here, where I am indicating, and we will get under way.
This conference is focusing on the post-crisis agenda for the centre left. And I am pleased and relieved that we have, in countries in Europe, progressive centre left governments, leaders, prime ministers, who are taking on the responsibility of not just navigating their own countries but Europe as a whole, through what are unprecedented, stormy waters.
I am relieved, we are relieved. I am not quite sure if it feels quite the same from the individual leaders’ points of view, to be burdened with this responsibility, because it’s tough; it’s very difficult, not just to make the choices, select the policies and satisfy themselves that they are the right ones, but they have to carry a public which, in many cases, is very nervous, very insecure and very fearful for their own futures and those of their children and families, as a result of the policies that have to be taken on, to deal with what is a serious crisis.
We are very honoured this morning to have with us those on the platform, prime ministers, deputy prime minister, to share with us their own thoughts and to open themselves to your questions about their approach in tackling this difficult situation.
Initially I am going to ask each of the panellists to make some introductory remarks. But before they do that, I am going to ask Karen and Pascal if they will help us frame the discussion, frame the issues, frame the questions, to help us put in context the discussion that we are going to have during the course of this session.
And I am going to ask Karen to go first, to speak for 5-6-7 minutes, no more. We have all of us accepted a very firm, strict injunction on ourselves that we are going to operate and speak in a disciplined way so as to maximise time for everyone else. But I am going to kick off by asking Karen, the US Ambassador at the OECD, to make the first set of introductory remarks. Karen.
Karen Kornbluh: Thank you very much. I am the US Ambassador to the OECD, but I also had the honour of working for President Obama before he was President in his senate office and then writing the Democratic Party platform, so I hope when I am presenting you with these slides as the US Ambassador to the OECD it’s as if I am ambassador to data, that you’ll take the broader message, which is that it’s possible for progressives to win and also to govern on an economic message, even in economic hard times.
But I think it’s very difficult, but I’ll try to run through it, that it requires optimism. And, as was discussed yesterday, owning the future.
But first the bad news. Just to give the context the panel is addressing, jobs: these are the unemployment numbers that you all know. Unemployment rates remain near historic highs in the crisis. In the US we have had some good news. The last three months have been better numbers than we’ve seen in five years, but we still need a long way to go.
But what I would argue that – and this is just the US; I’ll show you a broader cross-country comparison – if you just look at the job data, you are missing the story, because the real backdrop to this is what’s been happening to families, and that in the post-war period, in the 25 years after the war, incomes doubled in the United States and in many of the other countries we are talking about.
And there was an implicit deal in that, that if you worked hard you could make it.
And then growth really slowed in the ‘70s, and it seemed inexplicable. I was a management consultant at the time working with US manufacturing companies and going to Midwestern towns, where people were still puzzled and trying to figure out what to do. And then in the late ‘90s in the US, we had this boom, thanks to some very good policies. The Internet took off, companies started using it to improve their processes, productivity went up, jobs increased, poverty went down.
All a good story, but then after that, as John Podesta said yesterday, we had an experiment with conservative right-wing politics and policies, and you see the slowing again.
And then you start to see a split between productivity increase and how actual families are doing.
Then the crisis hit. This is the comparable data across OECD countries. You see that, on average, growth rates of 1.7% over the last 20 years, not really what people thought they were going to get, not the deal that people were expecting.
So what I would argue is the first priority is really growth. And it’s more than stimulus plans; it’s really getting at growth. I don’t think anyone would argue that what we want to do is just to divide up a shrinking pie. What we want to do is grow the pie.
And this is just a chart talking about entrepreneurship. The President, President Obama, has convened actually a commission, Startup America, to make this point that what we are going to be about is growth. He has been talking about winning the future. And now even some conservatives in America have picked up the theme. The head of something called the George W. Bush Institute is now calling for the 4% solution, saying that if we had 4% growth instead of what is forecast, we could solve a lot of our deficit problems and also obviously people would be a lot happier.
This is an incredibly hard message to sustain obviously, in an era of deficit, because the conversation, no matter how much President Obama wants to talk about winning the future, we have to talk about balancing the deficit. It’s a very hard conversation to sustain, but it’s very important to do so.
What he has been talking about and what many others have been talking about is things like broadband, things like investing in green jobs, things like education. And also we are talking about possibly corporate tax reform that will lower taxes and unleash growth, by closing loopholes.
And then I am just going to say one word, a plug for some of the international work that has to underpin this, which is: In the post-war period we had a level playing field that we worked very hard to build, rules of the road about how we didn’t bribe our ways into each other’s markets with export financing and so on. And it’s very important that, as we go forward, we can usually gauge, in all the multilateral organisations that we have and all the efforts that we have.
So just at the OECD for example we are trying to take what was the rich man’s club and turn it into a global policy network. And so we have had some recent successes in terms of Russia signing anti-bribery laws, new multinational enterprise guidelines that are how corporations should do business. We are working on Internet policy principles, and so on.
The next theme, which is of course, as progressives, we don’t just want growth, if it means continuing on inequality, that obviously if only the rich are getting richer the growth isn’t sufficient.
You know the inequality numbers people talked about from yesterday. The thing that I’d like to focus on, though, is not just fairness, again, but opportunity. And these are social mobility numbers that are very troubling to us in the US, because it says that a big predictor of how well someone does is how well their parents did, how wealthy their parents did.
So there is this sense, again, that the deal that was struck, that, if you work hard you could make it, that maybe there is something wrong there, something broken in the system.
The United States, the UK, Italy, France, at least 40% of the economic advantage that high-earning fathers have over low-earning fathers, is transmitted to their sons. Now, obviously this is not the case in Nordic countries, Australia and Canada, but it’s very troubling.
What we do have across countries obviously is this very high youth unemployment rate. And this again gets at this issue of opportunity. It’s very important to stress.
What do we do about opportunity? there are a number of things – I don’t have time to get into them, but wage supplements: we did a payroll tax cut. We have something called the earned income tax credit. Training, especially for young people, and of course bargaining rights.
The third thing I’ll just touch on is reform. We need to be about reforming government. We can’t fall prey to something that I call the progressive paradox, which is that even when people need government the most in an economic downturn, they become cynical and they don’t trust government.
And so progressives are in a box, because they know that often what the solutions are, to be more proactive, and yet people are very mistrustful. Sometimes they just want to get their money back in tax cuts.
So showing that we are not just for government, at all costs. We are for government that works, or for programmes that work, and forgetting savings.
We don’t have time to go through these, but the OECD has calculated potential reform from making education more efficient and health care more efficient, and you wind up seeing that you could save as much as two-thirds of our stimulus plan, if you did sensible education reform and health care reform that made those sectors more efficient and actually served people better.
And then finally what I’ll conclude with is just family. I think progressives see too often the family values to be too conservative. And we can’t do that, especially as we are governing. It’s families really need someone who is speaking to them, and the economic pressure that is being put on family well-being, and also stability.
We all know that women have entered the workforce. In the United States we are at 50%. But I think what’s important to know is they are doing it in large part because their families really need them to work. Especially in the downturn it has become incredibly important. New labour market data show that it’s very important to family economic well-being to have women in the workplace.
So we have to talk about the stresses. We have to talk about how important families are, how important what parents do, what children who are taking care of older parents do, not just talk about childcare and paid leave and flexibility: all these things are very important as well.
I am just going to say the one thing we have to talk about is local development. I think localism is incredibly important in the global economy. And I’ll just close by telling you that what President Obama has been trying to do is tie all this together in a values-based framework, and just say that the economic choices you make are values choices.
And I’ll just read a quote where I think he did a great job very recently. He said, “The America I know is generous and compassionate; it’s a land of opportunity and optimism. Yes, we take responsibility for ourselves, but we also take responsibility for each other, for country we want and the future that we share.”
So I think that’s the challenge. How do we do that as we govern, and how do we communicate that that’s what we are doing? Thank you.
Peter Mandelson: Thank you very much indeed. Pascal, the Hercules of the WTO.
Pascal Lamy: Well, thanks, Peter. Karen has just given us a sort of a macroeconomic framework for the discussion, and what I would like to do very briefly is introduce this important dimension, in my view, which is the one that relates to the politics of this macroeconomic globalisation.
During the crisis, we all hoped that this major failure of market capitalism as a system, would have convinced public opinion that we were on the right side of the argument.
But this did not happen. After the crisis, we all spent a lot of time lamenting about why it didn’t happen. Why is this crisis now lifting right-wing parties more than left-wing parties, populism more than social democracy?
And the answer to this question, in my view, is quite simple. We got it wrong on globalisation. We got it wrong on globalisation because we got it wrong on the analysis we made of globalisation, not the economic analysis which, in my view, was right, but on the politics of globalisation, on the political consequences this huge transformation has on politics, as it reshuffles the relationship between states and markets, for sure.
But probably more importantly as it reshuffles the relationship of people to politics, to the polis, to the city.
Identity, a sense of belonging, dreams, nightmares, is what shapes political attitudes. At the end of the day, what Karen just called trust.
And I think we have not yet seriously worked at understanding how this unfolds, hence how to relate to people’s expectations. And for many of our supporters, the reality the political reality, remains that globalisation is more of a challenge than an opportunity, more of a threat than a hope.
And I think to understand that you just have to read this very good book, even if I don’t agree with everything which he has written, by Danny Roderick, on the Globalisation Paradox.
Now, what should we do? And that’s my contribution to introducing the discussion. I think we should work first on building a better narrative on how to present globalisation at home. Explain, debate, not leave this ground to the populace.
And I believe this narrative is not yet available, so we have to work seriously on that.
Second, we have to build a convincing platform on how to harness the forces of globalisation, how to increase social justice and not social injustice, how to make globalisation work for job creation, how to avoid globalisation being captured against progressive taxation or human rights.
A large part of this, of course, has to do with the domestic agenda, and that’s not my focus.
Another part of this has to do with a proper international agenda, which we should build and promote together, in the various fora of what exists today of global governance.
Now what is this agenda? Very simply, finance climate, trade, currencies, taxation, migration.
Finance, because, as we all know, we are now back to business as usual, and we have not addressed, in my view, the inherent fragilities of the global financial system.
Climate, which is the new public good, which we had not in our sort of social democrat DNA.
Trade, where we are at a time where short-sighted mercantilist pressures do obscure the larger challenge of the multilateral system, which is one of the rare tools available to build a proper pro-development macroeconomy. And unfortunately, as you know, we now are stuck on this.
Currencies, because I do not believe that what was true at the time of Bretton Woods is not true today. On the contrary, we need more of an order in the international monetary system rather than less, which is what happened in the ‘70s.
Taxation, where I believe we should be pretty clear that competitive taxation is one of the differences between the right and left.
And migration, which is fundamentally an international issue, to avoid this problem being captured again by populism.
So in a nutshell, my suggestion is that we should work on this narrative. We should work on this platform. We cannot do that alone. The time is over where these issues could be dealt with by the usual white social democrats.
We need other forces, other partners, to build and to promote this agenda, and I think this is the priority I would like to suggest. And if we need one reference for a sort of fair globalisation, where domestic agendas and international agendas are not separated any more, let’s just look at how they did it here in Norway. It’s not just because of oil and fish that this country has been successful.
Peter Mandelson: Pascal, thank you very much indeed, and thank you and Karen for an excellent scene-setting set of remarks from you both.
I am going to ask each of our panel now to make some introductory remarks for the same time period, and I am going to ask Jens Stoltenberg to kick off.
Jens Stoltenberg: Thank you so much. First of all, let me thank you for sharing this panel, and also thank Pascal and Karen for their introductions.
I will just share with you some reflections and some remarks on the issues we are discussing today and we discussed yesterday. And that is that, first of all, as I said yesterday, there are very many national differences, so it’s always very demanding to sit in Oslo and to tell exactly what to do in the rest of the world. I have very precise ideas about what to do in Norway, but I am more reluctant to have any strong ideas or advices how to cope with big problems in the economy, in developing the welfare state in other European countries.
But having said that, I believe at least there are some general – how should I say? – aspects, advice which I think that we should try to leave after.
And one is that the core idea of progressive policies or politics has been for many, many years to combine, to reconcile the need for social justice with the need for economic efficiency.
And we have, in a way, always contradicted the conservative idea about that we have to choose between either efficiency or equity, either being social or efficient. We believe that actually a social society is also an efficient society; a fair society, where we give everyone opportunity, is also a very productive society.
So it’s not a question of choosing between social justice or efficiency, economic growth. It’s how to combine those two, because when we do it right, they stimulate each other.
So what does this mean in practice, in the aftermath of the financial crisis? and then again, just on a very few points.
One is that we shall continue to support classical, progressive, social democratic demand policy. I am strongly in favour of countercyclical policies. And one of the very few beauties of the financial crisis is that suddenly everyone is in favour of demand policy. Keynes is reborn, and we support him, everyone.
Also those who have for many, many years opposed the idea of the government being responsible for regulating total demand through fiscal policy are now strongly in favour of the government doing exactly that.
So without stimulating the demand during the financial crisis, increasing public expenditures, the crisis would have been much more severe.
So we should continue with demand management in the classical way.
But the challenge is that it’s very easy to get support for increasing public expenditures during times of recessions. But it’s very demanding to get support for keeping back, reducing public expenditures during upturns, or when the economy grows.
So the challenge is that if you are in favour of countercyclical policies, we have to be that in a symmetric way, both when we have to increase demand, but also when we have to decrease demand. And it is the last thing that is the difficult thing.
We are presenting our revised budget today in Norway. And there we are actually decreasing the fiscal stimulus from the national budget, exactly because now we see growth again. So we are going to spend much money next time we face downturns. We have to spend less now, and it has to be symmetric.
And I think that’s one of the lessons, is that too many countries spend too much money, both on public expenditures and on tax reductions, when we had strong growth some years ago, so they had enough reserves to implement countercyclical policies during the recession or the financial crisis.
The other thing, which I also mentioned during our meeting yesterday, is that we cannot only focus on the demand side of the economy. We have to focus also on the supply side. And that’s not a conservative message; it’s a progressive message.
But we have another idea of what this supply side measures, so a supply-side economy is then a conservative forces.
One key issue is for instance labour market measures. To keep up the skills, labour market training programmes especially target on young people, immigrants, those who have weak ties to the labour market. It’s extremely important, and perhaps the most efficient supply-side measure we can do to increase the growth capacity of our economies.
And just to underline that, I noticed that the thing that actually worries me most is the danger that the unemployment now can remain at high levels. And we have a long experience that it’s not a symmetric movement. When the economy goes down, the unemployment goes up, but when the economy starts to grow again, the unemployment tends to stick, to remain at high levels.
Labour market measures is perhaps the most targeted thing we can do to mobilise to help people back into the labour force.
Then family policy. It’s not perhaps the most classical supply-side measure you can think of, but again I think the lesson from the Nordic countries is that when we have invested in kindergartens, in paternal leave, in after-school clubs and so on, that’s good for the families. It’s good for equal rights between men and women.
But it is perhaps, at least in Norway, the most profitable investment we have made, because the increase in female work participation has really been one of the key explanations for the strong economic growth and the increased growth capacity in the Norwegian and the Nordic economies.
So to stimulate women to work, to integrate more people into the labour market is a classical example of how we combine economic growth with social justice, fairness.
I’ll just end by saying one more thing, and that is that I think also we learned during the financial crisis that we need better regulations. That does not necessarily mean more regulations, but better regulations, both on the national level but also on the international level, and we have to strengthen the international institutions like the IMF, and to have cross-border institutions, to stabilise also the international economy. Thank you.
Peter Mandelson: Jens, thank you very much. And I am sure there will be areas of your Keynesian-plus approach that we will want to come back to and probe.
George, how is the world from Athens?
George A. Papandreou: Whenever I come to Norway – and Jens, thank you for this invitation and hosting this event – it reminds me of course that when I was a young boy I was here with my family as a refugee, and my father even had a Norwegian passport because he could not get a Greek passport.
So this is an area of refuge, but it is also, I think, at a time when we should not kid ourselves: there is really no area of refuge in our world. Our problems are so intertwined, are so interdependent that we all have to work together. And I think this is the message I would like to bring from Greece, where the Greek drama actually has become a European drama, and we are dealing with this and it could be more widespread, if you like.
I think it’s testing – and I’d like to say a few words on Europe and what a progressive Europe could and should be – it’s testing really the political will and the cohesion of Europe. It’s testing our institutional capabilities; it’s testing our European identity. It’s testing concepts such as growth, competitiveness, solidarity. It’s testing our overall capacity to deal with the global crisis of the day in an effective way.
And this may not sound scientific, but I would like to differentiate progressive with conservative, where I see conservative in Europe today, and maybe not only in Europe, as the politics of fear, an underlying pessimism concerning our society’s capabilities, while I think we represent the politics of hope, underlying a belief in the empowerment of our societies and what we can do, and what we can do together.
I’d make five points of this drama, if you like, and some of the contradictions we have been dealing with. We were faced and are still faced with a huge debt and deficit, which I think very rightly we do not think that is progressive, to have a huge debt and deficit. And that’s what I think Jens also pointed to, that we can be both efficient and equitable at the same time.
It’s a huge burden, and on the one hand we have had success by cutting the budget by 5% in one year, reforming our pension system in this last year and making it viable, reforming our tax system to make it more equitable, opening up professions in Greece, consolidating local government, making things transparent in Greece – everything is online; every euro that is spent is online – meritocracy in the civil service.
And we have some initial positive results: a 40% increase in our exports; tourism seems to be doing well this year; our agricultural sector is going up; we are moving to subsidise jobs. We are moving into a green economy, investing in a green economy. And even the IMF today is saying that our debt is sustainable: we can manage our debt without restructuring.
However, on the other hand markets are pounding us incessantly. Media are predicting a doomsday. And this is promoting a culture of fear.
The pain taken by our citizens and by our youth, the sacrifices seem not enough to let up the situation and give us breathing space.
So that’s the first part of the drama, after a year of work.
A second part of the drama is the systemic contradiction in the European Union. We have created a monetary union, but we are halfway there. We have decided we will defend the euro. Greece has decided, and the Europeans in the eurozone have decided: Greece will remain in the euro. There is no going back in Europe.
Yet we are not moving forward enough, either. So we are somewhere stuck in the middle. Even though we have created a new mechanism for dealing with problems, whether it’s in Greece or Ireland or Portugal, we should move forward, such as what the socialists have proposed and others – and my dear friend Poul here has been fighting for this – the common European bond, for example, which would be a conclusive step for dealing with the debt management problem.
So I would see here again progressive politics could be a positive response to the crisis, an effective response to the crisis.
Third point: Europe today is more than ever a potential answer to our globalised problems. Not only a peace project, which it has been traditionally, between the East and the West, the Balkans, the issue of Cyprus and so on, but also a paradigm for where sovereign states of different cultures can share sovereignty to deal with common problems, and deal with them effectively, but also deal with them on the basis of values: democracy, rule of law, free trade, but also social cohesion.
Yet today in Europe we see, more than ever, more than ever before, I believe, instead of really coordinating our responses, a common response to so many of the global crises, from unemployment to migration to environment and of course finance, we are becoming ethnophobic, xenophobic. We are looking for scapegoats. We are playing a blame game. We are saying it’s the North that is to be blamed, or it’s the periphery to be blamed, or the migrants to be blamed. Obviously this is incapacitating Europe. It is losing the potential we really have.
And that brings me to the fourth point, where we face a particular drama in the region, in Greece. Greece, even though we are in the midst of a financial crisis, turmoil, if you like, we also remain a frontline state of stability for Europe and for the region. Greece remains key for the stability in the Balkans, key in the relationship with Turkey and the solution to Cyprus, key in the region, which is going through a turmoil, a democratic revolution but also other problems such as in Libya, where we have taken even initiatives to see if we can find a diplomatic solution to this problem.
And Greece also happens to be, not only for the West but even for these movements, a symbol of democracy. And I usually say that we should not identify democracy with the West or with a Christian Europe, as sometimes conservatives do. Democracy was founded in a polis or city which had 12 gods, not one, and of course was in the middle of the Mediterranean.
But this just shows the potential that Europe has in the region, which it is not using, if we had common policies to create peace, new relations with the Arab world, and of course greater stability.
Finally, growth and competitiveness are part of the drama. The EU could make, the European Union could make this financial crisis a time for, as Jens said, better regulation, not more but better regulation. Also dealing with the environment, dealing with the energy crisis, the food crisis, the regional revolutions, the question of migration and so on. These could be opportunities, opportunities for a new model of growth. I would like to call it green growth: investing in infrastructure, investing in green agriculture, investing in education for the new type of this green economy, investing in the energy networks, investing in connecting the European Union into a single market through the Internet and social media, investing in our capacity to grow, to be competitive, make us competitive, and bring jobs, jobs for our youth and jobs for our society.
So we would see competitiveness not as simply dealing with our debt and deficits and simply austerity at the national level, but as a European project where we invest and create growth.
So I would like to conclude simply by saying Europe has potential, great potential. I believe it’s wasting its potential at this point, allowing for the world to become more unjust, because Europe is playing and can play an even further global role, a more inequitable world, less secure world, unluckily more nationalistic, greater concentration of power, obviously more unemployment.
And this will only lead to the erosion of our democratic values and institutions and the frustration of our societies.
So our challenge, I believe, is that either we humanise globalisation or we will be moving more towards extremism, populisms and violence and frustration.
And this is where I think we progressives symbolise the hope that we can and will humanise globalisation, and do this in Europe obviously. Thank you very much.
Peter Mandelson: Giorgos, thank you very much indeed for those remarks, I mean not just for your leadership in Greece but what you have said about Europe, which I think we need to come back to.
I am going to ask the President of Serbia, Boris Tadić, who is sort of the newcomer into the European fold, to speak next. And it’s great to have you on this panel, Boris.
Boris Tadić: Thank you. Good morning, everybody. I am really glad to have the opportunity to present some views from the country like Serbia.
In my view, the situation is very similar in other countries of the Western Balkans, the countries that are not integrated in the European Union today.
Serbia is a country with 7.5 million people, inhabitants, and our GDP per capita is EUR4000; it’s very low. The average wage is EUR350. The average pension is EUR200. The unemployment rate is at 20%, and the absolute poverty rate is more than 9%.
Serbia is a country affected because of the war that happened in the 1990s. The situation in other countries in the region is even worse. Expectations are very high, because of having many opportunities before the war in the former Yugoslavia. And people are remembering what happened and how many chances we had 20 years ago. They are impatient. They need more jobs and a real perspective.
In that respect I don’t see alternative than European Union integration. At the same time, we know very well that we cannot bring a new conflict in the European Union, our poverty and our problems. Before joining, we have to solve our challenges.
How to do that in an atmosphere of economic crisis is a very important question, especially having in mind that Serbia for example had a huge growth after the democratic changes on October 5, 2000 until the crisis, between 6% and 7% per year.
The unemployment rate was 14% in 2008. The average salary in Serbia has been EUR460, which means that we are affected because of the crisis.
That’s the best possible atmosphere for populists. That is the best possible atmosphere for nationalists. Having in mind that we are vulnerable societies, we have to be focused on our main challenges.
In my view, this is not only reconciliation. We are doing a lot in that respect. This is not only implementing reforms. Yes, it is, but we have to be focused on a priority: this is creating new jobs.
Right now we are affected because of unemployment. That is becoming a critically important issue for Serbia and other regional countries.
What is the good news? We are bringing discipline in our state bodies, even though we are very much affected.
Our public debt is at 43% of our GDP. We are not spending more money than we are earning. We are cutting expenditures.
But at the same time we are asking ourselves how to create new jobs. We have to invest in the economy; it’s the state that has to invest in the economy. If we don’t have foreign investors, taking into account the fact that before the crisis that was EUR1.7 trillion foreign investments, globally thinking, and right now we have EUR700 billion all together investments in a global economy. The competition for foreign investors is very strong.
And who is going to be affected? Vulnerable economies like Serbia, like Western Balkan countries.
What I have to add to that issue: that we are also affected because of the crisis in North Africa. We had, traditionally speaking, many, many workers that had been working in that kind of countries, like Libya for example, and because of war they lost their jobs. They returned back in Serbia. What about our investment in that kind of countries today?
Anyway, we are focused on solving the main problems. At the same time we are participating in many, many other fields. This is finishing cooperation with the ICTY, arresting the last like Ratko Mladic and Goran Hadzic and sending them in The Hague Tribunal, reconciliation process, fighting organised crime, in which we are contributing to the European Union economies.
They are going to be more affected than Serbia and other countries, because the end users of the activities of traffickers and criminals are in the richer countries like European Union countries.
We are building right now infrastructure. We are trying to connect European Union countries that are on the northern border of Serbia and the southern border of Serbia, by building infrastructure projects.
We are working very hard on administration capacities in my country. We are implementing laws. We are fulfilling our obligations regarding reaching candidate status in the European Union.
But at the same time we are affected because of unemployment. Unemployment is a huge problem for my country. And we cannot solve that alone. We need understanding.
The situation is very fragile, and you can see demonstrations all around the Balkans. You can see more tensions, but I don’t see alternative than European integration, implementing reforms, fighting organised crime, and to be more innovative in creating new jobs.
What are we doing right now in that respect, in creating new jobs? We are reducing taxes for medium and small sized enterprises. I hope that is going to create an atmosphere much better in creating new jobs.
We are investing in building infrastructure. We are going to invest in the public work. We are taking into account how to do something for females right now, as Jens has been explaining clearly.
But we have to take into consideration that two parts of our population are very much affected: young people and the people that lost their job that are 50 years old, even more, and they don’t have a perspective regarding the current situation we are facing with. For those social groups we have to do something right now. Otherwise we will be in a very difficult situation, having in mind the structure of our population.
Young people have to have perspective, and older people have to have a social security atmosphere. That is what we are doing right now.
Peter Mandelson: Thank you very much, Boris. Thanks very much indeed. And our last speaker on the panel before we open it up, Eamon Gilmore, the Labour Deputy Prime Minister in the new administration. In Britain there has been some experience of coalition partners taking on responsibility but not total control of the fiscal situation in which they find themselves. Tell us about the first few months.
Eamon Gilmore: Thank you very much, Peter. It’s actually just been two months. It feels emotionally a little longer than that, but it’s been a coalition; as you said, it’s a coalition government just elected. The largest party in the coalition is Fine Gael, which is the affiliate party of the European People’s Party, and the second party is the second largest party in the state, the Labour Party, which I have the privilege to lead.
And we have come into government at a time of great economic crisis, which is characterised by, first of all, the failure in the banking system, a very big fiscal deficit, high level of unemployment, about 14.5% right now. And we have inherited the framework which was put in place by the previous government, the programme that they agreed with the EU, the ECB and the IMF.
And in those very limited circumstances, we have to address the issue of how do we create jobs and how do we grow the economy. And the approach that we have taken is, first of all, to be decisive. I was struck by what Karen said earlier about the progressive paradox, that at the very time when people need government to be effective, there is this lack of confidence or loss of confidence in politics and in government. And we have been hugely conscious that the new government was elected with a very large turnout at a general election and with a very large majority.
And therefore it is critically important that the public see that that government is addressing issues straight up. So straightaway we have addressed the banking issue; we had the results of very strenuous stress tests for our banks, and we decided straightaway to make decisions about the future shape of Irish banking, so that there will be certainty about that, that we will proceed with reforms of the banking system, and hopefully that that would release credit, particularly to small and medium-sized businesses.
Secondly, we have decided that we will put jobs and growth at the centre of our economic strategy, and this week we announced a jobs initiative or a jobs budget, which is not intended to be a major stimulus package but more a confidence-building measure, and we have concentrated on those areas where we can get relative wins. What sectors of the economy can we stimulate right now that will generate employment in the short to medium term, when we have looked at tax changes which will encourage activity in the tourism industry, and we have looked at areas where an infrastructure development, by shifting resources to more labour-intensive activity, in road building, school building, and so on.
And thirdly, in labour activation measures: education, training, measures which will get people into useful activity while they are unemployed.
The third part of our strategy is to build on the strengths, because we do have strengths. We are a strong exporting economy, and our exports are growing. So our focus is to look at where we can expand trade. We export 80% of what we produce, yet only 2% of our exports are to China, less than 1% to India.
So one of the areas that we are looking to is how we expand trade and how we grow our export economy.
The fourth area is to look at what George talked about, the new models of growth, in particular investing in people. As I mentioned earlier, in our jobs initiative we have concentrated on an education and training programme. We have particular emphasis in terms of our investment on research and innovation, on looking at the knowledge economy, not just as what we do in the high-tech area, an area where we have considerable strength, but also how the knowledge is an economy that is applied to the entire area of economic activity, how you apply knowledge to the wider economy, and of course looking to the green economy areas, such as the potential that we have for development in alternative energies.
The firth part of our strategy is reform. I think to some extent I think progressives, while we talk about change, we want change, we often find ourselves, I think, as the defenders of the status quo. And we have set out a reform programme which is across a number of areas: reform of corporate governance. Let’s not forget that the economic crisis is principally a crisis that emerged from the private sector and there is a need for reform of corporate governance, reform of banking and financial institution regulation, certainly clearly a need for reform of public services and public administration, reform of politics itself.
And reforms that bring about fairness in both the distribution of income and the availability of opportunity.
In the circumstances where we find ourselves, where we are dealing with an immediate economic crisis – and people understand the nature of that crisis – and in circumstances where, for the next couple of years, we are likely to be in a position where the changes and the decisions that we have to make are going to be difficult, and in many cases are going to be unpopular, what we have to do is we have to focus on the future and give a sense of what it is we are trying to build.
And I think that that is probably the area that we need to discuss, that we need to have a sense of the future, we need to be able to paint a picture of what the future is going to be like. We need to be, if you like, the political movement of the future.
And in addressing that, I sum it up in what I call the SOS message: S first of all for security, security in terms of what happens if things go wrong, what happens if you lose your job, what is the pension going to be like when you grow old, what is the health service going to be like. That is one of the critical things that people look to us for, and particularly look to the progressive political movement to address, is to provide the security that we have traditionally provided through the welfare state, but which we need to provide into the future by a reformed welfare state. So S for security.
O for opportunity, because we, I think, again have to look at where the economic opportunities are, where the opportunities for growth are, and how we translate that to ensuring that individuals and families and households and businesses have opportunities themselves that can see the progressive political movement as providing the political leadership, which is about opportunity.
And S then for sustainability, because I think the big lesson of the economic crisis that we have suffered from is that we build an economic model that is itself sustainable but is also located in a context of environmental and social sustainability as well.
So we are going through, Peter, a period, a difficult, challenging period, one that we are confident that we will come through. I agree with George that this has to be done in a European context and I think that there are lessons that Europe needs to learn at an institutional level and at a regulatory level.
But I think that there is also a call now too, I think, also on the solidarity on which the European Union and European institutions were built, that those countries which are challenged at the present, which have difficult economic crises to overcome, that European solidarity is a very important element in enabling us and in assisting us to do that. Thank you, Peter.
Peter Mandelson: Thank you very much, Eamon. Thank you very much indeed, and I think some of those present might want to come back and probe on your programme of security, opportunity and sustainability.
I’d like to kick off the questions, though, by just taking up the last point you made, if I may, Eamon, and put it back to George and to you, about the role of Europe, of the European Union, its institutions and the ECB, in helping you face up to the challenges that you do. I think I’m right in thinking that your party has in the past been slightly critical of the terms and conditions in which European institutions have put to you. And George, you said that you felt that there was a potential for Europe to do slightly differently and better in helping you meet this crisis.
Now, obviously we want Europe and its institutions to perform in the most optimal way. We certainly don’t want an anti-European backlash emerging in either of your countries or elsewhere.
Can you both just say a little bit more about how you think, both through solidarity and self-interest, Europe could do a bit differently and a bit better? George.
George A. Papandreou: Well, I think the point, from our point of view, is that we have been doing our homework in making the changes in Greece for debt sustainability and deficit reduction. But at the same time we are in an incomplete monetary union, or an incomplete economic union, if you like, which does not have all the tools to deal with the wider issues.
The most simple one which now every Greek understands is the one of spreads, that when we go onto the market to borrow, our borrowing interest is way beyond that of the average and certainly further beyond that of let’s say Germany or some of the more competitive countries.
That is not sustainable in a monetary union, and one of the reasons why we had to go to this mechanism is that we couldn’t really tap the market in a viable way.
But there are solutions to this, and, as I said, one of the solutions that has come up – and the European Parliament in its majority has supported this – is the Eurobond. There are other possible solutions to the growth potential and where do we get the revenue, for example again the Eurobonds, to leverage investment, but also the so-called financial transaction tax, which would be a way. We have a debate in Europe about shouldn’t the private sector pay for some of its sins, and the way we have created the mechanism, we have put the burden on the private sector if there is a future default in some country.
But this makes the risk for private investment even higher, and had a sort of self-fulfilling prophecy of pressuring Ireland and Portugal and Greece in the bond markets. But we could have a financial transaction tax where we actually say yes, you must pay for growth and development and use this for investment.
The migration problem. We really don’t have a common migration policy. Greece right now has approximately 90% of all illegal migration comes to Greek borders, and we have to deal with it. It’s a huge problem. This is not a Greek problem; this is a European problem.
These are problems that if we do not deal with collectively then they become nasty debates amongst ourselves: who is to blame and why aren’t you doing what you should do, and so on.
If we do deal with them collectively, I can assure you – and for example on the financial issue, in talking to the most, if you like, cynical hedge fund or bankers and so on, they say yes, the European bond would calm the markets and you would solve it and you wouldn’t have this fighting between countries: why am I paying for the Greeks, or why am I paying for the Irish, and so on.
So it’s not that simple, obviously. But I am just saying that there is a potential, and this is where I think progressive Europe can really make a difference.
Peter Mandelson: Thank you very much. Eamon.
Eamon Gilmore: The Irish experience of membership of the European Union has been a very positive one: access to a market of 500 million people. We have benefited over the years from a huge amount of financial support from the European Union, which helped the Irish economy to grow. Our membership of the euro has, by and large, been a positive one. I recall the difficulties that we had in the early 1990s, for example, when our currency was being speculated against, and that had a hugely stabilising effect.
I think that the cheap money, if you like, the lower interest rates that applied in the euro area, was a factor in the growth of the property bubble in Ireland. But it would be wrong to blame it on the euro. The reason that the property bubble created a problem for the Irish economy wasn’t because of the existence of euro; it was because of the pursuit of wrong domestic policies by the previous government, which tax-incentivised property activity.
So there is no point in blaming what happened in our domestic economy on the existence of the euro.
I think also that the support that has been available in recent times from the ECB is hugely important to us.
The one area where we have some difficulty at the moment is on the interest rate on the finance that we are getting, and to date the reduction in that interest rate, which was agreed in principle at the European Council in March, has not been extended to us, because it seems to me that some member states are blocking it for a number of reasons.
Now, I don’t think that that position is sustainable into the future, because a country that is complying with the terms of the programme that was agreed, that is going to return to growth this year, after three years of recession, I don’t think that it is sustainable or fair that that reduction in the interest rate, which had been agreed, would continue to be withheld from us.
That’s at one level. At a more general level, yes, I think we do have to, as a movement, I think we do have to address the measures that can be agreed collectively at a European Union level, because this is not just an economic crisis that applies to individual states; it is also a European crisis. And I think that collectively we do have to work on what kind of measures can be agreed at a European level to help get us through that.
George A. Papandreou: Just on that, because I wanted to agree with Eamon on that other side of the euro, that the euro did give us greater potential to borrow, countries that were maybe less competitive to borrow, and do so with quite large amounts and borrow cheaply.
And this is where the previous government in Greece – it is not a question, as Eamon said, of whether you can do this; it is how you use that money then, if you use if productively or if you use it in a way which creates a bubble. In the case of Greece, it was a bubble in the public sector, with policies which were not transparent and very clientelistic and so on and so forth, and that’s what we are paying for, a debt that almost doubled in the past 5.5-6 years.
And this is why of course the euro needs both the solidarity, but it also needs the strict controls that we are putting into place, to make sure that countries do follow a more efficient management of their debt and deficit. So that’s the other side of the story.
And I think we need, as progressives, to see both sides of the story in a way which is realistic. Yes, we do need the solidarity, but we also need the responsibility. And I think these are the two sides of the story.
Peter Mandelson: OK, thanks very much. I am going to just invite some indications of those who want to come in. OK, I’ve got three. Boris, can I just, though, just before we leave the European theme, just very quickly, could you just say how Serbia is advancing in its own European aspiration towards the European Union, and whether you think that – I mean I know it’s a very sort of emotional issue for some of your voters; it’s also sensitive in the European Union – how the position of Kosovo has been probably part in this advance of your own country towards membership of the European Union.
Boris Tadić: First of all, to return a little bit on the issue of the euro and the European economy, we are depending on the European economy. Our exports are going mainly on the European Union markets. And everything that is going on in the European Union is making a huge impact on the economic situation in Serbia and other Western Balkan countries.
The good thing is that we have an increasing of our exports more than 20% this year, and we are going to have growth for 3% this year. That is going to create some good elements in our economy and in the social atmosphere.
But at the same time we are facing with other difficulties. You mentioned one of them: this is the dialogue between Pristina and Belgrade and the situation on Kosovo; it is one of the most difficult issues for Serbia and the Serbian people.
What is in general my idea is to try to solve conflicts. In the atmosphere of conflicts we cannot have improvement. If we don’t have improvement of the economy, investments, we don’t have a social justice society. And if we don’t have a society that is oriented towards creation of social justice, we don’t have a real perspective.
In creating that society, we are going to be closer to the membership of the European Union. And from that reason we are working on more fields: dialogue with Kosovo, solving problem in Bosnia, trying to be helpful in solving other conflicts in the region, be very careful in commenting situation in other countries, for example in Croatia, hoping that Croatia is going to join as soon as possible in the European Union, and after that Serbia and other countries.
And that is going to create a better perspective, but the European Union has to understand – I mean I am talking about institutions and politicians – that without integration of the Western Balkans, at the end of the day the price is going to be higher. And the European Union has to take into consideration the fact that the Western Balkans is European soil.
Second, everything that is going on in the Western Balkans has an impact on the European economy. And solving and preventing problems in the Western Balkans is the best possible investment in the future, not only for us but also for European Union countries.
And that is why we are participating in all those processes by defending our legitimate national interests, but also taking into consideration that we have a common future in Europe.
Peter Mandelson: Thanks very much. Now I am going to go to Maria first, and then come down here, and then to there, and then to there, OK? So Maria first. Just say who you are as well, each person who asks a question.
Maria Rodrigues: Good morning. Maria Rodrigues, working the Party of European Socialists. About the eurozone crisis, I see it that we progressives, we should be clear that the only way for the countries’ problem is to ask a big effort from the countries, but also ask a general effort from the European Union and the eurozone. And what is missing, it seems to me, is a fair deal to make sure that we have a eurozone sustainable on the long term. And in order to have this deal, I think we have three very simple ideas. One is to make sure that we have fiscal discipline, with the last resort solidarity, but I mean a real solidarity, not the kind of solidarity which is including the possibility of default, which I believe would be a disaster. Second, to make sure that we reform the financial system, in order to ensure more responsible lending and borrowing. And third, a real coordination for growth, and this means not only reform but the investment in general. So it seems to me that we progressives, we could play a role over the next months, which we be critical to overcome the eurozone crisis, in order to come up with this new and fair deal for the eurozone. I believe it’s easier for us, in our political family, to achieve this kind of deal.
Peter Mandelson: Thank you very much. Just at the front here. I am going to ask members of the panel to come back a bit later and comment on these points. Just here, thank you.
Sony Kapoor: Sony Kapoor. And I run a think tank called Re-define. On the euro crisis, it has been very depressing in Brussels to see every single point in time, at every fork in the road, obfuscation rather than decisiveness, pushing the problem further down. And we have, on paper, put a lot of money for; we have put a lot of steps. And one year from now, if you went to Mars in April last year and came back, on paper it looks very good, but actually the situation is much worse. And the only thing that actually explains that is the process of getting here, which has been so fraught that, by getting to this point, in getting to this point, we have exposed political rifts, indecisiveness, often levels of incompetence, to such an extent that it is clear for everybody to see that when Europe says “We will do whatever it takes,” it is “We will do whatever it takes, subject to this, this and this constraint.” So we have a very large uncertainty overhang, for which Greece is paying the price, Ireland, but not just you, but the whole of Europe is paying the price. Sovereign spreads, bank spreads, private investment are all depressed. And I would ask you that, given that progressives are not in power in the EU and that we are not going to get a better process of decision-making and more money is actually not going to solve the problem, neither for Greece nor for you. Would Ireland and Greece then take the right steps in resolving the uncertainty, by actually having a fairer burden sharing and saying tomorrow is better and different than today, and restructuring some of the debt? It’s not going to happen at the European level.
Peter Mandelson: OK, thank you very much. We can come back to that. Let’s go over here now, to the lady just there.
Andrea Westall: Andrea Westall, consultant in the UK. I just want to pick up something that Pascal and George mentioned, because it kind of gets mentioned and then gets lost a lot in all these discussions. Pascal, you talked about the negative effects of identity belonging, trust that people are stealing, George about the need to humanise globalisation. Now, in a way we can’t just sort of say this is a crisis issue. This happened and has been happening for a long time. It’s the effects of growth and change. At the social policy and policy network event about a month ago, we talked again more about social ills more widely, but sometimes the negative impacts of social mobility, they are not always positive: isolation, mental health. So I think that we need to go way beyond narrative, and even beyond the kind of things – in the UK we are very balloted, but social partnership dialogue I know has been important recently. But I think we possibly need to go a lot further now. We are going to have a lot of transitions, positive and negative impacts on people. We’ve got complex, diverse issues to deal with in the economy. And in order to deal with climate change, we are going to have to go very fast. And do we have the right partnership, the right approaches to do that, and have inclusive growth? So what we’ve mentioned so far here has been economic democracy only in the workplace, probably not enough. Welfare state security, again not enough. A question for the panellists: Do we not need to think about issues of spaces, foreign partnerships, roles of the state that are all kind of spread across sectors; they are spread across local areas, across the EU, different ways of dealing with innovation and growth? And possibly also institutions and able people, to actually have identity respect within the transition, and the resilience needed as we go forward.
Peter Mandelson: Jens, just respond to that point. I just want to take that up, if I may.
Jens Stoltenberg: First of all, I believe very much that the ideal social mobility is the key issue, because it is actually in the core of what I was talking about in the beginning and what you mentioned now, and that is that social mobility is both a question of fairness and social justice, but it’s also a question of mobilising the potential of the people in a country.
So it’s just a very good example of that there is no contradiction between efficiency and fairness; it works together.
And of course the big danger now is that unemployment, the big economic problems we are seeing, will decrease the possibility of social mobility, and will actually set our world backwards.
And that’s one of the reasons I believe that we should focus on what’s going on in the labour market, both in the short term, but also more structural reforms related to for instance welfare schemes, pension schemes. And it’s difficult, it’s hard to see exactly how to do it, but the whole idea of combining some kind of demand for activity, education, some work, work to make people more active instead of being just passive recipients of welfare and benefits, is again a way of combining social fairness with a more growth-oriented policy.
Peter Mandelson: Thank you. The gentleman here. Can I just see where we are? Yeah, OK, I’ve got that.
Bo Rothstein: My name is Bo Rothstein. I am head of the Quality of Government Institute, which is a research institution at the University of Göteborg in Sweden. Two years ago we were asked by the European Commission’s Directorate for Regional Development to do a study of the quality of government in European countries, and this report is just finished. It’s based on 34,000 interviews with citizens in Europe, about how they perceive and their experience of quality of government, that is, how they perceive corruption, fairness, legality, impartiality and so on. And the most is that there is huge variation, and two of the countries that score worst are Greece and Serbia. People perceive corruption, people perceive unfairness, people perceive that you cannot trust the government institutions. And I am absolutely convinced that if you don’t get these institutions to work properly you will not have economic investment, but people will also refrain from paying taxes and trust the state with social services. So my question to you is: What is your strategy for doing something with this problem?
Peter Mandelson: OK, let’s just have a quick response, if we may, to that question before we move on, first from George and then from Boris.
George A. Papandreou: Well, I would agree with you. I think that’s the key to the problem. I have always said the economic question is the symptom. The debt and the deficit is the symptom of bad governance, and bad governance is a little bit technocratic, I would say the bad function of democracy, even though we have been a democracy for many years. But there is a lot of clientelism, as you said, corruption in the relation between citizens and the civil service.
And this was something which was exacerbated in the previous government. So we have said if we hadn’t faced the massive crisis right now, to have to cut wages and pensions and so on, which obviously was painful politically and had a political cost, we would have gone straight to the root of the problem, which we are doing now, of course at the same time.
Just the fact that we have put everything online, just that simple fact – everything, every euro now is online, so we have bloggers having a greater time, because from the napkins that are being bought to the pens in the ministries, you know, they say why so many pens? Why so many? But this just shows the transparency we are bringing to our country.
It’s taking time. Now, the tax evasion. We changed the tax system. But at the same time during a recession it’s not that easy to raise taxes, change the system and ask people to actually also pay even more, which they actually are doing. We are doing better, even though we haven’t reached the targets of what we want. But this is long-term process.
But there are many things we are changing, in fact. And I agree with you very much. Governance, transparent governance, democratic governance is the issue.
It’s not a Greek problem only – just one more point. Think of where the financial crisis began. It began with fraud: the so-called complex or SPVs and bonds and so on were sold as triple-A. These were sold as triple-A. And why? Because of course you had huge lobbies, you had huge business interests, that could capture the democratic system, could capture democratic processes and so on.
So I think the question of governance in a time of concentration of power and wealth, the question of democratic governance is key. And it will be very frustrating for the youth and for our citizens, if they don’t see real change in fairness in this issue.
Peter Mandelson: OK, Athens is not going to be rebuilt in a day. Boris.
Boris Tadić: The situation in the Western Balkans in that respect is maybe a little bit different, because we have to break the connections between. I mean what we are doing: this is a break in connections between war criminals, tycoons that are generating organised crime, and pure criminals.
And that is exactly what we are doing right now. I mean we are achieving a lot in so fighting organised crime. By bringing the very solid multinational companies in Serbia, we are doing even more. For example, Telenor is creating a great job in Serbia, a very transparent company.
And with that kind of companies that are investing in Serbia, we are creating a totally different business atmosphere.
And at the same time we are investing very much in regulatory bodies. This is a new area of Serbia. And they have a real credibility, and as the President of the country, I am working with them from time to time, not to make influence on their work but support them, their credibility and independence.
And the key issue is the reform of judiciary sector. I hope in the middle of this year we will reach new standards in the judiciary sector.
But a few things to explain that situation we were facing with. We had a real improvement in the fight against organised crime in the past two and a half years, but we didn’t have a judiciary sector that has been capable to deliver results. We arrested criminals, but we were erasing that judiciary sector to make sentence to them.
And right now the situation is much better. Big heads among the criminals are in the jail, 15, 20 years, I hope 40 years, and that is going to create better conditions for investors and improving society.
Peter Mandelson: OK. Well, I am going to go to this gentleman there, and then to that lady there.
M. Palatsi: I have been working for 20 years on what I call progressive economy. And I have an overall comment. Two things: The first is I think Europe is facing a global challenge, which of course we haven’t seen in the past. We are in a very different situation now, with China, India, Brazil. And I fear that we are not open enough to learn from South Korea, China. So I fear there is a bit of euro-centrism; we are not open enough to learn from these countries how best to develop the economy we need in the future. So I think we need to be a bit more innovative, as much as I think that for example what you said, Mr. Papandreou, about the new model of growth, absolutely correct, you know. The green industries, industries of the future, etc., etc. But there is a wider issue behind this. It is that I, you know, started working with SMEs, and I have found that the parties of the centre left had not been very near this word of entrepreneurship, the word 20 years ago was SMEs; now it is more responsible leaders; it is sustainable companies. And there are many out there working in the progressive economy which would like to be more connected with the centre left parties. So it’s sort of an appeal to you – and this is where often we see everything with one eye. So the market economy is still working. What is not working has been the financial sector and the regulation that is needed there. There are a lot of progressive business leaders out there, and many of them can’t connect with the centre left parties. So it’s an appeal for you to be more closely working with the progressive actors out there in the world.
Peter Mandelson: OK, I am going to take that point and extend it, and then in a moment put it to Pascal Lamy, because I want to just touch on the multilateral trade talks before we close this panel. Can we go that lady there?
Ms. R. (microphone problems): I am a sociologist at Kingston University in London, not in Jamaica, sadly. I think we have heard some very persuasive proposals over the last few days of how to win the economic argument of the downturn. But I think through the way the session titles have been framed, I think sort of questions of culture have been largely absent, and surely they would be part of a post-crisis agenda for the centre left. I mean we have heard bits about family policy and migration, but I just wondered how we sort of change political cultures to make the centre left more palatable to European electorates. How do you persuade people that green politics aren’t just a luxury in a downturn? The last big policy network I was at in Berlin, a big meeting – I think a lot of people here were there as well – I, too, was actually it’s not just the economy, stupid; it’s culture, too. It sounds good in practice, but how do you operationalise all that?
Peter Mandelson: OK, we’ll just come back to that. I am going to come down to the front now, to this man here.
Dan Jorgensen: Thank you. My name is Dan Jorgensen. I am the leader of the Danish Social Democrats in the European Parliament, and also Vice Chairman in the Environment Committee. And I would like to ask about green growth, of course the United Nations process of fighting climate change. Unfortunately that process is not going very well, even though Norway has set a great example in leadership and Papandreou is also fighting in general in the EU. What exactly do we do to get the process back on track? That’s one question. And a second question is: How do we make sure that the transformation into a low-carbon economy in Europe is a just transition? How do we make sure that the people, blue-collar worker, working right now in an old-fashioned industry, also see this transition as a good transition? Because even though I certainly agree with most of you that, at an aggregate level, we would get more in a green economy than in an old-fashioned economy, but for a person working in a coal mine today that might not be very easy to see. So how do we do this on a practical level? Thank you.
Peter Mandelson: Thank you very much. And now the gentleman there behind you.
Frank Vandenbroucke: Thank you. My name is Frank Vandenbroucke, a member of the Belgian Senate. I am working with a number of friends on the idea of a European-wide social investment pact. It’s kind of inspired by the discussions there have been about the competitiveness pact, the euro pact plus, etc. And so the question is: How could we make such an idea to have an EU-wide social investment pact? How could we make that operational, and how could that mean something in the kind of political discussions we will have over the next few weeks and months, which I think will be quite critical? The question I have is both about substance but also about the politics of it. I think we need a message that could both be interesting for, say, Mr. Papandreou and our Greek friends and interesting for our Spanish friends, but also interesting for Dutch social democrats, Belgian social democrats, who are in very different situations. We cannot say we don’t want austerity, because we are practicing it in a number of countries. We can also not simply say we should boost overall social investment, because I guess you don’t have all the money to do that. And so the question is: How can we formulate something that is both kind of mobilising but adds something that is really useful to the current discussions on economic governance in the European Parliament and in the Council, because I think we should urgently add something to that? And how should that resonate? I think George Papandreou went some way in saying for instance well, we need a more thorough discussion on funding and so-called Eurobonds. It goes some way. An idea that could go a bit further is that we could say well, we want to put pressure on every member state to pursue social investments, to carry on in that way, and we want to help countries and member states that pursue that way in different circumstances. This is the kind of reciprocity we need. I’ll stop there. So my question is how our Irish friends, our Greek friends, how they feel about this, what kind of wording they need so that it also sounds realistic for them.
Peter Mandelson: OK, I am going to invite all members of the panel to respond to these last points. Is there anyone, because Prime Minister Zapatero, for completely understandable reasons, can’t be here – we haven’t had a Spanish voice in this session, and I wonder if there is any colleague from Spain. Yeah, let’s go. Just come over here, and hear a Spanish voice.
Carlos Mulas: Well, hello. Good morning. Thank you, Peter. I am Carlos Mulas, the Director of the IDEAS Foundation, which is the think tank of the Socialist Party, and President Zapatero is also the President of the think tank. So on behalf of himself, apologies for not being able to come. The reason was precisely that he had an urgent meeting with the trade unions and the business confederation. And my question goes to this: This was about a wage bargaining, in order to see, well, there could be an agreement to reduce salaries to make it more flexible, the wage negotiation, to get the Spanish economy more competitive and sooner. This is one of the recommendations and also one of the prerequisites. It goes by Brussels, in a way. So my question is: Based on the Norwegian experience, which we heard a lot about that, no? How can we build some sort of confidence between trade unions and the business confederations that try to get to an agreement to see if they can collaborate in the fiscal effort and in the reform effort that the different countries, particularly Greece and also Ireland, are doing in this respect to get out of the crisis? So what is your view on this? Thank you.
Peter Mandelson: OK, I think that’s a good point. And instead we haven’t heard a German voice, either, but in Germany I think we would all acknowledge and accept that there has been a very strong partnership and agreement between the trade union movement and successive governments, in bringing about quite far-reaching structural, industrial and economic change in Germany.
I want to ask members of the panel, then, to respond to that point, but also to pick up the further final questions that have been put to you. And then I am just going to come lastly to Pascal. But let’s start. Eamon, will you just pick up some of the points that have been put to the panel in these last questions?
Eamon Gilmore: Well, let me take up the last one first. We did have, as a country, a very formal social partnership arrangement between government, trade unions, employers and indeed wider civic society. And that formal arrangement was one of the casualties of the economic collapse, because in effect it has ended.
What we have now ended up with is we have ended up with an agreement between trade unions and government in respect of employment and employment conditions in the public sector, but we don’t have a corresponding agreement in the private sector.
And I think one of the things that is probably hindering that is the degree to which there is now a relatively low level of trade union penetration among workers in the private sector and in particular among the new industries.
But it is an area that we are working on and have a dialogue with the unions.
I think we do have to be mindful of the fact – and I think this probably goes through a number of the questions – that if you look at the political profile across Europe and the European Union in particular, labour, social democratic parties are only leading governments in a handful of countries and only in government in a number of other countries.
So the political profile across Europe does not reflect very strongly our movement, and that I think to some extent is reflected in the decisions and the emphasis that there is in solutions that are being advanced.
But one final point that I want to address is the issue of a question which was raised, which is a question that we hear domestically, and that is, you know, well, why doesn’t Ireland restructure? We are not going to do that. We have committed ourselves to working the programme that we have agreed with the EU, the ECB and the IMF. We are confident that that will succeed. We know it is difficult and it is challenging.
I suppose the one thing that we would look for at this stage from partners is that additional obstacles not be placed in our way, in doing that.
And I think overall, in terms of where this movement is going, again I come back to the point that the issue, I think, that we have to address and the vision that we have to portray is one about the future. I mean I have just come out of a general election. And the strongest image that I have, coming out of that election, is normally people say to you, well, what are you going to do for me? That’s not the question that we were being asked this time.
The question we were being asked this time was what are you going to do for our children? Because people I think are looking much more ahead. There is a much greater sense of, you know, what the future, and there is an uncertainty about it, an uncertainty about where Europe is, competing with the rest of the world. I think that was reflected in some of the questions that are here. People are uncertain about where their own future is going to be, in terms of employment, in terms of earnings, in terms of pensions, in terms of social security, and indeed uncertainty about energy and about the state of the environment.
And I think it is that future, I think we have to capture that future and we have to present a vision which is realistic and which assures people that we have answers for them in the future.
Peter Mandelson: Eamon, thank you very much. Boris, can I invite you to offer some short wrap-up comments?
Boris Tadić: I totally agree with you that the main issue is are we capable to deliver something for children of our waters. And the second question is: Are they going to understand our intention right now, before elections?
If we want to deliver some concrete results/reforms, we have to be capable to defeat our rivals on elections, our populistic rivals and nationalistic rivals, on elections. People are impatient, having in their mind how deeply are they affected because of crisis.
And the worst thing is that we have to be more rational than our rivals. This is not very easy, having in mind the nature of human beings.
The energy of the irrational part of our personality is much stronger, and we have to find a way to explain in these very difficult circumstances. I am saying this as a psychologist, not only as a politician. But I know now difficult it is to be rational in politics.
Peter Mandelson: I doubt if we’ve ever had a politician psychologist qualified on one of these panels before. This is a first, and very valuable. Jens, your wrap-up comments.
Jens Stoltenberg: First a comment on the question of the trade unions where you referred to Norway. I think that we have great success in Norway with the very close cooperation between the Labour Party and the trade unions, and also between the government and the trade unions.
And I think that it’s not possible to understand it with a historic context, because it is a long tradition, and we have proven through many years that it is in the mutual interest both of the trade unions and of the government to work closely together.
And I think one reason for that is that in Norway we have a quite high degree of unionised workers. We have strong nationwide unions. So they are able to take the responsibility not only for a very narrow-minded union approach but for the whole economy. They restrain their wage demands to keep unemployment down. They are partners in social reforms, like the big pension reform, which was very radical and we did it together with the trade unions.
But in return they have an economy with low unemployment, with steady wage increases and with overall a good pension system.
So as long as we see the mutual interests, there is a potential for working together, but it’s not easy to copy in other countries, where the traditions are very different.
Just then two other short remarks. One is on the green economy. In one way, I think we make that much more difficult than it is. It’s very easy to promote a green economy, and that is to make the polluter pay. It’s straightforward, but we sometimes lack the boldness or the courage to do so.
And the most obvious way of doing that is to introduce more of carbon pricing. Carbon pricing has a double positive effect: It will reduce carbon emissions and it will generate public revenue. And then we can solve both the debt crisis and the climate crisis with one, too. If we have the courage.
Then of course the problem is that the more we price carbon, the more is the need for international coordination. And that’s also a big challenge to have it on a more global international scheme. I think that what the European Union do when it comes to emissions rating is excellent, and we need more of that.
The last remark is on the euro and the problems within the euro. I should be careful doing so, because in Norway we are experts in applying for membership to the European Union. Two times. As I told many of you, we are the only country in the world that has applied for membership and been admitted as a member, negotiated an accession treaty, and then watered it down in a referendum, not only once but twice. So we are really experts in applying.
But the only remark I have is that many of the problems – and I am sure that Pascal can say more on that later on – that the euro now is facing, they were foreseen. I mean because it was obvious that when you introduce that kind of currency union it will become very cheap to borrow for some countries. So then you had to limit the access or the ability or the opportunity to borrow.
And that was why you introduced a 3% deficit and 60% debt. But then you didn’t implement that. So you borrowed too much. And there we are back again, that progressive policy is to be prudent when it comes to fiscal policy.
And then you have to have surplus. You have to restrict demand, public expenditure, during good times. You should not spend that surplus on tax reductions or big public expenditures. You should create the reserves, the surplus you need, in downturns.
Europe didn’t do that, and that’s one of the reasons both for the debt crisis and the problems with the euro. So more discipline is a very soft democratic message.
Peter Mandelson: Very good, very Norwegian. We would love to have your common sense, your productivity and your sovereign wealth in the European Union. Anyway, I am not going to identify those two large member states of the European Union who first defied and weakened the Maastricht criteria and fiscal discipline. All I would say is that they are not on the periphery of Europe. George.
George A. Papandreou: Well, to take up the theme that Jens mentioned and link it to some of the questions of how can we have a policy which in a sense is a social democratic policy or a progressive policy and can apply to both the South, which is now having its problems, or the periphery, however you want to call it, and also the other countries which are more robust.
And I think the word austerity is not the right word. I think the word I would like more is responsibility. And responsibility would mean, as Jens said, how we manage our macroeconomic situation, how we manage our finances in a responsible way.
But I would add to that responsibility also would mean for us responsibility to values such as social justice, a sense of justice in our societies, which the increasing inequalities in, between, and also in this globalised society, is a big threat.
I would also add to this a question of responsibility to our democracies and the need to replenish, re-invigorate. You were talking about the social partners and trade unions, but there is in many countries a lack of participation, of institutions of participation, and particularly the youth, when they are unemployed, they don’t really have a place where they can sort of lay down their head and their woes.
And so the Internet, social media – we have to see how we find new ways of deliberation and participation in this, both politically but also in the social economy. and one thing we are doing in Greece also is looking into the issues of let’s say the social enterprises and so on, and see how entrepreneurship can be part of the social enterprises and part of our culture, too.
And of course responsibility to our environment and that means a green economy; it means the next generation, as Eamon said also. This is another responsibility we have, and it’s a collective one.
And I just want to add to this what Jens said, that the CO2 tax has been also one of the issues that we progressives have pushed forward, we in the Socialist International have pushed forward also. This would bring revenue. It is an area of revenue, such as the financial transaction tax, also such as Eurobonds, in leveraging private funding.
And if we did have a more coordinated policy, for example in Copenhagen a year or so ago, we possibly could have made more of an impact, and then created the environment where more investment would come into the green economy. And what Jens said of course is very right: A CO2 tax means more coordination and more global governance, and this is where Europe could play a much stronger role.
That would be able to be a way to say yes, we do have better, more responsible measures in dealing with our member states’ budgets, but at the same time we have other means where we bring in for growth and changing and transiting our economy to a much more viable economy, but bringing jobs also.
So I think this is where our progressive views can be of essence. I have, living through this period and living through this very difficult crisis in Greece, having to impose very difficult measures in order to deal with our debt and deficit, has not made me less progressive or I would say less socialist. I would say even more s I think that our views, our policies, the things we are talking about now, are more relevant in our world rather than less relevant.
Even though that may not show up in the polls and some of the elections, but I think this is where we need to keep on going.
And just one final point, thanking Jens. He talked about the two applications. And the second application I happened to be Foreign Minister in the presidency of the European Union, where we negotiated with the Norwegians. We were very unhappy that you didn’t make it into the European Union, but I did get something. I got a book with all the fish of the northern sea. So thank you very much.
Peter Mandelson: Well, small compensations. Anyway, I was actually trying to find a German face but have failed. But I think our German colleagues will take back home the remarks you made about the need for a Eurobond.
Now, just lastly in the final two minutes we have, a lot of the questions and the contributions that have been made on this panel have taken up the theme of the need to manage globalisation intelligently, in a progressive and fair way, and in a collaborative and cooperative way. I can think of no better illustration both of the need for that and the difficulties in doing so than the World Trade Round, the Doha Development Round.
Recently the former US trade representative wrote in Foreign Affairs that in her view the trade round was dead, should be jettisoned and buried, and we should move on, without, I must say, making very clear where we were going to move on to and how.
Pascal, can you just give us the final word on this, because for the sake of the whole multilateral system, not just the trade system, the rules-based trade system in the world, but for the whole cause of multilateralism, in which we believe, to see the trade round possibly foundering in this way is a huge potential setback.
Karen, I don’t know whether you might want to comment also, but Pascal, have the last word on this.
Pascal Lamy: Well, your starting point, Peter, is absolutely correct. This WTO system, this multilateral trading system, is the only real working system of multilateral economic governance.
And the fact that we cannot conclude this, one of the functions of the system, which is to update its rules regularly, is clearly a very disheartening and in a way dangerous signal for multilateralism at large.
The reality is very simple. The updating of this rule book, which members of the WTO have been working on for ten years and you yourself, Peter, brought your own stone to what has been built during ten years, is potentially there, but for a stalemate on a few industrial tariff line tariff reductions, between basically the US on the one side and China, India and Brazil on the other side.
So this small thing blocks the whole deal. And it’s a typical case where, you know, short-sightedness, domestic politics being captured by a few vested interests on this, and by the way I should be very careful about giving you a whole explanation on this, which probably would not please many people, or at least many WTO members, and I obviously shouldn’t do that.
But one of the reasons behind this is in the US domestic politics. And one of the reasons in the US domestic politics is the hostility of US trade unions.
Now, why is the AFL-CIO hostile to trade opening? The fundamental reason is that in the US unionisation is easier in the old economy than in the new economy.
So if I am the leader of the AFL-CIO, an open, active, trade policy will automatically erode my membership. I’ll be sawing the branch on which I am sitting every day.
Unlike Germany, for instance, where ten years ago trade unions had a big debate within themselves, and VERDI, which is the German trade union for services, is now sort of more influential than IG Metal, as it was 10 or 20 years ago. Why? Because they have identified this issue.
So at the end of the day it’s a big multilateral problem, it’s a big risk for a system that notably during the crisis has allowed to contain very efficiently inevitable protectionist tensions here and there. But as we all know, this is all about domestic politics. And it is about domestic politics, and this is where the solution lies.
Karen Kornbluh: I have to say, I think it’s a little bit more complicated than that, and I think one of the things that progressives have to spend a lot of time thinking about is how we make this multilateral system work, but also how we deal with some of the dislocations of trade in a way that builds trust among all people.
Peter Mandelson: Karen, thank you very much indeed, and that folds neatly and nicely into the next panel, which is going to take up international themes.
I doubt very much, frankly, whether Pascal would disagree with that last sentence you expressed. I think it reflects very strongly his own perspective.
Thank you all very much indeed for your candour, for your experience, but above all for your leadership on this panel.
Thank you very much indeed for your participation, and thank you, all those guys up here. Thank you.