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Martin Flanagan: Growth the only way to save jobless generation

'Growth is the only way' out of jobless future. Picture: Getty

'Growth is the only way' out of jobless future. Picture: Getty

THE latest unemployment figures, particularly for young people, are no less depressing because they were predictable given the current sputtering state of the economy and general austerity.

The increasingly politically sensitive number of 16 to 24-year-olds without a job rose to 1.04 million in the three months to January, the highest since records began two decades ago.

It gives an unemployment rate among British young people of 22.5 per cent.

That is not as high as the near-50 per cent of young Greeks, or 40-plus per cent of young Spaniards, for instance, who are without a job.

But the UK figure is still a cause for shame, with its bleak portents of a potentially wasted generation. In the wider picture, UK unemployment held at a 13-year high of 8.4 per cent to add to the cheerless jobs scenario. In Scotland, it stands at 8.7 per cent.

Perhaps the only piece of good news is that the private sector, as the CBI employers group believed it would, seems to be taking up some of the slack of public sector job cuts in George Osborne’s austerity programme.

Other data out yesterday showed that, in the final quarter of 2011, total public sector employment was 270,000 lower than in the corresponding quarter of 2010, while there had been a 226,000 increase in private sector jobs in the year.

We need more of this and some authentically innovative (see below) thinking from the Chancellor in his Budget next week on ways to stimulate growth and employment despite the unconducive backcloth. It is virtually inconceivable Osborne will row back on the five-year austerity programme, and, looking at eurozone sovereign credit ratings compared to ours, he is probably right in his mid-term thinking.

But as the great economist Maynard Keynes once said when arguing for a more interventionist government policy in the economy rather than a static focus on distant financial targets: “In the long run we are all dead.”

The only way that unemployment will start to come down meaningfully is if, as the CBI argues, private sector growth is made sustainable.

For that, Osborne needs to make the business environment as inviting as possible for companies to invest.

Innovation has its place but banking ain’t it

BRAVO. Financial Services Authority chairman Lord Turner is right on the money in lambasting the City’s parrot-like infatuation with “innovation” for its own sake. The FSA boss has been here before, having previously criticised “socially useless” banking activities that managed to be high-profit‑margin, esoteric and not in customers’ best interests simultaneously.

Turner’s latest broadside on innovation fixation in the banking palaces hits the spot again. His well-made point is that, by regularly harping on about how innovative they are, banks can baffle punters with over-complexity while blind‑siding regulators on dangerous financial products in the pipeline.

As Turner says, innovation really belongs in areas like science, medicine, food production, green energy and the like, where developments that are authentically ground‑breaking can have palpable benefits for society.

Much as it will irritate the City, it is right the FSA mentions the Emperor’s new clothes when necessary. True, some financial innovation is useful, such as the interest rate swaps that allow borrowers to get fixed-rate mortgages and take a measure of financial volatility out of their lives.

But the crash largely came about because banking forgot its meat-and-veg roots of deposits, loans and payment systems in the search for ever higher profit margins in an era of low interest rates.

This is not to argue that banking should just be a utility, like an energy company or the Post Office. There is room for bright financial brains to function.

But the very best brains in nearly all fields cut through the complexity to make things understandable rather than mindlessly assert that their stuff is really about rocket science and we should all just take the worth of “innovation” as a given.

Turner’s veiled attack on Goldman Sachs for helping bankrupt Greece take some of its debt off balance sheet, so to speak, shows the twisty moral road innovation can too often go down.

 

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