Two different bridges were under construction at the “job summit”. But where do they lead?
One bridge is a swingbridge, the sort boys used to learn in scouts. John Key has flung out guide ropes to where he thinks the other side is and is busily knotting up the V-shaped spacers which he hopes will steady our shaky passage across the valley of recession.
The other bridge is of metal-and-concrete to a different economy in which we can make a new start. Bill English hopes to build that bridge.
To keep these two bridges in view, summiteers needed bifocals. Most turned up with either short-sight or long-sight spectacles.
One chief executive, who must be nameless — the “work-streams” which took up most of the day were under the Chatham House rule — does have bifocals. He reckons his (rather large) business needs to plan for a five-to-15-year shakedown. While battling the immediate headwinds, he is planning his firm’s repositioning for the new firm ground.
Key is not alone knotting a swingbridge. President Barack Obama, Prime Minister Gordon Brown, Chancellor Angela Merkel, Premier Wen Jiabao, Prime Minister Taro Aso and Prime Minister Kevin Rudd — just about all heads of government — are at it.
But they take us over a stream to a bank roughly on the same level as the one we have left.
But this is no scouting exercise across a modest bush valley. Economic flashfoods have scoured the valley into a deep V-shaped ravine that gets deeper by the month. And the guide-ropes are slipping as the bank on the other side loses height.
So as we start out across Key’s swingbridge we may well find its only direction is down. Key’s gentle U is itself at best turning into a deep V and possibly into an L — an L with maybe a five-to-15-year bottom line.
History tells us busts are not blips. They end in wrecks. And this is not a modest bust. This is a big bust. All busts leave a lot of debris but usually the debris can be cleaned up and we get on with life — get back to a bank roughly on the same level as before the bust, with gently upward sloping ground ahead of us. Superbusts strew around so much debris that life can never be the same again even if eventually we find an upward slope.
It is to that different life that the metal-and-concrete bridge, if it is built, will eventually lead. It will not be to a bank at the same height as the one we left.
Our massive private debt — and the debt of the United States, large swathes of Europe and Australia — has to be paid down. We were not on a bank. We were on a cloud. The bank was far below.
So we need to drop rather a long way before we can start on the bridge. How far we don’t know yet.
Is this alarmist? Only if you think the Reserve Bank governor is alarmist. Alan Bollard’s presentation to the open-to-the-media first session of the job summit was grim. Treasury Secretary John Whitehead didn’t lighten up the atmosphere.
(Note, by the way, that the plural “jobs” morphed into a single “job” between initial concept and the event.)
It is additionally discomforting to this micro-economy that very little we can do here, privately or through the government, can have much effect. The big boys — they are nearly all boys — will determine how things go here and the big boys all live somewhere else.
But the big boys are all, like Key, roping up swingbridges. And the big boys were too swank to go to scouts so they don’t know how to do the knots.
So we have a new Keynesianism. The swingbridge ropes are lending lines. Somehow, from somewhere governments round the “western” world are going to borrow colossal amounts. And they are going to do this at a time when China is struggling with its own economy, Japanese investors are battening down and the oil states revenue has plummeted.
Do the sums and wonder where the money will come from.
Then notice this little slip of the mind that has slid into some countries’ politicians’ language: “shovel-ready”. To combat the “recession” — build the swingbridge — we need projects that can start immediately and employ those who are now losing their jobs at a quickening rate. That is the beauty of Key’s sudden interest in biking the length of the country.
To students of history “shovel” conjures up the work-for-the-dole schemes of the 1930s. To maximise the labour content, roads were built manually (and men lived in spartan tent camps). In 1936 the new Labour Minister of Public Works, Bob Semple, drove a bulldozer over a wheelbarrow to mark the end of that.
By talking “shovel-ready”, English and his counterparts in other countries are (unintentionally) evoking the 1930s depression.
That is, they are talking depression, not recession.
Far-fetched? Not at all. A year ago American commentators wondered whether to use the R word (for recession). Now the debate is over the D word.
Key has no political choice but to rope up up his swingbridge. But to where?