Last week, I was very busy travelling for Dublin to Bonn, from Bonn to London where I saw my daughter Juliana who lives there, then by train to Paris, and finally back home on Friday night.
In Bonn I attended an event organised in conjunction with the EPP Congress. I took part in a panel discussing transatlantic relations, with special reference to innovation in the economic field. I have put my own speech up on the website below this posting.
My good friend Elmar Brok MEP also spoke. He emphasised cooperating to protect intellectual property so that European businesses who invest huge sums in new products and processes do not have all their work undermined by competitors who steal their designs and brands and can undercut them because they have not had to expend anything on research. He also praised risk taking quoting Woody Allen who said that if you do not fail from time to time , it is a sign that you are not doing very much.
There was a very interesting panel on telecommunications . It was claimed that huge new investments will have to be made if the network is to keep up with demand….350 billion dollars in the US alone. At the EPP event, I also met Michel Barnier, who is about to take on a very important economic role in the European Commission, and the Vice Prime Minister of Ukraine, Hryhoriy Nemyria.
In Paris, I spoke at the French Institute for International Relations (IFRI). One of the questions addressed was whether we had yet discovered a new post crisis model for economic growth. I concluded that it will be difficult to find a new economic growth model, until the imbalances that led to the crisis have first been eliminated.
A Stimulus that prevents an over rapid economic decline may be justified and necessary, but it is an anaesthetic , it is not a cure. The cure is to eliminate the imbalances that led to the crisis. One of these imbalances is the continuing undervaluation of the Chinese currency, which continues to cause a misallocation of global resources.
The artificially large amount of Chinese savings, caused by the undervaluation of the currency, initially led to a bubble in consumer debt in the US, Spain, Ireland and some other countries. Now that that bubble is painfully deflating, the savings are going instead into a new bubble of borrowing by western Governments at low interest rates. It is too easy for Governments to borrow at these rates. But as soon as the savings are brought home to China, interest rates for Governments will rise, as happened in the 1980s. Then our problems will be far more severe than they are today.
My own strong view is that a new growth model must involve
1. radically raising the retirement age so that our pension and healthcare costs do not overwhelm us, and
2. investing in early childhood education so that we no longer have up to 10% of children emerging from our school system without the abilities they will need to survive in the modern high tech world.
There were a number of other interesting ideas at the IFRI Conference and I will come back to them in future postings on this site.