Monday, January 10, 2011

Barroso's growth delusion

I have a guilty secret to confess. Despite loathing the tittle-tattle about celebrities that routinely masquerades as journalism, I sometimes pay too much attention to ephemera. On Saturday mornings, my eyes tend to ignore the news headlines in The Financial Times and instead fix themselves on a feature called Lunch with the FT. The only justification I have for this weakness is that it affords me an opportunity to scoff at the powerful diners portrayed.

Among the recent beneficiaries of the FT’s expense account was José Manuel Barroso. The European Commission president chose an old haunt for his free meal – York House in Lisbon – and insisted that the menu of foie gras and John Dory was chosen not by him but by the restaurant’s manager. Yet the fact that he was sating himself on such delicacies at a time when more than 85 million people in the EU – or 17% of its population - live below the poverty line illustrates how aloof he is from the citizens he purports to champion.

Barroso also claimed that one of the guiding principles in his life is to embrace things that are new and different. Although this may be true of his penchant for experimental jazz, it is impossible to detect any signs of fresh thinking in the two most important activities on his schedule this week.

On Wednesday, Barroso will present the Commission’s annual “growth survey”. This will be heralded as the beginning of a cycle of economic governance, under which EU governments coordinate their national budget plans with unelected officials in Brussels. The paper will also contend that the savage cutbacks to public spending being taken across the Union must continue in order to please the goddess TINA (there is no alternative).

The “survey” will be a follow-up to the “Europe 2020” strategy agreed by the Union’s key bodies last year for achieving “smart, sustainable and inclusive growth” this decade. Barroso and his ilk tend to recite those buzzwords as if they amount to an incantation. Experience proves, however, that economic growth as it is currently defined can be neither sustainable nor inclusive. This is because it is measured using a crude and antiquated indicator called gross domestic product (GDP).

Back in 2007, Barroso himself acknowledged that using GDP - developed during the Great Depression era of the 1930s - as an economic compass was “not sufficient” today. Addressing a conference in Brussels, he pointed out that GDP calculates market activity, rather than well-being and intimated that relying on it alone can be catastrophic. He inferred, for example, that policy-makers could refuse to take measures essential for the survival of the human species – such as protecting the rainforest – if they were harmful to growth.

Some work has been undertaken by the Commission – mainly by its environment department – since then on devising measures to “complement” GDP. Similarly, the governments of Britain and France have sought studies on how the impacts of economic policies on the environment and even “happiness” can be gauged. It is telling, however, that the EU as a bloc still attaches more importance to GDP, a three-letter acronym, than to ensuring that each child realises his or her potential.

The notion that the EU will find a magic formula to make growth “inclusive” is particularly fanciful. The neo-liberal orthodoxy to which the Union is wedded has resulted in a situation where the world’s 200 companies account for 28% of global GDP, yet employ less than 0.25% of the global workforce. All of the euro-zone economies now in severe difficulty saw significant GDP growth per head of population between 1990 and 2010 – Ireland by 107%, Greece by 53%, Spain by 38% and Portugal by 32%. Yet none of these countries witnessed any comparable narrowing in the gap between rich and poor. Eurostat, the EU’s in-house number-crunchers, has published data indicating that the levels of income inequality recorded for Spain and Greece were higher in 2009 than in 2000.

Barroso has identified energy as “the next great European integration project” and as a “growth-enhancing sector”. Yet while he is extolling the virtues of renewable energy and of energy efficiency, the other important item on his schedule this week proves that his talk about steering Europe in a more “sustainable” direction cannot be taken seriously. As part of a visit to Azerbaijan and Turkmenistan, he and Günther Oettinger, the EU’s energy commissioner, will discuss the future of the 3,300km Nabucco pipeline project for bringing gas from Central Asia to Europe.

The project underscores just how skewed the priorities of EU energy policy are. The consortium behind the project – which includes Germany’s RWE - is seeking a €2 billion loan from the European Investment Bank. Yet in 2009, that bank allocated a mere €190 million for measures ostensibly promoting energy efficiency in EU’s 12 newest entrants from central and Eastern Europe.

Once completed, the Nabucco project would mean that a large proportion of the EU’s energy comes from Turkmenistan, a country where the ruling regime brooks no opposition and where human rights organisations are forbidden. You can be sure that Barroso is not going there to tell the authorities that the condition of buying Turkmen gas is that they become less repressive. For all of his rhetoric about Europe’s commitment to values like human rights and democracy, it is the value of business contracts that concerns him most.

·First published by New Europe (, 9-15 January 2011

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