Iam honoured to be able to join you today and am proud of the fact that the headquarters of your Federation is based in my constituency. Our annual lunch has become an institution. It is always a great pleasure to meet such a diverse range of people working in a sector that groups together such a range of small enterprises with their feet firmly placed upon the ground. It seems to me that the Federation represents the benefits of small firmly based, pragmatic organisations with the strength of a large organisation by coming together you are able to face up to the challenges of these times and the need to adapt to pressures of a globalising world. I have been impressed with your increased focus on training, quality and getting access to global markets.
I want to congratulate you on those achievements and unlike Digby Jones last year who was full of optimism about the situation of the UK in the world; I want to argue that we are living at times of enormous uncertainty, constant change and likely crises. There are difficulties ahead as global markets are demonstrating. The businesses that survive need to be adaptable and flexible and this relies on the skills of workforce, the ability of the management and focus on quality that is abundantly on display in your industry. But when we look at the history of the jewellery quarter in Birmingham your sector is probably better placed than many others to survive some of the turbulence that lies ahead.
The problems we face are the dangers of terrorism and the current unwise response which is exacerbating the problem, nuclear proliferation, strain on the environment, the problems of poverty, population growth, urbanisation and the likelihood of growing unrest in the poorer parts of the world as people see the material wealth that we enjoy and from which they are excluded.
In this new highly integrated world, the problems of countries far away soon come home to haunt us. All is not hopeless, there are great challenges but solutions are available. We have a really serious problem – poor global leadership and sadly the UK is part of the problem, not the solution.
This is not the place for a foreign policy speech but the point I am trying to make is that we are facing great uncertainty and this will affect the global economy and opportunities for business.
Of course, one of the great forces driving this current globalising boom is rapid economic development in China and India – these two massive countries of over one billion people. But such economic growth cannot continue indefinitely. Progress in China has reduced poverty faster for more people than ever before in human history. But they also show the limits to the economic growth the planet can bear. According to Lester Brown of the Earth Policy Institute in Washington DC, who is one of the leading US environmental analysts, if growth in China continues at 8 per cent a year, by 2031 China’s income per head for its 1.45 billion people will be equal to that of the US today. He said:
China’s grain consumption will then be two thirds of the current grain consumption of the entire world. If it consumes oil at the same rate as the US today, the Chinese will be consuming 99 billion barrels a day – and the whole world is currently producing 84 billion barrels a day, and will probably not produce much more. If it consumes paper at the same rate that we do, it will consume twice as much paper as the world is now producing. There go the world’s forests. If the Chinese then have three cars for every four people – as the US does today – they would have a fleet of 1.1 billion cars compared to the current world fleet of 800 million. They would have to pave over an area equivalent to the area they have planted with rice today, just to drive and park them.
Mr Brown, who has been tracking and documenting the world’s major environmental trends for 30 years then said:
The point of these conclusions is simply to demonstrate that the western economic model is not going to work for China. All they’re doing is what we’ve already done, so you can’t criticise them for that. But what you can say is, it’s not going to work. And if it does not work for China, by 2031 it won’t work for India, which by then will have an even larger population, or for the other three billion people in the developing countries. And in some way it will not work for the industrialised countries either, because in the incredibly integrated world economy, we all depend on the same oil and the same grain. The bottom line of this analysis is that we’re going to have to develop a new economic model. Instead of a fossil-fuel based, automobile centred, throwaway economy, we will have to have a renewable-energy based, diversified transport system, and comprehensive reuse and recycle economies. If we want civilisation to survive, we will have to do that. Otherwise civilisation will collapse.
There is also a problem that US booming economic growth that is helping to fuel the world economy is based on a growing imbalance in its import of cheap goods from Asia paid for by the willingness of Asian countries to hold large stocks of dollars. This cannot continue indefinitely. In addition the constant growth in consumer spending in the Anglo-Saxon countries is dependent on very high levels of indebtedness and house price inflation that will before long have to come to an end.
So as Lester Brown makes clear, we will need to change considerably the organisation and priorities of our society if human civilisation is to continue on the plant. But the reality is that our current arrangements are flawed and our society increasingly dysfunctional. There is clear evidence that phase of globalisation we are in is increasing inequality. But the evidence is also clear that growing inequality creates less stable and happy societies. Richard Wilkinson has made a systematic study of consequences of inequality in different societies and concludes:
In societies where income differences between rich and poor are smaller, the statistics show not only that community life is stronger and people are much more likely to trust each other; but also there is less violence – including substantially lower homicide rates – health is better and life expectancy several years longer, prison populations are smaller; birth rates among teenagers are lower, levels of educational attainment among school children tend to be higher; and there is more social mobility. In all cases, where income differences are narrower, outcomes are better.
He goes on to say:
The implication is that what really matters about income is where you are in relation to others in your society – it is a matter of relative income or social status, not whether the population in one rich country is on average twice as rich as that of another. So, for example, the USA has the highest homicide rates, the highest teenage pregnancy rates, the highest rates of imprisonment and comes about twenty-sixth in the international league table of life expectancy because it also has the biggest income differences. In contrast, countries like Japan, Sweden and Norway, although not as rich as the USA, all have smaller income differences and do well on all these measures. Even among the fifty states of the USA, those with smaller income differences perform as well as more egalitarian countries on most of these measures.
These findings should give us pause for thought – a commitment to economic growth at any price and shrugging off of the growth inequality this is bringing does not create happy societies.
And perhaps because this realisation has been growing recently there are an increasing number of studies of happiness. Richard Layard’s March 2003 Lionel Robbins Memorial Lectures on Happiness point to complementary conclusions. His analysis in a cross section of countries, of those who are happy and satisfied with their life shows that once a country has over $15,000 per head, its level of happiness appears to be independent of its income per head. For poorer countries, however, there is a clear impact of income on happiness. When you are near the bread-line, income really does matter. But for countries above $15,000 per head, the relationship breaks down.
His studies look at growth of alcohol abuse, the rise of mental illness and clinical depression. He concludes:
People in the West have not got happier in the last 50 years. They have become much richer, they work much less, they have longer holidays, they travel more, they live longer, and they are healthier. But they are no happier.
My conclusion is that these are times of enormous opportunity given the capital, technology and knowledge we have. But they are also times of great risk. We have to manage a period of massive change to make the world more equitable in order to be
capable of reaching agreement to use our environmental resources more sustainably. And we have to change our own societies to make them less unequal, crime ridden and unhappy. This is a tall order and the political leadership of the world is making things worse instead of better.
To get through this era we need people with their feet on the ground, anchored in the real world who are pragmatic and skilful and capable of adapting to change. The history of the jewellery industry in Birmingham certainly demonstrates those qualities and I think we can always be sure in good times and bad that people will give each other gifts and jewellery. But my message is that we should tighten our seat belts for the turbulent times that lie ahead and hope that lessons will be learned from the errors of the current global leadership so that we come together in future to manage these crises in a way that will enable homo sapiens to continue to survive and live more happily in the centuries ahead.