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“For Moynihan the only way to break the vicious circle in which the West finds itself is to ‘redirect public spending’ to the areas that best guarantee growth: education and infrastructure."

 

faro de vigo on jon MOYNIHAN's decline of the west 

Western salaries in free fall

Joaquín Rábago

Faro de Vigo

3 September 2012

 

PA's chairman, Jon Moynihan, has had his views on the economic decline of the West discussed at length in the online version of Spanish newspaper Faro de Vigo.

The article introduces Jon’s argument: “While our politicians are immersed in endless discussions about Greece leaving the Eurozone or about the benefits and drawbacks of mutualising the debts of countries accused of profligacy, they often lose sight of the bigger picture. The dangers of political short-sightedness have been alerted to us by Jon Moynihan in a lecture he gave at the London School of Economics with the Spenglerian title ‘The Decline of the West.’”

The article explains: “The first explanation and the key to everything is the huge difference between the average daily wage of a worker in the OECD region and their counterpart in the urban areas of developing countries like China and India: 135 dollars vs. 12 dollars. In light of this, the fight against wage decline for low-qualified workers is lost before it has started.

“Transferable jobs will ‘emigrate’ to countries with ever lower salaries. This has already happened to entire industries such as steel production and consumer electronics; it is currently happening in car production; and tomorrow will be the turn of the aerospace industry.

“What is also happening is that developing countries no longer limit themselves to providing cheap and low-qualified workforces or goods with low market value. They invest smartly in education, research and high-tech, which will soon turn them, if it hasn’t already, into our biggest competitors.”

Discussing Jon’s views on the outcome of this shift, the newspaper says: “The UK expert criticises the reaction of Western governments and especially the decision of then-president of the US Federal Reserve Alan Greenspan to ‘flood the market with liquidity’ because this policy of easy money has allowed governments, companies and families to become massively indebted in order to maintain their lifestyles.

“For Moynihan the only way to break the vicious circle in which the West finds itself is to ‘redirect public spending’ to the areas that best guarantee growth: education and infrastructure, from high-speed rail lines to the latest generation of telecommunications.”


This article is based on the interview in Le Nouvel Observateur and a talk given at the LSE by Jon Moynihan. Click here for more information.  

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