How your company can help create more jobs
Mass unemployment is becoming a headache for all world leaders. At the World Economic Forums (WEF) this year in Davos, Bangkok and Istanbul, I noticed the number one thing leaders were discussing was how to address growing unemployment. Globally, in the next 10 years there will be over a billion young people coming into the workforce and just 300 million jobs between them. Job creation is a key social good arising from business and is often cited as the justification for compromising on other public goals, such as environmental protection. What, therefore, is a positive approach to job creation by companies at this moment of mass unemployment in many countries?
As a meeting place of leaders in business and government, the WEF seemed the ideal place to share ideas on how to tackle the jobs crisis. Many of the discussions highlighted small things that businesses can do, such as helping promote employability through funding career-relevant education, or investing in internet start-ups that provide new job opportunities. They also discussed how governments could invest more in infrastructure, education and look again at labour mobility. However, all these issues are secondary to the prime role of our banking system in determining levels of potential employment. As money is issued as debt, if the banks won’t lend to businesses in the real economy, particularly small and medium sized businesses who provide the majority of jobs in any society, then as debts are paid back, so the amount of currency in circulation shrinks. The first key function of a currency, any currency, is to help connect assets, including people’s time, with needs. If a currency becomes scarce in an economy, then there is less ability for exchange. That means needs go unmet, and assets go underutilised. It’s called unemployment.
This critical factor was mentioned at the WEF events in passing, for instance when a finance minister from a North African nation called for more regulations on the percentage of bank lending that must go to small and medium sized enterprises. However, I did not hear discussion of how governments around the world have previously addressed this problem, for instance in East Asia, where 5 year plans often included controls on bank lending, to guide lending to the real economy and job creation, rather than lending for consumer debt and speculative activities. Indeed, I heard from a senior official in Thailand’s planning ministry that credit controls had been dropped from the new 5 year plan. This indicates that the mainstream discourse on the job crisis needs to shift, and business leaders from the real economy, could play a role in that, given that job creation is a win-win for business and society.
For business leaders to play a role in addressing the challenge, the first step is to gain insight into the most significant levers of change, and escape untenable myths about the key causes of unemployment. Five myths I heard from delegates in Davos, Bangkok and Istanbul about the main causes of the jobs crisis, that business leaders need to escape from are:
Myth 1: “Unemployment is due to falling demand.”
Are people’s needs really falling? Or just the amount of money in circulation to employ people/assets to meet those needs? Clearly, given the levels of human need in the world today, its the latter.
Myth 2: “Unemployment is due to technology displacing human labour.”
Could we not design systems of ownership and revenue distribution so that the income from technology frees us to work creatively and caringly for each other? How can we govern technology to release us to a world of service, not a life of redundancy?
Myth 3: “Unemployment is due to the cost of hiring and firing.”
Why then do some countries with high wages and labour standards, like Scandinavia, have less % unemployment? Where would competition between nations to lower costs of hiring and firing lead us? What will competition between nations for the same number of jobs worldwide lead to the total global level of unemployed? Clearly the loosening of employment law is not a systemic solution.
Myth 4: “Unemployment is due to a lack of skills and appetite for the new types of work.”
The world has more skilled labour than ever before, and more labour mobility than ever before, and many people with Masters degrees can’t get a job. The internet means that people can access knowledge more easily than ever before. Education is important, and a lack of education may be a problem for specific groups, but is not a critical factor in mass unemployment at present.
Myth 5: “Unemployment is due to the option to claim benefits.”
Why then was the existence of benefits not keeping people out of the workforce before the recession? Why do some countries with the most supportive welfare states, like Scandinavia, have less % unemployment?
These myths arise from a general lack of understanding about the monetary system. Once we understand that the availability of a currency in an economy determines employment levels we must then look at the monetary system. Once we look at the monetary system we must question why governments have chosen to create a system where 97% of our money is created by private banks as debt with interest so that governments cant spend on public needs without taxing us to pay interest to banks. Rather than maintaining the myth that the financial markets are like the tides or the weather, its time to redesign these entirely man-made systems, to enable currencies to be in fair, stable, sufficient and targeted supply, for job creation. To tackle jobs crisis we need to:
- wind down non-reserve banking and replace private bank credit creation with government issuance of money, according to strict rules enshrined in law, to avoid inflation. In this situation governments could create credit to lend at low rates to banks who would then lend it to businesses.
- regulate bank lending and leverage to ensure a large share of lending goes into the real economy and not into consumer debt or speculation.
- create complementary currencies or exchange systems for communities and businesses, some of which could be issued or backed by local governments.
In my video keynote at the Rebuild21 conference in Copenhagen last week I went into some detail on the monetary system and what we need to do about it, as responsible professionals working towards sustainable development. Then at the World Economic Forum in Istanbul, on video, I explained further how we need to work on monetary reform in order to solve the global jobs crisis.
Once these reforms and innovations occur then governments and companies in the real economy will be far better placed to invest in the necessary transition to a low carbon and resource efficient economy. As Ida Auken, the Environment Minister of Denmark explained at the WEF in Istanbul, there will be tens of millions of jobs created in the green economy of enterprises that deliver more efficient use of resources. Government needs to guide businesses in that transition, but if its only tools are bonds, even eurobonds, then that means very limited spending, higher taxes for future generations, and greater resources for global banking to invest in what it decides will deliver the highest returns. If anything is learned from the financial crisis is that the power of global banking is out of hand.
Folks, in the 5 years since the beginning of the credit crunch, it is now clear that not enough politicians or civil servants know what to do, or are willing to take leadership on the root causes of the financial crisis. In this situation, we need more statesmanship from business leaders from the real economy, to help shift the policy debate onto real solutions. In so doing, as business leaders you will be protecting your own businesses from the disruptive effects of recession. There is also a case for institutional investors to engage in this issue as well, as the long term interests of savers are being risked by the current monetary system.
To sum up: how can your company help create more jobs? By getting involved in monetary reform efforts, and alternative exchange systems, including business barter networks, and the fledgling self-issued credit systems that people like my colleagues are working on. It might be easier to parrot the myths I mentioned above, but it wouldn’t be responsible, or effective.
Professor Jem Bendell
Founder, Lifeworth Consulting, Young Global Leader, World Economic Forum.
June 10th, 2012.