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  • Is growth the answer? Not if it’s old-fashioned growth

    Opinion by Jos Dings - T&E Director The air in Brussels is thick with talk about the need to boost economic growth. As if any proof were needed, the French and Greek elections have once again demonstrated that people don’t like austerity. So talking about growth is politically quite obvious.


    Without passing judgement here on whether economic growth is the source of all evil or the mother of all happiness, one thing is certain: governments need economic growth more than individual people do. Anything that counts for GDP statistics (legal labour, production, etc) can be taxed; anything that does not count (the neighbour helping out with the plumbing) does not. Without GDP, no tax revenue.

    What worries me is that much of the growth talk is so old-fashioned. People are looking for new tools to finance transport infrastructure projects and the like. Building things is still a classic strategy that makes many people feel good.

    But let’s face it – Greece, Spain and Portugal are not in trouble for lack of motorways. In fact, Portugal and Spain lead Europe’s league tables in kilometres of motorway per head. Incidentally they also lead in terms of the number of severely under-used roads and railways; Spain has 40% more high-speed track than France, but 80% fewer passengers, for example. They have simply spent way too much on transport infrastructure, which was not only a waste of money, but also created an economy excessively dependent on building. Our member Ecologistas en Accion has written an excellent booklet ‘Transport Infrastructure in Spain’ which exposes this in painful detail.  Now the party’s over, all these millions of builders are unemployed and very difficult to employ elsewhere.

    Another issue is that, in many places in western Europe, car use is on a plateau, if not falling. And not just because of the economic situation; demographic developments and changing preferences are behind this. An iPhone is the new thing-to-have, more than a BMW. And if road use is not growing, you don’t need new roads. What’s more, the crisis was caused by too much debt, taken on by states, banks, or both. It’s difficult to see how magical new money for new construction could help in this respect, to put it mildly.

    So what’s a smarter plan? Unfortunately there is no short term magic wand or silver bullet. But we do have too much unemployment and too much pollution – so why do we still tax labour so high, and pollution so low? The EU can currently only decide tax issues unanimously. Surely it’s time to make an exception for environmental taxes, starting with the Eurozone which needs new powerful tools most. That would give the ailing green tax shift a big boost.

    Prices of resources, like oil, are still going through the roof despite the crisis, and Europe has to import many of them. We urgently need to find ways of using less of them and using them more smartly, creating green and secure jobs in the process.

    A classic example is the upcoming debate on future fuel efficiency standards for cars. It is crystal clear that Europe would be smarter to spend money on developing and manufacturing clean technology rather than on importing oil (which cost a record €300 billion in 2011 alone). Green change can create some of the new and secure jobs that the legions of Europe’s young jobless need. Sticking with business as usual, or worse, building roads and rails to nowhere, won’t.