In his last editorial (NYT 27 Dec. ), Paul Krugman has decided to call the last decade the Big Zero. Indeed, It has been a decade of zero economic gains for average families whose median income adjusted for inflation has decreased. It has been a negative decade for homeowners who contracted mortgages and now owe more than the actual price of their houses. It was also a decade with basically zero job creation, with significant decline of private sector employment . Also, for most Americans (and probably Europeans), it was also a decade of zero stock gains even without taking inflation into account.
In the Bush years, there was a sense of economic triumphalism, especially in America's business and political establishment based on the alledged superiority of the financial system. But the incredible thing, as Krugman points out, was our unwillingness to learn from past mistakes. After the dotcom bubble, investors and bankers started inflating a new bubble in housing; then, Worldcom and Enron revealed that there was no 'honest' corporate accounting; banks went on taking excessive risks and to make investments into highly speculative products. After triggering the global crisis, and having to be rescued by governments with tax payers money, banks continued with their old habits of excessive leverage and gigantic bonuses.
Nothing has happened in terms of economic progress nor in social terms. So we were wrong to call a period of boom what actually was artificial growth fuelled by speculative bubbles in the housing sector, a model which was replicated in a number of European countries, such as Spain, and Ireland.
Is Europe doing better? The Lisbon Strategy's aim to make the union "the most competitive knowledge-based economy in the world" by 2010 is widely acknowledged to have failed, while its two headline targets of 70 percent employment and research and development spending equivalent to 3 percent of GDP are both set to be missed. Yet the aims of the new economic plan called 'EU 2020' may not differ radically from aspirations in the outgoing decade, although there is likely to be a considerably stronger emphasis on 'green growth'. It will include three broad themes: 'Creating value by basing growth on knowledge', 'Empowering people in inclusive societies', and 'Creating a competitive, connected and greener economy'. Achieving greater growth and higher employment levels through improved education, tailored towards industry needs, and greater levels of research and innovation is unlikely to face major opposition from member states, although many stakeholders, including trade unions, NGOs and members of the European Parliament are keen to see real steps towards securing social inclusiveness.
The next few months will be decisive for the European Union's economic future, with the forthcoming agreement on a new 10-year economic plan to address the consequences of the global crisis , and set a new course towards sustainable growth and job creation. Rising inequalities, high unemployment together with increasing poverty, an ageing EU population and soaring budget deficits form the backdrop for policy makers involved in laying the foundations for future growth and development.