CNBC Business | Trading On Promises

Trading On Promises

Editor's Letter

Now that waste is being regarded as a precious resource instead of mere rubbish to be shoved into a landfill site, all sorts of exciting and innovative companies are springing up to transform it into energy, to recover precious metals from discarded phones or to create new types of materials that can actually outperform timber for forest-decimating essentials such as railway sleepers.  

Unfortunately, the economics of recycling in Europe is almost totally dependent on EU regulation and incentives designed to drive up the cost of dumping rubbish. Left to the free market, the sector would be a shambles.  

For the same reason, one of the current quandaries is where exactly to direct fiscal stimulus cash. All government spending interrupts the free market in a pure sense, yet even ardent free marketers concede that the G20 deal to bolster the IMF’s coffers — agreed at the London summit in April — was a positive step.  

Much less was said about the baleful logic of most bailouts to date, that they have shored up the very industries that should be left to fail, whether car makers mired in obsolete product such as General Motors, or banks grotesquely loaded up through their own volition with toxic assets, such as Royal Bank of Scotland. 

The G20 leaders deserve a special recycling award for retreading in London the commitment to Free Trade they had made so vocally at the New York Economic Summit last November. Yet the World Bank claimed that within the intervening four months, G20 members had adopted 47 trade-restricting actions ranging from tariff increases to import bans, weasel-worded anti-dumping clauses and subsidies wrapped up in patriotic ribbons.  

Of course, it might be some time before we even know if the leaders keep their promises this time or if a revival of sly protectionism will lead to even more doom and gloom, just as in the 1930s. In the meantime, though, what we do need is a much bolder vision for the economy, allied to a willingness to consign obsolete jobs to landfill.  

Incredibly, hardly any stimulus cash is going into tomorrow’s industries, the subject of our cover story — either to kick-start basic training for tradespeople in short supply throughout Europe; or to invigorate the creative sector which is growing faster than finance; or to nurture the green sector, which is receiving less in stimulus spending across the entire EU than in South Korea alone. The one thing proliferating in Europe, however, is huge promises. Sadly they are unmatched by political action. 

Richard Lofthouse 

CNBC European Business Editor

richard.lofthouse@cnbceb.com