The work of economic developers and community builders is often focused on one end deliverable: creating jobs in our respective communities. This has been the goal of governments worldwide since the recession of 2008. Governments moved to stimulate economic growth and job creation through deficit spending. Four years later, many countries are implementing austerity measures and budget cuts to counteract the overspending of yesteryear. Governments all over the world are looking for economic growth and more tax revenue with which they can repay their national debt and meet the demands of creditors. While many countries have emerged from the brink of disaster in the past to rebound stronger than ever, Jeff Rubin argues in”The End of Growth“ that this time it is different for two reasons: the Euro and high energy prices.
With Europe’s harmonized currency, struggling countries like Greece are unable to devalue their currency and offer lower prices to world markets, undercutting the competition and attracting European tourists. Instead, Europeans find themselves funding Greece, Spain, Ireland and Italy’s troubles (without receiving a summer vacation) as their governments plow billions into the Greek economy through bailouts.
Readers of Rubin’s work won’t be surprised to see him tackle energy prices. He has been pointing to their impact on our current economic system since his first book “Why Your World Is About to Get a Whole Lot Smaller”. Ruben revisits this topic, arguing that our national economies can’t feasibly grow at a strong pace when oil is above $100 a barrel. As world fuel reserves dwindle and demand from emerging economies increases, energy costs will rise and diminish returns on economic activity. These high energy prices are limiting economies across the world from growing at the rates that were the norm in the post-war period. That growth is necessary to pay down national debts and meet government spending needs.
So what does this all really mean? Rubin’s proposed scenario offers a mixed bag of economic predictions. Canada, for example, is an oil producing country, which means it nets some of the benefits of increased prices, including a strong dollar and employment. Higher fuel prices will act like a tariff for overseas imports, meaning manufacturing and other commonly outsourced industries are on their way back to North America. The bad news is Canada is vulnerable to the fluctuating energy prices, to the whim of large corporations who tend to be the investors in oil development, and to the impacts of oil extraction on the natural environment. No matter where you are in the world, increased energy prices are going to hurt. Of course, Rubin being an economist, prices are paramount: they are the only way to really change behavior. When the costs of filling the tank of your car or heating your 5,000 square foot home expand well beyond your income, you’ll probably drive less and put a sweater on. Food and retail goods will see enormous price increases.
These situations are the tip of the iceberg; they will become the norm over the next decade, and we will need to make sure we have the ingénue and innovative spirit to meet these new challenges head on, both individually and as economic developers seeking to drive prosperity in our communities.