John Kirton: We have to unleash the power of young entrepreneurship. We need more Steve Jobs
John Kirton, co-director and founder of the G20 Research Group at the Munk School of Global Affairs at the University of Toronto, on the about possible G20 contribution to job creation.
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Question: How can we improve financial inclusion in a world of globalized finance?
John Kirton: There are several things that should be done. First we need to strengthen support for micro-finance, which is the easiest straight-forward mechanism. We need to gain support from development banks, in particular regional development banks, and from development agencies of the G20 members. Secondly, we need new donor countries. Within the G20 we are creating a whole new generation of development donors. The Russian Federation is one of them, also Mexico, Republic of Korea, even India. Another instrument would be to take the G20 financial regulation regime, beginning with the banks, and create as a part of that standards to have the existing large financial institutions do more to support financial inclusion. Another instrument being introduced by the government of India is to give every citizen a personal identification number and once you have it you become available for conditional cash transfer payments. That was a policy pioneered by Brazil. You need to know how to get money directly to the individual with no bank account who does not have an address. But with a personal identification number, which we take for granted, the government can get the conditional cash transfer right to the individual. That would be the first step to bring individuals completely outside of the financial system into the financial system.
Question: How could the G20 economies contribute to promoting green growth?
John Kirton: There are several things. The first is to recognize that there will be no economically sustainable growth unless it's ecologically sustainable. The outstanding issue is climate change control. So the G20 has to deal with it: adaptation, mitigation and resilience. In the year 2015 the international community is obliged to create a regime to succeed the failed Kyoto protocol. It's really up to G20. How do we do it? The first thing is to simply keep one promise that the G20 has already made, which is to phase out fossil fuel subsidies. If we just do that one thing we get 6 benefits. First, we cut 10% of the carbon dioxide emissions going up to the atmosphere each year. We can solve one tenth of the problem simply by keeping a promise that has already been made. Secondly, we have to get rid of a broader range of ecologically damaging subsidies, meaning agricultural subsidies. 60% of the EU budget is agricultural subsidies. They are subsidizing crops, basically the old monocrops, which are ecologically damaging in a number of ways. What we specifically need to do is to stop subsidizing such crops which are the competitors to green friendly crops or even engage in subsidy shifting to privilege environmentally friendly crops. The most outstanding ones are pulses. Pulses are traditional part of the Middle Eastern diet. They are, relative to grains crops, environmentally friendly because they don't require chemical fertilizers. They actually absorb nitrogen from the soil and enrich the soil. Even if you are growing other crops after you put pulses in you need far less chemical fertilizers and all of the enormous amounts of hydro-carbons it takes to produce the fertilizers we use today. India - the key G20 member - is a major consumer of pulses because so many people there are vegetarians and rely on pulses for their proteins. Countries such as Canada or Australia are major exporters of pulses. So we should use the power of trade liberalization to do subsidy shifting in agriculture. It could have very significant gains. Thirdly, we need to unlock another instrument of trade liberalization to work for the environment. At the APEC Leaders' Meeting in Vladivostok they agreed on full free trade in environmental products. What we need to do is to take this agreement and simply say we are going to do the same within the G20. That means that all G20 countries that are not members of APEC - all of Europe, Turkey, South Africa - will be included in the regime and that will become a new global standard.
Question: What should be done globally for improving quality and decent employment in the developing countries?
John Kirton: First, we have to recognize that given the necessary fiscal consolidation, not just in the advanced economies but also in the emerging economies such as India (which has almost a 10% fiscal deficit), neither big government nor big industry is going to have the money to create all the needed jobs. So what we need to do is to let people, particularly young people, create their own jobs. We have to unleash the power of young entrepreneurship. We need more Steve Jobs. He didn't ask a big company to give him a job, he just went to the garage in his parents' home and created a job for himself and then thousands more. We now have his great and most innovative company that we take for granted. So we need to unlock the power of young entrepreneurship. In the G20 we pay much attention to the issues of employment, to small and medium size enterprises but almost no attention to entrepreneurship. We need to create an enabling environment for school-leavers to start their own firms, their own jobs. That means action on student loans, on getting loans without assets to pledge and we need to change tax laws so that they could hire their friends by giving them stock options that won't be taxed right away. Start with entrepreneurship as a key to employment. It does not only generate jobs tomorrow but it generates productivity and innovation that will go on. Use the Steve Jobs of tomorrow to create the jobs of tomorrow.
Question: What is your personal view on Russia's presidency priorities? What could be Russia's input or contribution to the G20 agenda?
John Kirton: They've outlined, publicly as well as privately, a recognizable set of themes and priorities which they wish to address. But there are big issues that haven't yet been identified that the Russian presidency can still put in. The one that stands out is health, specifically the prevention and control of non-communicable diseases. We heard about fiscal consolidation and how governments can save money. The number one cause of escalating government spending and deficits in all countries of the G20 except South Africa is healthcare costs. Overwhelmingly, because we are largely an aging society, there come the big four non-communicable diseases: cancer, heart disease, diabetes and chronic respiratory disease. Recently the G20 said that we may have to control employment insurance or raise spending limits on Medicare and Medicaid, as they call it in the US. But that does not solve the problem. It either means that these people get unhealthy and die or employers have to pick up the costs and that's a burden on business. We need to prevent and control non-communicable diseases. We know how to do it. We just have to do four things: stop smoking, drink less, exercise more and eat better. The Russian presidency and President Putin personally understand that we need to have Russians at home drink less. Australia has just taken some historic steps to get people to stop smoking. So in the agenda we need to focus on health. The control of non-communicable diseases can solve a lot of problems: fiscal consolidation, development, productivity, employment. Can the Russian presidency do it? I remember a few years ago President Putin hosted for the first time for Russia the G8 Summit, also in St.Petersburg. He did take the inherited agenda but he added three Russian priorities: energy, education and health. It's time for him to do it again.