Did you hear the one about the economist who accurately predicted nine out of the last five recessions?
Forgive my little joke at the expense of the honourable profession of men and women who try to make sense of the complicated and arcane workings of the economy and how it impacts on society. But I think it symbolises a truth about them, and about how we – the rest of humanity – perceive them: they may give us all the warnings they like, but if we do not understand what they are saying, it is of little use – we will not be able to act upon it.
Economists often use such esoteric jargon that the ordinary individual cannot begin to evaluate it – until it is too late.
So, while the financial and business pages have been screaming “sub-prime crisis” and “credit crunch” at us for months, very few people outside the specialist disciplines of finance or economics will have understood the danger – until this week, when the news coverage became rather more down-to-earth: “property prices plummet” and “credit card limits cut”. We can all understand those as real attacks on our very livelihood.
As a huge, but valid, generalisation I believe there are only two economic concepts used by the experts that are instantly understood by the rest of us: inflation and unemployment.
The words are meaningful because they have an immediate impact on our way of life and standard of living – if prices of basic foodstuffs rise (as is happening now with rice) we can see the effect instantly; if you lose your job, the repercussions are immediately and painfully tangible.
Inflation and unemployment often go together in the popular imagination as twin evils that lead to other, greater problems, like war and famine. The experience of Europe and North America in the 1930s – when much of modern economic theory was conceived – has left such a lasting impression on the global psychology that we all fear them, doubly so when they come together.
Which, maybe belatedly, brings me to the point. The UAE has lived, and even thrived, with the spectre of inflation now for at least a couple of years. Apart from some rather hysterical headlines in the consumerist-oriented press, it has done little harm.
But what if unemployment were added to the problem? A recent report from government-controlled Emirates Industrial Bank highlighted the threat in a very specific fashion. Despite an economic growth rate of 17 per cent last year, the bank said, unemployment among UAE nationals remained high, and with nearly 40 per cent of the national population under the age of 21, the proportion of those out of work will grow.
Though the bank did not give an official current unemployment figure, most estimates put it at between 15 and 20 per cent.
I find those figures staggering, even for a region like the GCC, which ever since the Age of Oil was ushered in last century has traditionally had a young population. With so many people due to come onto the jobs market in the near future, the UAE can expect unemployment among the national population to top 25 per cent or more in the next few years. The social and demographic consequences are enormous, even for a country with such a generous system of social benefit and support for its nationals.
In an exact opposite to the situation in Europe and America, where an increasing number of people are working to support an ageing population, in the UAE the government will have to find ways to defuse the economic consequences of youth unemployment.
Their preferred solution hitherto has been to create jobs in the public sector to soak up the excess labour capacity of young, usually well-educated Emiratis. But with the twin pressures of global economic slowdown and the government’s declared policy of privatising state-owned corporations, that will become more difficult.
It is a conundrum that will require all the economists’ arcane language to explain and resolve.
Economic threat that haunts UAE