Act now to avert economic catastrophe, says former US comptroller general

18 Mar 11
Developed nations are facing a 'tsunami of spending' because of changing demographics that governments are failing to address, the former US comptroller general told the CIPFA international conference
By Lucy Phillips

15 March 2011

Developed nations are facing a ‘tsunami of spending’ because of changing demographics that governments are failing to address, the former US comptroller general told the CIPFA international conference.  

David Walker said the developed world needed to act on the demographic trends facing them. These included ageing societies, longer life expectancy, changing ratios of workers and retirees and varying immigration policies. These came on top of the fact that economic growth is much faster in developing countries than developed nations.

He said: ‘This changing demographic in many cases will end up bringing a tsunami of spending that will present tremendous challenges to many nations.

‘And unlike the tragic tsunami that struck Japan, unexpectedly and tragically with loss of life, property and other threats that exist, this tsunami is known, is predictable and yet in many cases countries are not acting to defend their shores.’

Walker, who is the founder and CEO of the Comeback America Initiative, which promotes fiscal responsibility, said governments around the world had ‘grown too big, promised too much and waited too long to restructure’.

He added: ‘They will have to restructure to become more future-focused and more results-orientated in order to become more sustainable as well.’

He urged countries facing fiscal difficulties to ‘act before market forces force them to act’ so they would be able to do so in a ‘reasoned and responsible manner’.

‘Key’ government leaders, including American president Barack Obama, needed to understand the difference between ‘leadership and laggardship’, he said.

Walker told the conference:  ‘Leadership is seeing the trends, the challenges, the opportunities, taking affirmative steps to capitalise on the opportunities, mitigate the risks and hopefully avoid crises. Laggardship is doing none of that, waiting until a crisis is at the doorstep, taking action many times without due diligence and forethought and then calling it leadership. We need leadership, not laggardship, especially in the US.’

Walker said transparency and accountability were ‘absolutely critical’ to ensuring sustainable economic success.

He urged delegates to learn from history. Pre-emptive steps could have been taken to avoid the global financial crisis and subsequent deteriorating finances, for example, while past civilisations offered lessons too.

Walker said: ‘The Roman Republic lasted over 500 years, the longest republic in the history of mankind, and the Roman Empire lasted over 1,000 years before it declined and fell for several reasons... A decline in moral values and political civility at home, over-extended military around the world, fiscal irresponsibility by the country’s government and an inability to control one’s borders. I know they sound familiar in the US, they may sound familiar in other countries too.’

Next week the Comeback America Initiative, in conjunction with Stanford University, will be publishing an index that ranks developed countries according to their fiscal responsibility. Walker revealed to Public Finance that the UK was ranked ‘much higher’ than the US.

All speakers' presentations from the CIPFA international conference can be watched again on the CIPFA website

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