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Wealth Creation No Longer Creates Jobs & Unemployment Sucks

Our Afghanistan Marketplace project has created and sustained approximately 118,000 jobs since 2006.  As far as aid effectiveness goes, that’s the equivalent of less than $130 of taxpayers’ money for every job created.  No other project or development program worldwide has been so effective at creating jobs.

Put this into the context of an important issue being raised at Davos this week:  youth unemployment. The numbers are stark: in some countries of the Arab world, up to 90% of 16-to-24 year olds are unemployed. In Spain, it’s nearly 50%. In the United States, the youth unemployment rate is 23%. In the UK, it’s 22%.

Then there’s the lack of basic life skills. Many youngsters today don’t know the basics, from getting on with co-workers to having entrepreneurial skills starting with simple street savvy.

In South Korea, it’s the other way round. So many people are now university graduates that the country is running out of people to fill blue-collar jobs.

The UN’s International Labor Organization (ILO) reports that worldwide, some 200 million people are unemployed, with 75 million of those unemployed between the ages of 16 and 24. And yet the legislated response of developed nations has so far been to increase the age of retirement for us older generations who are already currently employed—resulting in even fewer vacancies for the 40 million or so young people who are entering the workforce as every year goes by.

Does this make sense?

World leaders in Davos are waking up. Young people who are unemployed for a long time will earn less throughout their whole lives. They will be less employable in the future. They don’t have the skills that businesses are crying out for. They are more likely to have long-term health problems.

Our world is plagued by youth unemployment, which is leading to a greater demand for government benefits at the same time that commercial production, plus consumption and hence economic growth that contribute to governments’ fiscal revenues are all falling. All this leads to escalating sovereign debts, which are likely to cause further social disruptions. The leaders in Davos say that “we’re sitting on a social and economic time bomb“.

There’s another term for it: the lost generation. Or as one business school professor puts it: “Unemployment sucks. Youth unemployment sucks even more.”

Sadly we also live in a world where wealth creation has become uncoupled from job creation. This once-close connection is ruptured. Take Mitt Romney who made his fortune by laying people off. Take me, among others: I made the equivalent of two months’ salary over the last four months simply by converting my euros into US dollars last September and then converting those dollars into UK pounds sterling this month. In such a way millions of zeros have been added to speculators’ balance sheets all over the world during the last calendar quarter without adding a single job.

All that said, alhamdulillah for the Afghanistan Marketplace project!

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  1. Duca Hart says:

    Why you old dog, still at it, and boasting to boot. Congratulations on your project, on a great article, and all my best to Yulia. When in DC, make sure to get in touch. Sorry of this is inappropriate response to a blog: don’t have much experience but happy to hear from you. Duca

  2. Phil Colgan says:

    Thanks Duca! Now get this…

    Last night Lord Levene, the former chairman of Lloyd’s insurance market (who did a good deal to restore its reputation – and its finances) in a speech to the Worshipful Company of International Bankers, said:

    “If we examine the business model of many of the largest financial institutions operating today, you will find that a large part of their operations, are concerned with trading with each other in financial products that operate virtually in a closed loop and are not relevant in the wider economy.

    “Where activity in banks is completely disconnected from the real world, then ultimately it will create no value except for those people involved in it. It potentially destroys value elsewhere, and the whole thing crashes. The wrong people make off with the money. We have, sadly, seen plenty of evidence of this over the past few years.

    “So, part of our responsibility, as an industry, is to ensure that all our activities connect to the real economy. Banks should be there to provide services, not to be self-serving.”

    Too many financial transactions are essentially just bets (and hugely complex wagers at that) by banks for their own gain (or taxpayers’ bailouts when the bets go wrong as we’ve seen), rather than genuine attempts to serve businesses and households who make up the economy as a whole.

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