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Right-Wing Dogma Has Had Its Day - Unemployment Trends Are An Example Of How Economic Orthodoxy

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http://www.guardian.co.uk/business/2010/sep/06/employment-core-economic-recovery

Economic orthodoxy has been turned on its head during the Great Recession of the past three years. Left to their own devices, markets have proved to be neither rational nor stable. They don't miraculously come up with perfect solutions.

Unemployment is a case in point. According to neoliberal theory, those countries that had the most flexible labour markets would find it easiest to adapt to the more challenging environment, while those countries that insisted on featherbedding their workers would reap the consequences of being soft.

It hasn't worked out like that. There are, according to estimates, 210 million unemployed people around the globe, an increase of 30 million since 2007. The largest increases have been in the US, the home of the hire-and-fire culture, and Spain, which developed a two-tier labour market in which temporary workers enjoyed fewer rights than their full-time colleagues. Youth unemployment in Spain has doubled to almost 40%.

In contrast, in Germany and Norway – two countries that have strong trade unions and long traditions of collective bargaining – the unemployment rate barely budged.

Britain's jobless performance fell somewhere between these two extremes. The jobless rate rose, although not by as much as in the US and Spain, and by not nearly as much as in the recessions of the 1980s and 1990s. Workers swallowed pay freezes and often pay cuts, while the government spent money on job placements, particularly ones targeted at the young and the long-term unemployed. Despite pressure from the unions, however, Labour decided against directly subsidising jobs – a scheme which in Germany was largely responsible for preventing unemployment from rising.

The experience of past recessions shows that the legacy of the past three years will be long lasting. Unemployment at an early age can leave permanent scars; studies in the US have shown that someone laid off during a recession will suffer an earnings loss even when they get back into the labour market. They go into less well-paid employment and earn less than those fortunate enough to remain in work. Even 15 to 20 years later these losses amount to 20% on average.

But there are also wider social costs. The loss of a job has a marked impact on health, with the mortality rate of those made jobless significantly higher than those who remain employed. There is an average loss of life expectancy of one to one and a half years. Children suffer when their parents are laid off: they are more likely to fall behind in school and tend, on average, to earn less than the offspring of those who stay working.

The long-term costs of the recent increase in unemployment threaten to be severe. A recent paper by Carmen and Vincent Reinhart, After the Fall (PDF), says that after especially profound economic shocks – such as the Great Depression, the stagflation of the 1970s and the current crisis – it takes far longer for growth and employment to recover.

Next week in Oslo, the International Monetary Fund and the International Labour Organisation are holding a conference to discuss ways of tackling the threat of a slow jobless recovery. Both bodies have prepared a section of a joint paper (PDF) for the meeting, and the IMF's contribution is something of a slap in the face for Britain's coalition government.

Much reviled as the embodiment of the Washington consensus, the IMF has had something of an intellectual make-over under its managing director, Dominique Strauss-Kahn, and looks more like the institution originally envisaged by Keynes in the 1940s. It has been radical in its proposals for levying taxes on the banks, while it's approach to unemployment is also refreshingly progressive.

What the article fails to pick up on is the effect of globalisation on the job market with a lot of jobs simply moving to countries with lower wages. For countries like the US/UK once these jobs go then the more likely replacement for these jobs will be low paid jobs which are at high risk of being cut under economic stress.

Germany which is cited as an example of strong union bargaining has a manufacturing base which it's economy is built around, both the US and UK have service / consumer led economies. The structural differences appear to be ignored in article to reinforce the narrative being stated. I suggest it's more complex than the analysis here.

For the past 20 years jobs have been exported and now it appears that we are reaping the rewards of our own demise.

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It astounds me that someone gets paid for writing this drivel.

Hardly a day goes by without someone at the Guardian trumpeting the death of the non-existent "right-wing". A couple of centuries ago people like him would be accusing all the village pretty girls of witchcraft when they were rebuffed.

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Q.E.D.

two Wolves I totally agree with you. I'm so sick of hearing we need more market intervention, more taxes, more borrowing, more regulation & more money printing.

People seem to have called a day on capitalism without understanding that they have never really had it to begin with, and how could capitalism possibly fail if it wasn't there in the first place??

Every market in our current economy is regulated to the hilt. The economy is now directed by government by a massive degree. One only needs to look at the Smithonian institute to find that the government now make up somthing like 40% of all economic activity. People need to understand that this is a massive percentage and is a blot against the capitlist system itself and against our personal freedoms too.

I have no problem trying capitalism first and seeing if it works, but i'm am not prepared to give up on it when I see government spending my money on propping up bankcrupt banking conglomerates. I am not prepared to call a day on capitalism when I pay total taxes of 50% like a surf from some bygone era so the goverment can give it to 'too bif to fail' manufacturing companies. I am not prepared to call a day on capitalism when I see left wing idiots tumpeting 'save the world' bull. and then bankers and politicians calling carbon dioxide a poisen and waking a 20% tax onto my electricity bill for it. Our monetary system has been hijacked, our incomes robbed and whatever market left is being regulated out of existence.

The right wing - if you mean capitalism - has not existed in a very long time man. You hit the nail head

Edited by sj032

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..the Great Recession of the past three years.

It's the Great Recession that SO FAR relatively few have noticed in the UK.

A sort of Great Recession that wasn't - or at least was only in the economic stats and not in the numbers unemployed or lost their houses etc. If it's been a Great Recession then what happened in the early 90s MUST have been a Depression because SO FAR it was much much worse.

Edited by billybong

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What the article fails to pick up on is the effect of globalisation on the job market with a lot of jobs simply moving to countries with lower wages. For countries like the US/UK once these jobs go then the more likely replacement for these jobs will be low paid jobs which are at high risk of being cut under economic stress.

We need to get this message out.

James Goldsmith had it right - does the economy exist to serve the people, or do people exist to serve the economy? At the moment all social consequence is being ignored in a race for higher profits and lower expenses, and each "wing" is at it, the right who support outsourcing because of the profit motive, and the left supporting mass immigration out of ideology. This country is literally being looted from both directions.

Edited by Britney's Piers

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two Wolves I totally agree with you. I'm so sick of hearing we need more market intervention, more taxes, more borrowing, more regulation & more money printing.

People seem to have called a day on capitalism without understanding that they have never really had it to begin with, and how could capitalism possibly fail if it wasn't there in the first place??

Every market in our current economy is regulated to the hilt. The economy is now directed by government by a massive degree. One only needs to look at the Smithonian institute to find that the government now make up somthing like 40% of all economic activity. People need to understand that this is a massive percentage and is a blot against the capitlist system itself and against our personal freedoms too.

I have no problem trying capitalism first and seeing if it works, but i'm am not prepared to give up on it when I see government spending my money on propping up bankcrupt banking conglomerates. I am not prepared to call a day on capitalism when I pay total taxes of 50% like a surf from some bygone era so the goverment can give it to 'too bif to fail' manufacturing companies. I am not prepared to call a day on capitalism when I see left wing idiots tumpeting 'save the world' bull. and then bankers and politicians calling carbon dioxide a poisen and waking a 20% tax onto my electricity bill for it. Our monetary system has been hijacked, our incomes robbed and whatever market left is being regulated out of existence.

The right wing - if you mean capitalism - has not existed in a very long time man. You hit the nail head

+1

People's view of "capitalism" is a guy in a big hat smoking a cigar, whilst his workers toil in the trenches earning him a fortune.

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Economic orthodoxy has been turned on its head during the Great Recession of the past three years. Left to their own devices, markets have proved to be neither rational nor stable.

Governments They don't miraculously come up with perfect solutions

A bit nearer the truth.

Edited by billybong

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bankers and politicians calling carbon dioxide a poisen and waking a 20% tax onto my electricity bill for it.

Tax on your electricity bill is 5% not 20%

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I'm sure last time I looked there was a 2.5% climate change levy on my gas or electricity bills. +5% VAT

Not on mine just checked it before i wrote that post.

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I remember seeing it once, but I direct debit these days....

So do I Direct Debit , but they still send me a bill just for reference ever now and again and the tax payable is shown on that.

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Funny that many socialists (reasonably) argue that socialisim never failed because it was never implemented properly, while capitalists (reasonably) argue that capitalism never failed because it was never implemented properly either.

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Funny that many socialists (reasonably) argue that socialisim never failed because it was never implemented properly, while capitalists (reasonably) argue that capitalism never failed because it was never implemented properly either.

I think leftists argue that the New Labour Government aren't socialist, so we cannot blame socialism for our economic demise. The implication is that if we did adopt proper textbook socialism, things would turn out a lot fairer for everyone.

The fly in the oinment is that where socialism has been adopted the results are always horrific.

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I think leftists argue that the New Labour Government aren't socialist, so we cannot blame socialism for our economic demise. The implication is that if we did adopt proper textbook socialism, things would turn out a lot fairer for everyone.

The fly in the oinment is that where socialism has been adopted the results are always horrific.

Where has socialism been adopted with horrific consequences?

Please note communist dictatorships will not be accepted as examples.

Anymore so then I could site Somalia as being the small government dreamland.

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http://www.guardian....onomic-recovery

Germany which is cited as an example of strong union bargaining has a manufacturing base which it's economy is built around, both the US and UK have service / consumer led economies. The structural differences appear to be ignored in article to reinforce the narrative being stated. I suggest it's more complex than the analysis here.

Surely, that is exactly the point. Without well-regulated workers rights, it is hard to have a sustainable manufacturing base in a wealthy country. German manufacturing companies pay their workers a larger percentage of their profits (their CEO's take less :) ) and hence income inequality is much lower.

IMO it is income inequality which gave rise to the high indebtness in US/UK - the real middle class (not the 100K champagne quaffing fleet street journos) were too poor to sustain the economy and were encouraged to get into debt to keep the system going.

I lived in Germany for 3 years at the end of the 90's and on an average middle class salary was paying more than

half of it in taxes, health and social security. However my quality of life there was much higher than when I returned to the UK where I was paying 'much less tax' as a fraction of my income. All the UK debt means the cost of living here is kept artificially high. Friends and family dismissed me when I said at the beginning of the noughties that I thought the German way of doing things was better and it seems that my gut feeling was right. They have a more sustainable version of capitalism.

I would say it is the end of the dogma of the anglo-saxon model of capitalism being better.

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Where has socialism been adopted with horrific consequences?

Please note communist dictatorships will not be accepted as examples.

Anymore so then I could site Somalia as being the small government dreamland.

THE MOXXXRFXXXKING UK

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Where has socialism been adopted with horrific consequences?

Please note communist dictatorships will not be accepted as examples.

Anymore so then I could site Somalia as being the small government dreamland.

Communist dictatorship are the result of taking socialism to it's logical conclusion, just as Somalia is the result of taking anarchism to its logical conclusion.

Where 'mixed economies' have been adopted the result is usually high taxation, excessive government interference, over regulation and a poverty problem that never gets resolved. Just look at New Labour, their aim (I believe) was to make this country fairer but they ultimately lost their way ended up swamping us with beaurocracy and hailing rising house prices as some sort of economic miracle.

You cannot have a central force dictating the entire economy, the evidence says that it never works.

Edited by Chef

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I think leftists argue that the New Labour Government aren't socialist, so we cannot blame socialism for our economic demise. The implication is that if we did adopt proper textbook socialism, things would turn out a lot fairer for everyone.

The fly in the oinment is that where socialism has been adopted the results are always horrific.

I don't think either socialism or capitalism can be implemented in their purest forms, since they both contain elements that are incompatible with human nature. I think they should be treated as "points of view" rather than quests for some final solution. Socialists tend towards more state control while capitalists tend towards less. However these days very few of them explicitly want either complete state control or a complete lack of it.

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I don't think either socialism or capitalism can be implemented in their purest forms, since they both contain elements that are incompatible with human nature. I think they should be treated as "points of view" rather than quests for some final solution. Socialists tend towards more state control while capitalists tend towards less. However these days very few of them explicitly want either complete state control or a complete lack of it.

They are theories nothing more nothing less. On paper they work well it's just that people who tend to have minds of their own get in the way of allowing these theories to work in reality.

There is too much randomness for any theory to work.

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http://www.guardian.co.uk/business/2010/sep/06/employment-core-economic-recovery

What the article fails to pick up on is the effect of globalisation on the job market with a lot of jobs simply moving to countries with lower wages. For countries like the US/UK once these jobs go then the more likely replacement for these jobs will be low paid jobs which are at high risk of being cut under economic stress.

Germany which is cited as an example of strong union bargaining has a manufacturing base which it's economy is built around, both the US and UK have service / consumer led economies. The structural differences appear to be ignored in article to reinforce the narrative being stated. I suggest it's more complex than the analysis here.

For the past 20 years jobs have been exported and now it appears that we are reaping the rewards of our own demise.

This is quite a funny assertion. According to OECD Union Density List :

http://stats.oecd.org/Index.aspx?DataSetCode=UN_DEN

and then sort it by 2008 union density.

UK has more trade union membership as a % of employee compared to Germany. Also German unions have been pretty sensible as well to ensure that the country is competitive. Further, Norway is of course a natural resource economy more than anything.

Singapore, China, HK have lower union density but are booming but without much (if any) real union setups. As for US, there is a giant union of bankers and Washington DC vested interest which does not show up in the statistic.

The measurement is pretty inconclusive at best.

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  • 259 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • Even
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      • up 5%



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