“If, as a result of Brexit, the economy crashes it will not vindicate the economists, it will simply illustrate once more their failure.” — Ann Pettifor
You can see immigrants. You can’t see NAIRU or flexible labor market policies. Most people wouldn’t know a NAIRU from a Nehru jacket and have probably never heard of flexible labor market policies.
There is a simple logic behind the “growth through austerity” policies beloved by Cameron and Osborne: “wages are too damn high.” But there is also a more technical-sounding obfuscation. This more convoluted explanation is that there is a long-run, “natural” rate of unemployment that is unaffected by aggregate demand, therefore fiscal stimulus will result in inflation. Thus the only non-inflationary way to reduce unemployment is to fine tune this hypothetical natural rate by removing labor market rigidities.
Sounds plausible? What it means in practice is “wages are too damn high.” In the 19th century, this superstition was known as the wages-fund doctrine. Also known as this magazine of untruth.
Another euphemism for these “flexible labor market policies” (i.e., “wages are too damn high.”) is “structural reforms.” In a press release from the Center for Economic and Policy Research, Mark Weisbrot pointed out the connection between Brexit and these so-called structural reforms:
“While the movement in the UK to leave the EU had right-wing, anti-immigrant and xenophobic leaders, in most of Europe that is not the driving force of the massive loss of confidence in European institutions. The driving force in most of the European Union is the profound and unnecessary economic failure of Europe, and especially the Eurozone, since the world financial crisis and recession.
“It has cost European citizens millions of jobs, trillions of dollars in lost income, and is sacrificing a generation of youth at the altar of fiscal consolidation and ‘structural reforms.’ It has delivered an overall unemployment rate in Europe that is twice the level of the United States; more than seven years of depression in Greece; more than 20 percent unemployment in Spain, and long-term stagnation in Italy. In recent weeks French workers have been fighting against ‘structural reforms’ that seek to undermine employment protections and the ability of organized labor to bargain collectively.”
And the reason why the press unthinkingly regurgitates the term “structural reform” with no explanation whatsoever of what it means is . . . ? Same reason as for “tort reform”? And why are right wing policies that reduce demand for the goods and services businesses produce — with minimal if any positive effect on costs — routinely called called “pro-business”? And where are the progressives who should be burying reporters and editors with relentless ridicule for such practices but just let them be?
“And where are the progressives who should be burying reporters and editors with relentless ridicule for such practices but just let them be?”
That’s the part that worries me the most. I suspect that most progressives aren’t that familiar with their adversaries’ positions, which means they don’t they don’t really understand their own, either. This is true not just for progressives but it is a more fatal flaw when you are already battling the head winds.
Sorry, but old labour was the key pinning under driving “leave”. In otherwards, it was left wing nationalism while the market driven righties were used like sheep. So in many respects, it was like the rest of Europe.
Old labour has a mess on their hands now. If they can rebuild old labour back into a party and begin industrial policy and massive money flows into production, maybe, they can survive, but I doubt it.
Rage, I do not think you are right. It was old working class whites–many with few skills and many of whom were retired with pensions who drove the leave vote. It was split Tory party which supported it politically, while Labor–the leftists supported staying in the EU with the support of organized labor. The woman who was murdered for supporting the stay side was a Labor MP and her killer was a 52 year old white male with ties to white supremist groups in the U.S.–not sure if they are the same groups that have been supporting Trump. Young people of all colors and classes overwhelming supported staying in the EU but of course turnout among the young was lower than among the old. I daresay that the young in Britain like the young here are generally more left.
The Maestro speaks:
Prettier much states the same, stagnant income across Europe, lower employment . . .
More countries dropping out.
In the short run — 1 to 2 years — maybe the stimulus of the plunging pound will offset the negative impact of Brexit on the UK economy.
But for the rest of the world it is just another factor contributing to world economic stagnation.
In the US, and elsewhere as well, the real problem of having only 2% trend real growth is that it is harder to absorb shocks and sustain growth. If trend growth is 4% and you get hit with a 2% negative shock
— like a strong currency — growth is still 2%. But if trend growth is
2% and you get hit with a 2% shock growth falls to 0% and the economy does not have the momentum to carry it through the shock and keep growing.
A world of 2% trend growth is a much more dangerous world!
“A world of 2% trend growth is a much more dangerous world!” Especially when the policy prescription is more than likely to be, more austerity.