Eric Raymond has a thoughtful and compassionate article at his blog about two people he knows who are down on their luck in the US economy. They are not uneducated bums, or lacking in motivation. But they are examples, he says, of how the rising costs of hiring and firing people has, when coupled to other factors, meant that many people will not enjoy the benefits of any subsequent economic recovery. Money quote:
“I now think the increasingly jobless recoveries from the last couple of downturns were leading indicators. The end of the post-New-Deal fantasy that we could increase the friction costs of capitalism without limit, regulating and redistributing our way to prosperity, is hurtling towards us like a dark sun. A and B are two of the luckless bastards who are spiraling down its gravity well. Multiply them by ten million to see what it’s like when the contradictions of socialism on the installment plan come home to roost.”
I tend to associate labour market rigidities with Western Europe – where high levels of unemployment have persisted alongside relatively high GDP growth (that’s assuming you believe government GDP figures, Ed). It is tragic that the same process is at work in the US, at least if Mr Raymond’s article is indicative of a broader trend.
I believe that it doesn’t matter if the budget balances, large scale unemployment is so corrosive socially and democratically that such a society is not sustainable. It certainly isn’t any where you would want your children and grandchildren to live.
There is another related but still different phenomenon at work in the US: the Democrats’ and in particular, the Obama administration’s inability to actually legislate. Formulate policy. Create laws. Govern.
This is not a statement of agreement with the Democrats. This is an indictment of their (brazen and corrupt) incompetence. Is the healthcare system is going to change radically, a little or not at all? Are there going to be massive costs associated with regulation associated with AGW? Or not? Are some employees going to be allowed to bully their co-workers to unionize? The list goes on….
Businesses will hire in economically difficult environments – Europe’s roughly 90% employment attests to that. The problem is not being able to plan. Anything. Better to not do anything that is not necessary.
Sorry. To complete my thought. I agree with everything that esr wrote insofar as it applies in a larger, societal sense. It’s just that something else, related but still different, is gumming up the works at present.
I like the phrase “socialism on the installment plan”. Very apt.
The US needs to implement the Fairtax to get its economy on track and serve as an example to the rest of the world. Visit http://www.fairtax.org
One hidden reason of the crisis is the rigidity that prevents we get all the great benefits of extended efficiency of Free Markets. If we look deeply it is easy to see that natural unemployment with current 5 days work per week is probably around 30%, that does not show due to useless jobs in State and even some in Firms.In Britain it is said that 57% of jobs in last 10 years were in Public Sector. It doesn’t make sense, and that proportion would have been even higher if the Private sector wasn’t so hot with cheap credit.
This problem will be much worse every day and can only be stopped when people start to accept 4 days work week.
If they can these people should get out of the United States – just anyone (who can) should get out of Britain.
Things do not “have to” get vastly worse – government spending could be vastly cut back (Glenn Beck suggests that a practical target would be to cut it in half – and he is correct), and then big tax reductions would be easy, and regulations repealed.
But I see no sign of this happening (in the United States or Britain) – therefore things are going to go down the drain.