The economic slowdown may entail a double-dip in employment …
The next few months will be crucial for avoiding a dramatic downturn in employment and a further significant aggravation of social unrest. The world economy, which had started to recover from the global crisis, has entered a new phase of economic weakening. Economic growth in major advanced economies has come to a halt and some countries have re-entered recession, notably in Europe. Growth has also slowed down in large emerging and developing countries
Based on past experience, it will take around six months for the ongoing economic weakening to impact labour markets. Indeed, in the immediate aftermath of the global crisis it was possible to delay or attenuate job losses to a certain extent, but this time the slowdown may have a much quicker and stronger impact on employment. After the collapse of Lehman Brothers in 2008, many viable enterprises expected a temporary slowdown in activity and so were inclined to retain workers. Now, three years into the crisis, the business environment has become more uncertain and the economic outlook continues to deteriorate. Job retention may therefore be less widespread.
Moreover, government job- and income-support programmes, which proved so successful in cushioning job losses and supporting job retention practices in firms at the start of the global crisis, may be scaled down as part of the fiscal austerity measures adopted in a growing number of countries. Lastly, and more fundamentally, while in 2008-2009 there was an attempt to coordinate policies, especially among G20 countries, there is evidence that countries are now acting in isolation. This is leading to more restrictive policies driven by competitiveness considerations, and job retention measures could fall victim to it.
The latest indicators suggest that the employment slowdown has already started to materialize (Chapter 1). This is the case in nearly two-thirds of advanced economies and half of the emerging and developing economies for which recent data are available. Meanwhile, young people continue to enter the labour market. As a result, approximately 80 million net new jobs will be needed over the next two years to restore pre-crisis employment rates (27 million in advanced economies and the remainder in emerging and developing countries). However, in light of the recent economic slowdown, the world economy is likely to create only about half of those much-needed jobs. And it is estimated that employment in advanced economies will not return to its pre-crisis levels until 2016, i.e. one year later than projected in the World of Work Report 2010.
… exacerbating inequalities and social discontent …
As the recovery derails, social discontent is now becoming more widespread, according to a study carried out for the purposes of this Report (see special focus on social unrest in Chapter 1). In 40 per cent of the 119 countries for which estimates could be performed, the risk of social unrest has increased significantly since 2010. Similarly, 58 per cent of countries show an increase in the percentage of people who report a worsening of standards of living. And confidence in the ability of national governments to address the situation has weakened in half the countries.
The Report shows that the trends in social discontent are associated with both the employment developments and perceptions that the burden of the crisis is shared unevenly. Social discontent has increased in advanced economies, MiddleEast and North Africa and, albeit to a much lesser extent, Asia. By contrast, it may have stabilized in Sub-Saharan Africa, and it has receded in Latin America.
… and further delaying economic recovery
The worsening employment and social outlook, in turn, is affecting economic growth. In advanced economies, household consumption – a key engine of growth – is subdued as workers become more pessimistic about their employment and wage prospects. Indicators for the United States and several European countries suggest that workers expect stagnating or even falling wages. The uncertain demand outlook, combined with continued weaknesses in the financial system of advanced economies, is depressing investment in all countries, including in emerging and developing economies which rely primarily on exports for growth and job creation
In short, there is a vicious cycle of a weaker economy affecting jobs and society,
in turn depressing real investment and consumption, thus the economy and so on…
World of Work Report 2011
Lets roll! Please copy to omeconomicdiscussion
b.k.
ILO admits that capitalism is in deep shit
but then it needs complimenting with a marxian analysis giving us a deeper class dimensions e.g.
The Global Reserve Army
In order to develop a firmer grasp of this issue it is crucial to look both empirically and theoretically at the global reserve army as it appears in the current historical context—and then bring to bear the entire Marxian critique of imperialism. Without such a comprehensive critique, analyses of such problems as the global shift in production, the global labor arbitrage, deindustrialization, etc., are mere partial observations suspended in mid-air.
The data on the global workforce compiled by the ILO conforms closely to Marx’s main distinctions with regard to the active labor army and the reserve army of labor. In the ILO picture of the world workforce in 2011, 1.4 billion workers are wage workers—many of whom are precariously employed, and only part-time workers. In contrast, the number of those counted as unemployed worldwide in 2009 consisted of only 218 million workers. (In order to be classified as unemployed, workers need to have actively pursued job searches in the previous few weeks). The unemployed, in this sense, can be seen as conforming roughly to Marx’s “floating” portion of the reserve army.
A further 1.7 billion workers are classified today as “vulnerably employed.” This is a residual category of the “economically active population,” consisting of all those who work but are not wage workers—or part of the active labor army in Marx’s terminology. It includes two categories of workers: “own–account workers” and “contributing family workers.” read full text>> http://monthlyreview.org/2011/11/01/the-global-reserve-army-of-labor-and-the-new-imperialism
Chapter one of the ILO reports very high percentages recorded in many countries that there are no quality jobs available. Note the high job dissatisfaction percentage in China as well.
Extract:
The ILO social engineers have also developed a “social unrest index” (also in Chapter one), the details of which are rather amusing. I suppose if you can measure social unrest accurately then it helps keep everything under control 😉
Something that leapt out at me from the figures in Bill’s comment is that workers everywhere are dissatisfied with their jobs. Why would workers in advanced economies like Italy, etc., only be marginally less dissatisfied than those in much poorer places like sub-Saharan Africa?
Some figures for Australia point in the same direction. We’re the second best country in the world to live in, according to the latest UN Human Development Index annual report, yet, according to the following survey – http://www.news.com.au/money/most-aussie-workers-want-to-quit-their-jobs/story-e6frfmci-1226022356541 – more than 80% of Australian workers want to change their jobs and thought about doing so over the previous 12 months.
What’s behind this? I think it’s to do with the wages system itself: alienation. http://strangetimes.lastsuperpower.net/?p=411
Don’t expect the ILO to raise this question. They believe in a fair day’s pay. But as a revolutionary once pointed out, the question of the day is not about that but something much bigger: the abolition of the wages system. http://www.marxists.org/archive/marx/works/1865/value-price-profit/ch03.htm#c14
News I heard overnight was that Brazil has overtaken Britain as the worlds 6th largest economy. The world certainly is changing.
Bill I thought that you and others might be interested in this
http://notthetreasuryview.blogspot.com/2012/01/recessions-and-recoveries-historical.html
http://www.niesr.ac.uk/
at this site you can enlarge the same graph by clicking on it
In 1987 where CPA..ers like Laurie Carmichael and Alp..ers like Bob Hawke were arguing that Sweden was the model I was strongly against the idea.
If we agree that revolution is still some way off and the argument is about how capitalism can best be run with the living standards of the working class as the bench mark for either success or failure then I’m afraid Carmichael and Hawke were correct.
Sweden remains the best run of all the capitalist societies. We could of course reproduce the Schumpeter argument that the only way to replicate the Swedish model was to import the Swedish people.
http://www.heraldextra.com/news/opinion/editorial/around-the-nation/samuelson-the-swedish-model-for-economic-recovery/article_9b0d1084-8c74-57bd-b3d2-c57f8bcf0896.html
Steve you must know that Sweden’s solutions from the 1990s are not now options for any capitalist country that’s part of the Euro-zone implosion!
‘Sweden suffered its own economic crisis in 1992…’
What a country in the current downturn must do apparently is
1st arrange for the currency to fall by 25%+ against the trading partners (hint not possible with the one currency) and simultaneously do all the other stuff Sweden did…
a) reduce government expenses
b) increase revenues
c) decrease imports
d) increase exports
and do it all during a global downturn.
This really amounts to introduce 1930s beggar thy neighbour policies, making things far worse if everyone is doing it. All talk about Sweden as a model obviously makes no sense.
In the 1990s Germany, the U.S. and China provided the engine to pull Sweden along with good prices for Swedish exports, and after their devaluation brought on the sharp rise in import prices cutting Swedish demand for a few years of austerity, (with still a light at the end of their tunnel) the ever falling cost of imports resumed. Sweden was well placed, with for example mobile phone production during a global mobile phone boom; Ikea was well placed while the world was plunging into a debt driven consumer boom, and naturally high quality cars were in big demand, as were Swedish weapons systems and so forth.
This round of more general austerity in Ireland, Greece, etc., has already been going for some years and the only light is from an on-coming train. It’s getting much worse!
Like Italy, Sweden will hit the wall, along with Germany after the French etc., make their now inevitable way economically ‘south’. Whatever Sweden did years ago, economic inequality must sky rocket with the growth of 7.5% unemployment, into mass unemployment and that’s what’s growing in the European countries.
The Swedish devaluation … allowed them to do massive [budget] adjustment without putting the economy into a deep recession…. In Europe, neither of these conditions now holds. … Sweden’s good fortune is that it had its crisis two decades ago.’
This is not the time to start promoting the Hawke – now Shorten – ALP types as if they are the way forward when they go on about emulating somewhere else where a nicer type of capitalism is supposedly practiced.
I agree that a proletarian ‘revolution is still some way off’ in Australia though obviously bourgeois democratic revolution is unfolding in the ME and I have no idea about what working people in places like Spain and Greece ought to be doing right now to protect their own interests, but whatever it is it does not include working for the election of the Bill Shorten’s of this world out of fear of the Abbot’s!
I can even accept that ‘the argument [particularly for those wanting to defend capitalism] is about how capitalism can best be run with the living standards of the working class as the bench mark for either success or failure’ without bothering to defend the carbon taxing cranks, and revolting CP or LP phonies Swedish or Australian as anything other than sure to make the situation even worse.
Patrick I really like discussing politics and the crisis with other people but to do this with you we would need to get some fundamentals straight.
You state that adopting the Swedish model of crisis management would be a return to 1930’s style beggar thy neighbours policy.
In the 1930’s countries put up protectionist walls and ran curreny policies that had currencies fixed to the price of gold.
The Swedish model is trade oriented not protection oriented.
The Swedish model is currency flexible not currency fixed.
If Greece leaves the Euro I expect that its new currency will depreciate a lot more than 25%
If Greece leaves the Euro I think that they will reduce government spending, they could increase revenue simply by collecting the estimated $37 Billion that is owed in unpaied taxation. Any significant devaluation will decrease imports and a significant devaluation will increase exports just as happened with both Sweden and Argentina. And yes this can all be accomplished during the current European fiasco.
So to start a discussion we would both have to agree that the Swedish model is an option and then move to discussing whether it is a viable option or whether the Greeks would be better off staying in the Euro. Or you can argue that all these countries are going to hell in a handbag so there is no point in discussing any options as all options are equally bad.
Heres a video debate about the way forward for Europe and particularly about Greece
http://www.cepr.net/index.php/events/events/the-eurozone-recession-are-there-alternatives
Markets Insight
November 21, 2012 12:26 pm
China will suffer for not tackling imbalances
By Charles Dumas
Only weeks after the US elections and the Chinese Communist party’s Congress, America is regaining its former primacy in the world economy. Why? Because the US has tackled the imbalances that lie beneath the 2007-08 crisis, whereas China’s exit from recession has reinforced them, internalising its excessive savings rate.
America’s two big imbalances at the start of the crisis in 2007 were unaffordable household debt and a persistently excessive real exchange rate. When the first of these precipitated the crisis, and China’s downward manipulation of its currency prevented a proper cure for the second, the halting US recovery required a third imbalance: huge government deficits that ensured a soaring ratio of public debt to gross domestic product.
Since 2009, the household debt problem has been largely solved. Meanwhile China’s soaring wage costs have cut the US real exchange rate “through the back door”. And the budget deficit, 12.5 per cent of GDP at its 2009 peak, had fallen to 8.5 per cent by mid-2012. All this deleveraging has ensured a weak recovery.
Yet the deficit needs to be cut further. With trend growth of 2-2.5 per cent, and inflation close to 2 per cent, keeping US public sector debt (now 90 per cent of GDP on the Fed’s measure) below 100 per cent will require a budget deficit less than nominal growth, of about 4 per cent. Hence the US fiscal cliff (planned spending cuts and tax rises that would reduce the deficit), and the threat of disappointing growth in 2013. But the upside potential is there. If the cliff does turn out to be large – our forecast is that budget tightening in 2013 will be 2-2.5 per cent of GDP – most of the needed budget adjustment will have been achieved, and the stage will be set for a strong recovery from 2014.
An important aspect is the role of default. Default and/or devaluation (a form of default from the standpoint of foreigners) is normally needed to emerge from a debt crisis. Sure enough, the cuts in US household debt from 130 per cent of disposable incomes to 110 per cent have largely occurred through default (bank write-offs) with a modest benefit from growing incomes. And the slashing of interest rates below inflation, which has also helped make current debts readily affordable by past standards, might also be regarded as a form of clandestine default.
So much for household debt, but what about US government debt? Imagine you are China’s People’s Bank, with up to $3tn of Treasuries. The interest rate is zero. The dollar has been falling 3-5 per cent a year against the renminbi. And Chinese consumer inflation has averaged 4 per cent or so, though now it is down below 2 per cent. In real renminbi, those dollars have been falling at a rate of about 8 per cent. “No default, please, we’re American” – but it feels like a big loss to the Chinese.
Domestically, China continues to build up its own bubble of debt that will probably never be repaid in full. And its refusal to reverse the policies that underlie this build-up is why its growth may halve to 5 per cent in the next few years. Without a sharp shift of policy, that 5 per cent may be the upper limit of Chinese growth for the long term, with a plague of banking crises threatening a worse result. This would be a disastrous result for a country whose per capita GDP (at comparable prices) is just 17 per cent of the US level, versus 67 per cent in 1973 in Japan, when its growth likewise halved to 5 per cent.
China’s huge savings rate was 51 per cent of GDP in 2011, slightly up from pre-crisis 2007. Its pre-crisis means of disposing of this excess of saving (and product) was a 10 per cent of GDP current account surplus, essentially relying on US households to borrow the money and buy the goods – which they gladly did until the subprime crisis stopped them in their tracks. China’s response to the crisis was strong stimulation of both exports and investment – the two standard sources of growth in the past. As a result, investment by 2011 was 48 per cent of GDP, and the inflation resulting from this policy had wiped out China’s export cost advantage. The “right rate” of investment, if China is to grow at 7-8 per cent in future, is at most 35 per cent of GDP. So the economy has been taken in the wrong direction for the past four years.
Of China’s savings, nearly 40 per cent of GDP is concentrated in the business sector, yet does not translate into spending without passing through the financial system. Investment is not being done by those who are profitable, but elsewhere.
Debt is building up, and will have to be written off. The financial liberalisation China needs – no more interest rate and exchange controls, flotation of the renminbi – would provoke an immediate banking crisis. But that will happen in due course anyway, and reform and recapitalisation are better done sooner than later. Talk of reform is all well and good, but action is what counts.
Charles Dumas is chairman of Lombard Street Research
Just thought that I would do a bit of gloating
Ive had arguments here where I said that inflation could be managed tick
I argued that China could collapse but probably wouldn’t tick
I argued that the Australian housing market technically in a bubble wouldn’t collapse tick
I argued when the price of gold was at $1900 that the gold bugs at Barrons were wrong. Price went down to $1200 tick
Looks like I got ticks
Patrick in this thread in May 2012 you stated “Like Italy, Sweeden will hit the wall…” You also argue that Sweeden’s unemployment rate of 7.5% will become mass unemployment. Sweedens unemployment rate did rise to 9.1% but has now returned to 7.5%. Was this the wall or is the wall still to come?
Italy and Sweden are good examples to compare.
Italy has a public debt to GDP rate of 126%
Sweden has a public debt to GDP rate of 38%
Sweden runs its own currency where as Italy is locked into the Euro
So I guess my question is why do you see them as esentually the same?
Is it that they are both Capitalist economies and therefor unable to exert control?
Interesting article
http://www.bloomberg.com/news/2013-12-12/how-u-s-workers-rebuilt-an-industry.html
Capitalism will never die because its a zombie or a phoenix, it just keeps coming back to life
http://www.bloomberg.com/news/2013-12-17/packard-plant-buyer-predicts-rebirth-for-symbol-of-detroit-decay.html
Im a little unclear Do you bloggers believe in ‘collapse theory’ Arthur some time ago said no but Dave recently said February 2, 2016 diffwavelength
“As a radical loon, I will need to have something whacky to propose when the world economy collapses sometime in the not too distant future.”
I had to post this somewhere this is gold
https://www.youtube.com/watch?v=ipiOIvjRmpE