Thursday 9 August 2012
Internal devaluation in the Eurozone
Tom McDonnell: Ronald Janssen explores the impact of falling wage costs in the Eurozone periphery here. He argues that export revival has not been enough to prevent the collapse in domestic demand that accompanies the cuts in public budgets and real wages and that the net outcome has been recessionary.
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There is a neat, but totally debilitating, symmetry between the views of those on the right and those on the left. The former see labour as the only factor of production and believe that regidities, inefficiencies and dysfunction in this market are the principal reasons that other factor and product markets aren't working properly. So pay levels have to be reduced and working practices changed without any reforms in other factor and product markets.
The latter see labour as the sole and ultimate source of value and see market failures in all other factor and product markets. So the state, using raid tax and spend policies, should remedy these perceived market failures and support pay, employment and welfare transfers at all costs.
Any rational debate or consideration of sensible and viable policy options is suppressed or drowned out when these deluded forces clash. The noise they create and the relevance of the out-dated rhetoric they employ is inversely related to any residual rational underpinning of their stances.
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