Wednesday, March 17, 2010

Layer 265 . . . The Eurozone, Decisive Shifts, and Long-term Economic Health

"There is no doubt Europe's economy is in a mess, but we should be concerned, not smug"
Larry Elliott, the paper's economics editor, always writes excellent columns in the Guardian. This week he dealt with the crisis and the mess within the Eurozone, and stressed the fact that the EU (and the Euro) can only function in the long run if it's remodelled on the following lines:

* greater fiscal freedom by member states

* a substantially enlarged European budget

* fiscal transfers from rich to poor

* protection for employment

* support for wages

* cross-European investment in sustainable industries

Mr Elliott also gives details of what should happen in countries like Greece (and Britain?), especially where the Euro becomes a straitjacket rather than a support for the economy -

* leave the eurozone and devalue

* cessation of payments and restructuring of debt

* banks would have to be nationalised

* public control extended over utilities, transport, energy and telecommunications

* industrial policy developed, including strategies to improve productivity

*  infrastructure and environmentally sensitive investment to support equitable growth.

As Larry points out, quoting from the SOAS paper* which sets out these proposed measures - "This option requires a decisive shift in the balance of political power in favour of labour."

In conclusion, he says,

Frankly, this solution does not look that likely either, and in the short term orthodoxy will rule. If the past is any guide to the future, Europe will continue to grow slowly, leading to ever more strident calls for structural reform to labour markets (ie wage cuts and benefit reductions) to make the economy more flexible. But there are limits to austerity, and the longer Europe seeks to grind it out, the more likely one of the other two options – radical reform or disintegration – will become.



It's also well worth taking a look at Larry Elliott's piece on the latest unemployment statistics, and his thoughts on whether they're likely to be of benefit to Labour in the coming election:

Britain's flexible labour market has resulted in people taking wage cuts or pay freezes rather than losing their jobs – but this won't do much for the feelgood factor ahead of the election

Oxzen posted this comment:

There are, and always have been, two Britains that somehow co-exist. In Feelgood Britain people still have jobs, still have careers, and are feeling really quite good about the substantial reductions in their mortgage repayments.

In Non-Feelgood Britain, the part that the Labour party was meant to care for and support, people who, for the most part, are used to living near to or below the poverty line on low wages or no wages, life has become even harder, and in some cases intolerable - due to greater unemployment; reduced working hours, reduced wages and reduced opportunities; inflation, higher rents, etc.

How can this generation of Labour politicians even imagine that they've done a decent job of making life better for the less well-off, and thereby deserve their support in the forthcoming election? Even the minimum wage is way below a proper living wage. The level of the jobseeker's allowance is a disgrace. The failure to re-regulate the City and promote investment in industry was unbelievable, especially when writers like Will Hutton and Larry Elliott had long ago warned of the need to do so.

Who can possibly blame the less well-off for becoming cynical and saying it's not worth supporting any of the major parties, come the election? The continuing fall in the numbers of people voting won't just be down to apathy. Abstention is a valid means of protesting about the current system. I certainly won't turn out to vote for any candidate or party that doesn't stand for greater social justice and equality, and doesn't have a clear track record of doing so. New Labour, with its massive landslides and mandates for change, had its chance and blew it, thanks to its ideological shift, its Blairism, and its lack of political courage.



Speaking of industrial policy, here's a little story about another 60 jobs being deleted in Coventry due to outsourcing to China the production of body panels and chassis for the "Coventry-based London Taxis International". That's Black Cabs to you and me. Another fine British invention.


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