Austerity and destruction of trade unions in Europe seeks to restore the anti Keynesian economic policies of the 1930s

The unemployment rate dropped slightly in the U.S. which is of course a good thing. Check out the U.S. Bureau of Labour statistics for the latest numbers. However, there are still some very bad things happening in Europe around economic and labour relations policy which need to be discussed.

The New York Times has done its part by publishing an important article which discusses the latest trends in European labour and wages policy . The data is not pretty as it reveals a widespread campaign to eliminate collective bargaining rights and the unions that are essential to maintaining a decent standard of life for working people and  a reasonable degree of income equality. Instead European economists and policy leaders and politicians are promoting these policies as a way to reduce both nominal and real wages. The approach which The Times calls the Americanization of the European labour markets is much more troubling than that. European policy specialists , neo-con economists and others wedded to anti-Keynesian theory are convinced that the solution to unemployment lies not with bolstering inadequate aggregate demand but rather with promoting a ruthless race to the bottom making countries’ with high unemployment more competitive by lowering their   average real wage. This is precisely the argument that Keynes attacked in The General Theory namely that unemployment was voluntary due to the claim that the  marginal disutility of work always equalled the utility of the wage. So if people were unemployed it was by choice. They simply had to lower their wage demands and they would find work . Keynes rejected this classical postulate. (See G.T. p.5)   In framing the argument in this way classical economists in the 1930s were trying to deny what stared them and Keynes in the face. There were not enough jobs available to soak up the unemployed because of inadequate aggregate demand. Keynes and his circle understood this but the classicals did not. The European leadership is engaged in committing the same fundamental error.They are seeking to lower wages in the mistaken belief it will restore prosperity.  They are wrong and repeating one of the terrible errors of the 1930s . It can only end badly.


About haroldchorneyeconomist

I am Professor of political economy at Concordia university in Montréal, Québec, Canada. I received my B.A.Hons (econ.&poli sci) from the University of Manitoba. I also completed my M.A. degree in economics there. Went on to spend two years at the London School of Economics as a Ph.D. student in economics and then completed my Ph.D. in political economy at the University of Toronto. Was named a John W.Dafoe fellow, a CMHC fellow and a Canada Council fellow. I also was named a Woodrow Wilson fellow in 1968 after completing my first class honours undergraduate degree. Worked as an economist in the area of education, labour economics and as the senior economist with the Manitoba Housing and Renewal Corporation for the Government of Manitoba from 1972 to 1978. I also have worked as an economic consultant for MDT socio-economic consultants and have been consulted on urban planning, health policy, linguistic duality and public sector finance questions by the governments of Manitoba, Saskatchewan,the cities of Regina and Saskatoon, Ontario and the Federal government of Canada. I have also been consulted by senior leaders of the British Labour party, MPs from the Progressive Conservative party, the Liberal party and the New Democrats on economic policy questions. Members of the Government of France under the Presidency of Francois Mitterand discussed my work on public sector deficits. I have also run for elected office at the municipal level. I first began to write about quantitative easing as a useful policy option during the early 1980s.
This entry was posted in austerity, classical economics, deficits and debt, European debt crisis, European unemployment, full employment, J.M.Keynes, treasury view, Uncategorized, unemployment and tagged , , . Bookmark the permalink.

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