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Why is the Northern Ireland protocol still an issue? Actions have consequences | Fintan O'Toole

Published by Anonymous (not verified) on Fri, 23/07/2021 - 5:00pm in

Someone tell Boris Johnson: you can’t bake your ‘oven-ready deal’ and then remove a key ingredient (even if it’s a sausage)

Ask a stupid question and you get a stupid answer. The Northern Ireland protocol is a stupid answer: it imposes a complex bureaucracy on the movement of ordinary goods across the Irish Sea. But it is the only possible response to a problem created by Boris Johnson. The reason it keeps coming around again and again, like a ghoul on a ghost train, is that it requires Johnson and his government to do something that goes against the grain of the whole Brexit project: to acknowledge that choices have costs.

There used to be a gameshow on American radio and TV called Truth or Consequences. It was so popular that a whole city in New Mexico is named after it. It’s where we live now. In each episode, the contestant was asked a deliberately daft question – and when they failed to answer it, they had to perform a zany or embarrassing stunt.

Fintan O’Toole is a columnist with the Irish Times

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European Commission processes still biased towards fiscal austerity

Published by Anonymous (not verified) on Tue, 13/07/2021 - 1:57pm in

I keep reading that the European Commission has abandoned the Stability and Growth Pact (SGP) and that the euro is no longer a problem. I beg to differ. On June 6, 2021, the European Commission released a – Report prepared in accordance with Article 126(3) of the Treaty on the Functioning of the European Union – which updated their latest views on the state of fiscal balances in the EU. The Report confirms the Commission’s intention to return to the Excessive Deficit Mechanism process in 2023. The problem is that the whole assessment process is biased towards fiscal austerity. I show why in this blog post.

The content of – Article 126 – deals with the “excessive government deficits” rules and the surveillance mechanisms that the European Commission conducts via the Excessive Deficits Mechanism.

Clause 3 notes that:

3. If a Member State does not fulfil the requirements under one or both of these criteria, the Commission shall prepare a report. The report of the Commission shall also take into account whether the government deficit exceeds government investment expenditure and take into account all other relevant factors, including the medium-term economic and budgetary position of the Member State.

The Commission may also prepare a report if, notwithstanding the fulfilment of the requirements under the criteria, it is of the opinion that there is a risk of an excessive deficit in a Member State.

In its most recent Report (noted above), the European Commission stated that: “On 20 March 2020, the Commission adopted a Communication on the activation of the general escape clause1of the Stability and Growth Pact.”

They concluded that “given the severe economic downturn resulting from the COVID-19 outbreak, the conditions to activate the general escape clause were met.”

The regulation they invoked was – COUNCIL REGULATION (EC) No 1467/97 – which was agreed on July 7, 1997 and relates to the Stability and Growth Pact.

Under Regulation No 1467/96, the Excessive Deficit Mechanisms and surveillance are articulated.

Under 1467/97, specifically Articles 3(5) and 5(2) “facilitates the coordination of budgetary policies in times of severe economic downturn.”

But the important point is that the Commission was saying to the Member States, when it invoked the exceptional conditions, that:

The general escape clause does not suspend the procedures of the Stability and Growth Pact. However, its activation has granted Member States budgetary flexibility to deal with the current crisis, by allowing for a temporary departure from the adjustment path towards the medium-term budgetary objective of each Member State, provided this does not endanger fiscal sustainability in the medium term. For the corrective arm of the Pact, the Council may decide, on a recommendation from the Commission, to adopt revised fiscal trajectories. The general escape clause allows Member States to depart from the budgetary requirements that would normally apply while enabling the Commission and the Council to undertake the necessary policy coordination measures within the framework of the Pact.

So, to conclude that the fiscal austerity bias within the EU and the Eurozone, specifically, has gone forever, ignores the firm statement that the Commission is making here.

The Commission has also been pressuring the Member States to deal with the crisis but also:

… pursue fiscal policies aimed at achieving prudent medium-term fiscal positions and ensuring debt sustainability …

After around 18 months of the pandemic crisis, the latest statement reflects on the progress to date.

The Commission concluded that:

… the general escape clause of the Stability and Growth Pact will continue to be applied in 2022 and is expected to be deactivated as of 2023.

So, by 2022, the Commission is claiming that it will be back to enforcing the Excessive Deficit Mechanism. even though 25 Member States had deficits that “exceeded the 3% of GDP Treaty reference value”.

Romania is also in excess but the Commission is retaining them within the Excessive Deficit Mechanism framework, that is, not allowed them to use the exception.

The latest European Commission – Spring Forecasts 2021 – notes that deficits will be above 3 per cent in all Member States bar Luxembourg in 2021 and by 2022, it is forecasted that 15 Member States will remain with deficits above 3 per cent of GDP.

Thus, it will be difficult (politically) for the European Commission to start pushing the Member States around this year or next as they continue to experience Covid-related economic downturns.

But, politically difficult, doesn’t mean that the entire framework is about to be abandoned.

That will only start to happen if a large nation like Spain or Italy threatens to exit.

My bet is that the European Commission will be champing at the bit to get control of the situation and corral the Member States back into its austerity framework.

One of the problems is the way the European Commission constructs the databases that it uses to assess the state of fiscal policy in the cycle.

The European Commission publishes its annual – Macro-economic database AMECO – which underpins the Commission forecasting process.

It publishes an array of data and constructed time series such as the cyclically-adjusted fiscal balances.

Please read my blog post – Structural deficits and automatic stabilisers (November 29, 2009) – for more discussion on this point.

Remember, that the actual fiscal balance is the product of the ‘state’ of the economic cycle and the discretionary policy decicions taken by government.

The fiscal balance is the difference between total federal revenue and total federal outlays.

So if total revenue is greater than outlays, the fiscal balance is in surplus and vice versa.

If the fiscal balance is in surplus we conclude that the fiscal impact of government is contractionary (withdrawing net spending) and if the fiscal balance is in deficit we say the fiscal impact expansionary (adding net spending).

However, the complication is that we cannot then conclude that changes in the fiscal impact reflect discretionary policy changes. The reason for this uncertainty is that there are automatic stabilisers operating.

To see this, the most simple model of the fiscal balance we might think of can be written as:

Fiscal Balance = (Tax Revenue + Other Revenue) – (Welfare Payments + Other Spending)

We know that Tax Revenue and Welfare Payments move inversely with respect to each other, with the latter rising when GDP growth falls and the former rises with GDP growth. These components of the fiscal balance are the so-called automatic stabilisers

In other words, without any discretionary policy changes, the fiscal balance will vary over the course of the business cycle. When the economy is weak – tax revenue falls and welfare payments rise and so the fiscal balance moves towards deficit (or an increasing deficit).

When the economy is stronger – tax revenue rises and welfare payments fall and the fiscal balance becomes increasingly positive. Automatic stabilisers attenuate the amplitude in the economic cycle by expanding the budget in a recession and contracting it in a boom.

So just because the fiscal balance goes into deficit doesn’t allow us to conclude that the Government has suddenly become of an expansionary mind.

In other words, the presence of automatic stabilisers make it hard to discern whether the fiscal policy stance (chosen by the government) is contractionary or expansionary at any particular point in time.

To overcome this uncertainty, economists decompose the actual fiscal balance into the component that is impacted by the state of the cycle (the departure from some full employment or trend benchmark) and the component driven by the discretionary policy decisions that would generate the outcome at that benchmark.

So if the actual deficit is 10 per cent of GDP, and the economy is in a deep recession, then a significant component of that 10 per cent would be considered cyclical, say 8 per cent.

That means that if the economy reached its benchmark (which is usually considered to be full capacity but ideological interference means the defintion of full capacity is usually not as low an unemployment rate that is possible) then the deficit would still be 2 per cent of GDP.

They call this the structural deficit.

The calculation of the structural deficit spawned a bit of an industry in computing the full capacity benchmark in the past with lots of complex issues relating to adjustments for inflation, terms of trade effects, changes in interest rates and more.

Much of the debate centred on how to compute the unobserved full employment point in the economy.

In the 1960s, the benchmark was defined in terms of some irreducible minimum unemployment rate, that reflected frictional constraints (mostly informational – employers taking time to find workers and workers taking time to find jobs).

That was usually very low (below 2 per cent in Australia) in an era where there was no underemployment.

Things changed in the 1970s and beyond.

At the time that governments abandoned their commitment to full employment (as unemployment rise), the concept of the Non-Accelerating Inflation Rate of Unemployment (the NAIRU) entered the debate – see my blog posts:

1. The dreaded NAIRU is still about (April 16, 2009).

2. Redefining full employment … again! (May 5, 2009).

Those posts make the point that once we entered the NAIRU era, the full employment benchmark was redefined to coincide with much higher unemployment rates, than could reasonably be considered to be true full employment.

What this meant was that estimates of the structural fiscal balance were now severely underestimating the tax revenue that the government would be receiving at the ‘full capacity’ activity level and overestimating the spending that would occur based on the discretionary policy settings.

That means that the authorities would now conclude that the structural balance is more in deficit (less in surplus) than it actually is.

Which means in a recession, they underestimate the cyclical component of the fiscal balance and conclude to readily that fiscal policy is excessive under their rules.

One of the measures the European Commission uses to cyclically adjust fiscal balances is based on trend GDP.

Look at this graph, which shows the actual path of GDP for the Eurozone countries the European Commission estimates of trend GDP (red) and potential GDP (blue) from 1995 to 2020.

The dotted green line is an extrapolation based on the average annual growth rate between 1996 and 2006.

The EU trend is a moving-average type calculation which means that if actual GDP goes through a prolonged recession and slow recovery, as it did following the GFC, then the trend will be much lower than otherwise.

And this creates a sort of vicious cycle:

1. Private spending collapses and the economy goes into recession.

2. EU rules force nations to adopt fiscal austerity.

3. The recession deepens and the fiscal balance expands.

4. Excessive Deficit Mechanism forces further austerity.

5. GDP struggles to recover and trend GDP falls dramatically the longer the stagnancy continues.

6. And, if the trend is used to assessed the cyclical component of the fiscal balance, it will always understate it.

Look at this graph, which shows the actual fiscal balance in 2020 (blue bars) and the European Commission estimates of the cyclical component (red diamonds).

The black line is the 3 per cent SGP fiscal rule threshold.

The Commission is thus estimating a fairly small pandemic impact from the cycle downturn and a much larger discretionary policy impact on the actual fiscal balance.

The next graph shows the estimated EU discretionary component (the difference between the cyclical-adjusted balance and the actual balance) and the 3 per cent SGP rule.

Clearly, if we were to believe the EU decomposition as reflecting reality, then a significant number of the EU Member States are running fiscal policy that is well in excess of the allowable levels under the SGP.

If this situation persisted, then the EU will sooner or later invoke the Excessive Deficit Mechanism as they note in their most recent statement on the matter.

But if the real full capacity position was denoted by the dotted line in the first graph, then the current deviation of GDP from Trend GDP would be 2,931 million in 2020 rather than 704 million that the EU estimates using its trend measure.

Which means that the cyclical component of the actual fiscal balance is much larger in fact than the EU has estimated.

Which means that as the economy improves the discretionary fiscal component will remain low and probably well below the 3 per cent SGP threshold.

Which means that policy settings are currently too tight and causing elevated levels of unemployment but the EU will judge them to be too lax once it resumes its Excessive Deficit Mechanism process.


I consider that there is little hope that European Commission will be able to resume its Excessive Deficit Mechanism process in 2022 without causing massive damage to already damaged economies.

But I have no doubt that they will try.

And one of the ways they will justify that is to appeal to the sort of data I have discussed here.

The problem is that the data they use – not the raw data published by Eurostat but their own manipulations of it – biases the conclusions towards thinking fiscal austerity is appropriate.

That is enough for today!

(c) Copyright 2021 William Mitchell. All Rights Reserved.

More Brexit commercial reality

Published by Anonymous (not verified) on Wed, 07/07/2021 - 6:17am in

The Nikkei, the newspaper with the financial world’s largest circulation, had a headline yesterday on the unstoppable decline of the British financial sector, which, they consider, is driven by Brexit. This shows the share of international trade represented by £ Sterling – vanishing fast: And, indeed what else would drive it? While Britain has one... Read more

Nestle, Pinkwashing and the Corporate Enslavement of Black Africans

Apart from the mad internet radio host, Alex Belfield, another right wing YouTube channel I keep an eye on is The Lotus Eaters, with Sargon of Gasbag, alias Carl Benjamin, and his friends. It annoys me with its calm assumption that capitalism is perfect, more privatisation and deregulation will lift the world’s starving billions out of poverty and their casual sneers against the left. I found their review of Ze’ev Sternhell’s latest book on Fascism, Neither Left Nor Right, absolutely unwatchable because of the massive amount of ignorance about the subject, and just intellectual history generally. Sternhell’s an Israeli who grew up in Poland during the Nazi invasion. He’s a very well respected scholar of Fascism, not surprisingly. But Benjamin and his cronies took the book as proving that Fascism is a form of socialism. This idea is rampant on the right. This ignores the Fascist alliance with big business, their promotion of capitalism, and their recruitment of private sector businessmen to run the vast industrial associations through which the Nazis exercised control of industry and society. Mussolini started out as a radical socialist, but moved right to ally with the industrialists and feudal landlords to break up the socialist trade unions, smash workers’ and peasants’ cooperatives, and destroy other dangerous liberal political parties, like the Populists. The Italian Popular party was founded as a Catholic organisation, and stood for a widening of democracy including the radical step of votes for women and further rights for the workers and peasants. But the papacy at the time allied with the Fascists to smash it because it wasn’t under the control of the bishops. Yes, Mussolini’s ideal of the corporative state, in which industries are run by vast industrial associations which combine the trade unions with the employer’s organisations, sort of if someone combined the Confederation of British Industry and the Trades Union Congress and then gave them a separate parliamentary chamber, was derived from anarcho-syndicalism. But it also incorporated ideas from Nationalists like Alfredo Rocco, who wanted the state to take over the trade unions from a right-wing, pro-business viewpoint. It also ignores Adolf Hitler’s adulation of the big businessman as biologically superior to the proles, his blanket refusal to nationalise anything and a speech he made to the German version of the CBI stating that business needed dictatorship to protect it. Instead you generally get a lot of waffle about how the Nazis were socialists, because they said so, but it and Fascism were different types of socialism to Communism. In fairness, this analysis of Italian Fascism does have more than an element of truth. In the words of Sargon’s matey Callum, Fascism is socialism after it dumps Communism. Which is almost true, but ignores the fact that Communism is only one form of socialism, and was so even at the time. But it excludes the fact that Mussolini and the rest were generally and fanatically pro-capitalist. The statement that it must somehow be a form of socialism rests on the Fascist’s state control of industry. But this state control is contrasted with an idealised form of free market capitalism that has never existed. And Fascist corporativism looks very much like the Blairite Third Way or modern neoliberalism, in which the heads of big corporations form government policy and and are rewarded with government posts.

It looks like Boris Johnson’s crony capitalism, and is, I fear, what we are moving towards with his continued attack on democracy and the right to protest.

However, I believe very strongly that the Lotus Eaters are absolutely right about the extremist views promoted by the far left, like Black Lives Matter and Critical Race Theory. So do many left-wing intellectuals, who feel that there is still a lot of racism, sexism and bigotry that needs to be tackled, but despise Critical Race Theory and Queer Theory for their rejection of objective truth and fact in favour of feelings, ideological assumptions and subjective interpretations.

It was the end of Pride Month a few days ago, and the Lotus Eaters marked the occasion by sneering at the corporate nonsense various big companies were putting out to show that they indicated Pride and gay and trans rights. I’m blogging about this not because I wish to attack genuine support for gay rights or promote intolerance towards trans people, but because some of this corporate support does seem a mite excessive. And in some cases it might even be hypocritical. The Lotus Eaters’ video included a promo video from one of the banks telling everyone to watch their pronouns around trans people. Ikea went even so far as to launch gay and trans sofas. The gay sofa has various colour straps running across it, presumably to represent the colours of the rainbow gay flag. The trans sofa has various slogans written on it, one of which is ‘No-one will believe you.’ The sofa is also decorated with prints of multicoloured hands. Various trans people appear in the video saying that they can really express their essential selves on this piece of furniture. Which makes it sound like no trans person was ever comfortable on a normal sofa before. Sargon and Callum then giggle about how the hands and slogan make the sofa creepily rape-y, and unfortunately they do have a point.

But they have a rather more serious point when they report that a legal suit brought against Nestle, one of the companies loudly promoting their support of gay and trans right, was thrown out last week by an American court. The suit was against the company’s use of enslaved Black African labour in the production of the cocoa from which their chocolate is made. The case was thrown out because the people enslaved aren’t under American jurisdiction. Sargon and Callum used it to argue that Nestle, and all the other companies, really don’t care about the various left-wing issues they claim to support, like Black Lives Matter. They just want to be seen as nice, liberal and cuddly to avoid being attacked for racism or any other form of bigotry. And in the case of gay rights, it’s called ‘pinkwashing’.

Israel’s particularly guilty of this, using the state’s official tolerance towards gay culture and the Jerusalem Pride parade to present a false liberalism and appeal to western liberals and radicals against Islam. Israel is pro-gay, even though many of its citizens are extremely conservative in their views and hate gays just like they’re hated by other religions and societies. They contrast this with the persecution of gays in contemporary Islam. But traditionally Islam was far more tolerant of homosexuality. Tele Sur’s Abbie Martin reported that when she went to Palestine, she found the situation the complete opposite of what the Israelis were claiming. Gayness was definitely tolerated, and she saw gay couples who were not persecuted at all.

Nestle’s a nasty corporation. I remember the scandal a few years ago when they were pushing their baby milk, a substance that needed to be bought after the baby was started on it, as against healthy breastfeeding in Africa. And all for corporate profit. It doesn’t surprise me that they source their cocoa from plantations using slave labour. It also bears out a comment by one of the great readers of this blog, who pointed me in the direction of an article about how the various big companies all pledging their support for Black Lives Matter were ruthless exploiters of slave, or starvation level labour in the developing world. This is all lies and corporate hypocrisy, done to impress liberal consumers in the West, while the reality is very different.

I’ve also no doubt that the example he makes of Nestle using Black African slave labour also damages his case for unrestrained capitalism. This is what unrestrained private enterprise looks like. The most horrific example of this was the Belgian Congo, now Zaire, when it was the personal fief of the Belgian king, Leopold. Leopold set up his own private police force, the Force Publique, and demanded that all Congolese produced a set amount of rubber. If they didn’t, they were beaten, mutilated and killed. Eight million Congolese died in what can only justly be described as a holocaust. This is what unrestrained global capitalism is doing today – forcing people into real slavery and poverty. We need more regulation, not less.

And I’m dam’ sure that the case against Nestle was brought by lefties outraged at this corporate enslavement for a western multinational.

Don’t be taken in by this type of false advertising, which only really applies to the West. We needed to see beyond the specious support some companies give to liberal issues like anti-racism and gay rights, and look at what is really going on elsewhere in the world.

If you want to have a look at their video, it’s entitled ‘Social Justice Is Going Over the Top’ and it’s at (2) Social Justice is Going Over the Top – YouTube. I’m not going to post it, just link to it, because, well, this is Sargon of Gasbag, the man who broke UKIP, and the Lotus Eaters are annoying, even when they make some decent points people on the left can also get behind.

Massive wastage of labour in the European Union

Published by Anonymous (not verified) on Thu, 24/06/2021 - 6:08pm in

I have been updating my databases in the last few days and getting up to speed on the latest trends. In the past, I developed a set of broad labour market indicators for Australia with colleagues at the – Centre of Full Employment and Equity (CofFEE). Our quarterly measures of underemployment were precursors to the Australian Bureau of Statistics measures which are now published on a monthly basis. I was doing some calculations this morning using Eurostat data as part of some research I am doing to assess the inflationary potential that exists in various labour markets. As regular readers will know, my assessment of inflation risk starts in the labour market. Rarely do we encounter a situation where nominal spending outstrips the productive capacity of the economy (a demand-pull inflationary environment). That can occur is specific product segments but rarely overall. History tells us that there has to be some distributional struggle between labour and capital to drive an inflationary spiral. I am out there looking for any evidence of such a struggle. I am not having much success!

Concepts – unemployment and underutilisation

The labour force framework is the foundation for cross-country comparisons of labour market data and is made operational through the International Labour Organization (ILO) and its International Conference of Labour Statisticians (ICLS).

These conferences and expert meetings develop guidelines or norms for implementing the framework and generating national labour force data.

The rules contained within the framework generally have the following features:

  • an activity principle, which is used to classify the population into one of the three basic categories in the labour force framework.
  • a set of priority rules, which ensure that each person is classified into only one of the three basic categories in the labour force framework.
  • a short reference period to reflect the labour supply situation at some point in time.

The system of priority rules ensure that labour force activities take precedence over non-labour force activities and working or having a job (employment) takes precedence over looking for work (unemployment).

As with most statistical measurements of activity, employment in informal sectors lies outside the scope of measurement.

Paid activities take precedence over unpaid activities.

A person is typically considered to be employed if they work 1 or more hours per week, which means the threshold between being unemployed and employed is marginally to say the least.

In terms of those out of the labour force, but marginally attached to it, the ILO states that persons marginally attached to the labour force are those not economically active under standard definitions of employment and unemployment, but who, following a change in one of the standard definitions of employment or unemployment, would be reclassified as economically active.

For example, changes in criteria used to define availability for work (whether defined as this week, in the next 4 weeks etc.) will change the numbers of people classified to each group.

Underutilisation is a general term describing wastage of willing labour resources.

It arises from a number of different reasons that can be subdivided into two broad functional categories:

  • a category involving unemployment or its near equivalent – In this group, we include the official unemployed under ILO criteria and those classified as being not in the labour force on search criteria (discouraged workers), availability criteria (other marginal workers), and more broad still, those who take disability and other pensions as an alternative to unemployment (forced pension recipients). These workers share the characteristic that they are jobless and desire work if there were available vacancies. They are however separated by the statistician on other grounds
  • a category that involves sub-optimal employment relations – Workers in this category satisfy the ILO criteria for being classified as employed but suffer ‘time related underemployment’ – for example, full-time workers who are currently working less than 35 hours for economic reasons or part-time workers who prefer to work longer hours but are constrained by the demand-side. Sub-optimal employment can also arise from ‘inadequate employment situations’ – where skills are wasted, income opportunities denied and/or where workers are forced to work longer than they desire.

The following diagram summarises the main sources of labour underutilisation and trace them back to their labour force status.

We consider a person to be unemployed if they are over a particular age, they do not have work, but they are currently available for work and actively seeking work.

Unemployment is defined as the difference between the economically active population (civilian labour force) and employment.

The inference is that the economy is wasting resources and sacrificing income by not having the unemployed involved in productive activity.

The diagram above shows that there are other avenues of labour resource wastage that are not captured by the unemployment rate as defined in this manner.

The persons represented in these other avenues of resource wastage may be either in or out of the labour force.

Time based and other types of underemployment

Underemployment may be time-related, referring to employed workers who are constrained by labour demand to work fewer hours than they desire, or to workers in inadequate employment situations, including skill mismatch.

Time-related underemployment is defined in terms of an individual who is willing to work additional hours, is available to work additional hours, but is unable to find the desired extra hours.

An economy with rising underemployment is less efficient than an economy which meets the labour preferences for working hours.

In this regard, involuntary part-time workers share characteristics with the unemployed.

A part of an underemployed worker is employed and a part is unemployed, even though they are wholly classified among the employed.

Marginally attached workers and others outside the labour force

From a statistical consideration, discouraged workers (also called hidden unemployed) are classified as being not in the labour force.

The international guidelines suggest, however, that for persons not in the labour force, the relative strength of attachment to the labour market be measured.

From the perspective of underutilisation, the issue is whether those classified as being out of the labour force have characteristics similar to those who are classified as being in the labour force but unemployed.

They want to work and are available for work (under the same terms as the unemployed) but believe that search activity is futile given the depressed labour market.

The discouraged worker is thus more like the unemployed worker than they are, for example, like a retired person or a child in full-time education.

In the mid-1990s, the US Bureau of Labor Statistics developed six indicators to measure labour underutilisation.

The measures are arranged from very narrow indicator (short-term unemployment) to the broadest conception of labour wastage.

CofFEE adapted this technique to different data definitions and availability in Australia and the following Table describes the Measures of labour underutilisation and underemployment that we developed for Australia.

This morning, I calculated a version of those measures for the European Union 27 (again tailored to the way Eurostat presents its data).

As I noted in the Introduction, I am researching the possible inflationary environment in various countries and my starting place, as you would guess, is the state of the labour market.

It is very hard to precipitate an inflationary spiral if the labour market is flat.

The European Union labour market reality

The first graph shows the evolution of total employment and hours worked for the EU27 since the March-quarter 2008 to the December-quarter 2020 (the latest available data).

The series were indexed at 100 in the March-quarter 2008 (so just before the onset of the GFC).

The time series are interesting because they tell a story about how the European labour markets (in aggregate) adjusted to the GFC and the Pandemic.

During the GFC, both hours worked and employed persons were shed.

In the recovery, which was incredibly slow to emerge – it took until the March-quarter 2013 for employment to reach the trough (the downturn) as a result of the ridiculous austerity that was imposed across the Member States.

And employment did not return to its pre-GFC level until the December-quarter 2016.

Hours worked also fell for many years, reaching the trough in the June-quarter 2013 and in the lead-up to the pandemic had still not reached the pre-GFC level.

That should be emphasised – the European Union 27 Member States in total were still working less hours in the December-quarter 2019 than they were working in the March-quarter 2008 and that is not because of enlightened employment practices.

The experience of the pandemic is different with employment taking a smaller hit – dropping by 1.4 points between the peak in the December-quarter 2019 and the December-quarter 2020.

However, hours worked collapsed by 5.1 points over the same period.

This pattern is the result of the policies that were implemented by various nations during the Pandemic which aimed to protect the employee-employer relation while shutting down workplaces.

Just looking at that data indicates to me that there is little likelihood of any strong wage pressures emerging within the European Union.

The next graph shows the official unemployment rate (U3) and the broadest measure of labour underutilisation (U6) for the EU27.

You can see that during the GFC, the European Commission through its obsessive austerity mindset allowed labour wastage to rise above 20 per cent and only slowly retreat.

Just before the pandemic, the broadest rate had only fallen marginally below the pre-GFC level.

That is just deliberate human wastage leading to massive daily losses of national income.

By the December-quarter 2020, the official unemployment rate was 7.5 per cent which was 0.7 points above the pre-pandemic level.

The unemployment rate was 3.1 per cent, effectively unchanged over the pandemic.

The U4 rate – Total unemployed, plus discouraged workers, as a percent of the civilian labour force plus discouraged workers – was 11 per cent up from 9.7 per cent (pre-pandemic).

The U5 rate – Total unemployed, plus discouraged workers, plus all other marginally attached workers, as a percent of the civilian labour force plus all marginally attached workers – was 11.69 per cent up from 10.4 per cent.

And the U6 rate – U6 – Total unemployed, plus all marginally attached workers, plus total employed part time who preferred to work more hours and who looked for full-time work, as a percent of the civilian labour force plus all marginally attached workers – was 14.8 per cent up from 13.4

You can draw two broad conclusions.

1. Quoting the unemployment rate as the indicator of the state of the EU27 labour market is likely to grossly underestimate the extent of labour wastage.

2. With 14.8 per cent of the willing labour resources underutilised in one way or another, it is hard to see any wage pressures emerging from that depressed labour market.


I will report more on this research as it unfolds.

That is enough for today!

(c) Copyright 2021 William Mitchell. All Rights Reserved.

The religious principle…

Published by Anonymous (not verified) on Tue, 22/06/2021 - 6:41am in

This picture is apposite when we know that the US has frighteningly many more deaths from food poisoning than does the UK or any other country in the EU, where the precautionary principle has served so very well…... Read more

Open Britain on Boris Johnson’s Further Assault on Electoral Democracy

Published by Anonymous (not verified) on Sat, 19/06/2021 - 6:22pm in

Open Britain is a pro-democracy organisation, because the democracy we’ve got is increasingly limited and under attack from the Conservatives. I got this email from them yesterday warning of another plan in Boris Johnson’s sordid pipeline to decrease it even further. Apparently he plans to strip the Electoral Commission of the power to prosecute corrupt MPs.

“We have learned today that Boris Johnson is planning to remove the Electoral Commission’s power to prosecute corrupt politicians.

If he succeeds, our elections regulator will no longer be able to hold to account those politicians found to have taken back-handers or lied to the public during election / referendum campaigns.

Removing these powers from the guardians of electoral integrity would be the most outrageous attack on democracy since the lies told by the Vote Leave campaign in 2016.

We cannot allow a Prime Minister who was carried to power by a campaign so full of lies and deceit to neuter the official body responsible for protecting us from such lies and deceit.

Our democracy can’t stand much more of this. Enough is enough.

Over the weekend, we’ll be kicking off a campaign to ensure every voter knows what this outrageous Vote Leave Government is up to.”

This is in addition to his criminal justice bill, which severely limits the right to protest and his scrapping of the fixed term parliaments act, so that he put off elections as long as he likes so that we get an indefinite Tory dictatorship. Plus the proposed constituency boundary changes, another piece of Tory gerrymandering to go with the one they put through parliament under Thatcher in the 1980s. This will result in the Tories getting a further 26 MPs, according to the information given at my local Labour party constituency meeting Thursday night.

This is also the type of legislation Burlesconi, the former Italian president, used to put through their parliament. Burlesconi was the leader of the right-wing Forza Italia party, which ruled through a coalition with the separatist Liga Nord and the ‘post-Fascist’ Alleanza Nazionale. His own media monopoly meant that Italians were fed a diet of his propaganda while it excluded those of his electoral rivals. He was also notoriously corrupt to the point that many of the bills he pushed through parliament repealed legislation he had broken so that he could avoid prosecution. It looks like Johnson, whose administration is coming under increasing criticism because of numerous breaches of proper ministerial conduct and the way commercial contracts have been given to firms run by Tory MPs and donors, is trying to do the same thing here.

British democracy is being hollowed out, reduced to a sham, a democracy in name only, in order to provide a veneer of respectability to hide the reality.

That Britain is being ruled by and for the corrupt, corporate rich.

Immigration’s brexit is only just beginning..

Published by Anonymous (not verified) on Sat, 19/06/2021 - 6:30am in

This is a great article on Byeline Times from Jonathan Portes – and that is an almost surprising sentence for me to suggest. Although I’m not in favour of his interpretation of Labour’s economic policy this article seems entirely on the button. It concludes: What difference will it make if, in 2030, nearly one-tenth of... Read more

Johnson negotiated in full knowledge

Published by Anonymous (not verified) on Wed, 16/06/2021 - 6:01am in

Quite remarkable that he has to say this – but Johnson justifies with knobs on the ‘perfidious albion’ nomenclature. I’m really proud to be British… Not.... Read more

Amid all the fuss – what Macron actually said..

Published by Anonymous (not verified) on Mon, 14/06/2021 - 7:17am in

It is instructive to watch this French Television piece, which indicates that Macron knows precisely what the United Kingdom is and is not trying to split it up. He is so obviously clear it has to be doubted whether the UK government’s version is related to fact or fantasy – in fact knowing the truth... Read more