This morning greets us with this honest (and incredibly gloomy) report from the ILO.
It tells us things that will disappoint two groups of people – firstly the left, and secondly those who think that capitalism has t least some limited potential to continue to offer the broad mass of people a buy-in via higher living standards.
We are now in a situation more serious than the great recession. Paul Krugman calls this a depression, terminology that makes sense. From the perspective here though, I think that the ‘European austerity crisis’ is increasingly the main challenge of public policy. Where before the problem in the public consciousness was the deficit, it will increasingly be austerity itself, as it becomes clear that cutting the state in not mending the banking crisis, the public finances, or providing and kind of social good.
Over half of the young workforce of both Spain and Greece now lies unemployed, despite Greeks working the longest hours in Europe, and both countries needing far more productive hours from workers if they are to close their fiscal gap. In this sense there is a relationship between the deficits and austerity where the solution is now clearly the ongoing source of the problem. A third of the young workers in question have been out of work for six months or more. These people have a personal deficit to manage.
So why all this?
This isn’t about deficits. It’s a political expression of the political power of employers vs their staff. And it’s about creating a reserve army of labour – one that will work for very little, or if unemployed will subsidise them with free forced labour via workfare.
The thing is, it doesn’t make sense for capitalism as a system – in other words, they could be focussing on growing their way out of the crisis and closing the deficit slowly instead.
Austerity measures and uncoordinated attempts to promote competitiveness in several European countries have increased the risk of a deflationary spiral of lower wages, weaker consumption and faltering global demand. In light of the global jobs and consumption deficit, countries should adapt the pace of their fiscal consolidation to the underlying strength of the economy and recognise that short-term stimulus may be needed to grow out of debt burdens.