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A UNITED NATIONS agency has criticised austerity measures, saying that in their current form they are hampering economic growth and job creation.
‘World of work report 2012′ by the International Labour Organization (ILO) described the global employment situation as alarming.
It says that around 50 million jobs which had existed before the economic crisis are no longer around, and that the pursuit of austerity measures by many governments especially in advanced economies is having a devastating impact on the job market.
The ILO also says that austerity has failed to reduce fiscal deficits and the measures have “to a large extent been counter-productive” – and could actually lead to another recession.
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“The narrow focus of many Eurozone countries on fiscal austerity is deepening the jobs crisis and could even lead to another recession in Europe”, said Mr. Raymond Torres, director of the ILO Institute for International Labour Studies and lead author of the report. He added:
Countries that have chosen job-centred macroeconomic policies have achieved better economic and social outcomes. Many of them have also become more competitive and have weathered the crisis better than those that followed the austerity path. We can look carefully at the experience of those countries and draw lessons.
Many jobseekers in developed economies are becoming demoralised and losing skills, the ILO warned, while it credited Brazil, Indonesia and Uruguay with improving employment levels and the quality of that employment through well-designed employment and social policies.
“Globally, long-term unemployment rates have increased much more in advanced economies compared to developing economies,” the report says. “In half of the advanced economies, more than 40 per cent of the unemployed are long-term, that is unemployed for more than 12 months. The long-term unemployment rate has increased most significantly in Denmark, Ireland, Spain, the United Kingdom and the United States since 2007.”
“The presence of a large proportion of longterm unemployed could result in huge economic and social costs,” it warns.
The report recommends job stimulus and social policies to reach employment targets, saying that fiscal stability “should not be an end in itself but the means to achieve a quicker and more equitable economic and labour market recovery”.
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Can they not tell us something that we don’t know this gov is like the last when they where told about the economy now this gov told that total austerity can not work
And the shower of Muppets we have as a government will probably say the report was taken out of context, and that it doesn’t really mean what it says because I can’t see the government liking this,
The government will react as they always do to outside remarks regarding the austerity due to the bailout; if it’s a good remark (such as Ireland is meeting all of its targets and is doing well) they’ll say it’s due to the good work they’ve been doing, and if it’s ever a negative remark they turn around and say their hands were tied by the previous government and it’s all their fault.
They don’t seem to be able to see the difference between Ireland recovering and Ireland meeting all of its targets, because the two have not gone hand in hand so far. How many more countries/bodies have to come out and say austerity is the wrong answer and we need to promote jobs and growth on a serious level before they start listening? Will it take the persuading of Germany and the ECB before the government will consider it?
Great to hear something like this from an impartial source. nice and timely and am feeling a little less brainwashed. Now will our bloody government sit up and listen? Its going to be a right tired cliche by may 31st but ‘you can’t starve your way out of a famine.’
This is why we need to regroup, reject the fiscal compact treaty, and at least ask for more flexible measures and policies for stimulating employment. Not just allow ourselves to be blindly dictated to! Not just go with the flow because its easier than standing up and being counted!This is not a good deal for Irish people! Please consider voting no!
It’s ridiculous how this government were elected under the premise that they would stop banking bailouts “not another cent” and ” labours way not Frankfurts way”. But as soon as they got into government the story change. If they listened to the people instead of getting advisers from the banking sector and other highly paid individuals to give them advise would they have continued this financial suicide they are currently committing. They should have taken a step back and not payed any more promissory notes or any other bonds that are related to a closed institution and any other institutions that are part or fully owned by the Irish people to bondholders while we can’t afford it. A complete review of our regulation of the banking sector is needed. A complete review of how our public sector is been run is also in order. Austerity is not working this is obvious. Another obvious thing is our government is completely blinded by power. They should open there eyes and look at the reality of the situation we are in. While blinded our government was talked into another bad deal this fiscal compact will strangle smaller country’s like ourselves if it’s fully implement. Its a bad treaty for us as it means we will lose what ever is left of our financial sovereignty and that Europe will be always controlling the purse strings if it is voted in. So vote no.
Most of the world knows austerity isn’t working…the powers in Europe seem to think they’re right and everyone else must be wrong. The so called Stabilty Pact is dead in the tide anyway if the French get their new president….assuming of course the markets don’t rein him in.
For all those calling for stimulus over cost-reduction, I have one simple question:
What do you classify massive government deficit spending as, if not stimulus?
- Is spending more than we’re taking in on public sector pay not stimulus to the economy? These people spend their pay cheques, providing economic activity.
- Is putting generous social welfare into the hands of the unemployed, when we’re not taking enough taxes in, not stimulus to the economy? These people spend every last penny on subsistence?
It seems to me that we’re stimulating the economy by between 10 and 20 billion per year, (or to put it another way, we’re overspending by at least 1/3 to provide stimulus) just to maintain the job levels we have.
Other than tweaking where some of that money is spent to target job growth in certain sectors, what would you propose we do? Increase the already massive stimulus provided?
One could easily turn around and say that ‘Stimulus is not working’. We’re overspending by billions and getting no net job creation.
It is excessive cost reduction following the financial crash that has put us in this situation now. Causing higher unemployment, lower tax take & a further round of aggregate spending loss on the next turn round the downward spiral.
The fact that we have unemployment benefits has served to slow the spiral down, but is insufficient on it’s own to reverese it..
It’s a common misconception to see welfare benefits & other government spending purely as ‘costs’. They are are ‘costs’ to the government account, but are +spending+, part GDP, GNP in the economy as a whole.
The effect is no different to when households & businesses – the non-government sector – reduce spending, cutting ‘costs’. When you or I do it alone we can save costs. When we all do it, in the aggregate, GDP goes down, people lose their jobs.
The only hope was for exports – net spending of the external sector – to increase to make up the spending gap. But it was always optimistic, given the sheer size of the crash. It also meant that, particularly, the rest of the Eurozone had to increase +their+ spending (Gov or Private sector) to increase our exports to them. But they are reducing their spending too.
The global nature of the crisis & universal adoption of austerity policies in Europe, & only brief, meagre efforts at stimulus in the US, meant relying on increased exports was never going to work. It’s a ‘fallacy of composition’ – if we all try & save at the same time, our economies are only going one way – down. Eventually, after we’ve all hit bottom, they will slowly recover, but this crash is so deep, we’re talking at least a decade & probably longer, unless we adopt different policies. Made worse of course by 4 years of austerity and/or lack of sufficient net stimulus.
Something nobody ever seems to talk about in the media is the ‘costs’ in lost output caused by the crisis. This is real wealth, goods & services that will not be produced because so many are out of work. Andrew Haldane of the Bank of England wrote a paper estimating these annual costs whilst we vandalise our economies with austerity. It runs, global to many $trillions per year. Sums which absolutely dwarf what would be required to stimulate economies. Extract here:
“World output in 2009 is expected to have been around 6.5% lower than its counterfactual path in the absence of crisis. In the UK, the equivalent output loss is around 10%. In money terms, that translates into output losses of $4 trillion and £140 billion respectively.
Moreover, some of these GDP losses are expected to persist. Evidence from past crises
suggests that crisis-induced output losses are permanent, or at least persistent, in their
impact on the level of output if not its growth rate. If GDP losses are permanent, the present value cost of crisis will exceed significantly today’s cost.
By way of illustration, Table 1 looks at the present value of output losses for the world and the UK assuming different fractions of the 2009 loss are permanent – 100%, 50% and 25%. It also assumes, somewhat arbitrarily, that future GDP is discounted at a rate of 5% per year and that trend GDP growth is 3%.
Present value losses are shown as a fraction of output in 2009.
As Table 1 shows, these losses are multiples of the static costs, lying anywhere between one and five times annual GDP. Put in money terms, that is an output loss equivalent to between $60 trillion and $200 trillion for the world economy and between £1.8 trillion and £7.4 trillion for the UK.
As Nobel-prize winning physicist Richard Feynman observed, to call these
numbers “astronomical” would be to do astronomy a disservice: there are only hundreds of billions of stars in the galaxy. “Economical” might be a better description.
It is clear that banks would not have deep enough pockets to foot this bill. Assuming that a crisis occurs every 20 years, the systemic levy needed to recoup these crisis costs would be in excess of $1.5 trillion per year. The total market capitalisation of the largest global banks is currently only around $1.2 trillion.”
But the really disgusting thing about all this is that there is no need to ‘borrow’ at all to fund a stimulus program.
Our currencies, Euro, £, US$, are ‘fiat’, free-floating. Our currency issuing authorities can issue all the funds we need, debt free. This would entail no inflation risk until our economies return to prior levels of employment/GDP – some years. Simple measures can be adopted then, as & when it occurs, to control it.
The only reasons this is not put forward are purely political & relate to the vested interests of the banking sector’s monopoly franchise on issuing all new money as debt. Plus the ‘useful idiots’ of the intellectually bankrupt & captured mainstream economists. (No austerity for any of them.)
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