Friday, June 19, 2009


I don’t know Why I advise you to read this article, except it highlight the confusion in the EU as to the manner in which Labor should be handled under the conditions of an extended Recession. Europe truly does not want to abandon the principles of Job security; yet, every ongoing Recession increases the numbers of Jobs which must be underwritten in excess from the previous Recession. It does not help that each Job in question provides less Profitability per Product element in the face of advancing technology. The Labor intensity of Production is definitely declining, in a Time where greater Product sales are desired; a Condition entailing less Labor reward exactly at that point where We desire that Labor to purchase more Product. This is much of the real propellent behind the financial crisis, where artificial methods of Sales empowerment failed under the lack of an effective Repayment system. Shotgun Advertising fails miserably under the inefficient repayment schedules. The mess throws off the entire Production system, because of the failure of followup reward.

Arnold Kling is discussing this same problem, just much better than I; so you should read his commentary. Where I would take Arnold to task is his refusal to admit that the shortcomings of the Government were the direct result of Business lobbying for the financial loopholes which brought Us the financial crisis. Government is a convenient ‘Whipping Boy’, but lay the Whip at the feet of Those truly responsible. Business is a Profits-maximizing machine, and they would not have been Spending the millions which they did on Politics, if they had not been getting the legislative and regulatory Profitability that they sought. The wide range of Interest groups Arnold defined possessed a well-funded means of political leverage, which never came from potential Homeowners seeking a mortgage. The financial crisis, and much else, could be saved by proper regulation of lobbyist Interests.

I will finish with advisement to read this article by Oliver Blanchard. He is quite right about the Need to address the global imbalances, but his plans may require substantial revision. The extension of Social Welfare to a significant portion of the World’s population would require much alteration to Business practice. The United States cannot afford its health care system today, and extending it to half the World’s population would exert a yearly Cost much higher than the World could provision. Doctors would have to be paid at the same level as automobile mechanics, and Hotels and Motels would have to be converted to specialize in Hospital patients for sufficient Bed space. The taxation for these benefits would exceed any freeing of Savings to utilize in Consumption, so that it would convert Savings into Public Spending. China recognizes it must provide Jobs, or face Revolution. Blanchard suggests investment in Consumption rather than Production, but it is a proscription for anarchy. The final idea I would advance consists of China’s inability to finance any internal development without the existence of their Export credits; so Blanchard’s ideation fails here as well. lgl

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