[lit-ideas] Re: Are you out there, Didier?

  • From: Teemu Pyyluoma <teme17@xxxxxxxxx>
  • To: lit-ideas@xxxxxxxxxxxxx
  • Date: Fri, 31 Mar 2006 13:58:46 -0800 (PST)

Lawrence, the current problems with European economy
are about German, French and Italian economy. Italy is
a different basket case, but German and French
corporations in general seem to have no problems
competing in the global economy, it is the domestic
demand and consumer economy in general that is the
problem. I also have to note that the companies having
trouble competing in the global market place are more
often than not big US corporations, something that
gives me no satisfaction as I work for one. I have a
cultural explanation for this and in a nut shell it
boils down to amount of red tape that makes Russian
bureaucracy look efficent...

But that is beside the point. As Munchau, an editor in
an economically right-wing business paper, notes the
Villepin proposal is economically and politically
counter-productive. It is very hard to see how it
would create new jobs, as it applies to only those
under 26. The kind of economic havoc further strikes
will cause will certainly out do any benefits. And
anyway it has mainly to do with goverment jobs,
private sector can and does fire people too in France
I believe.

The political price is far bigger. As much I dislike
the conservative left, I have even bigger problem with
dimwit reformists, namely because I symphatize with
their aims. We've got this cheerleader crowd who
reflexilevely supports any kind of measures to lower
employment protection, whether they work or not.
Lay-off periods, severance packages and so on are
basically part of compensation given to the worker.
From an employer perspective, that you have to pay say
six months salary to someone you fire has a cost of
the propability you me indeed lay him of multiplied by
six months salary. That we should in effect, given
alreay week domestic demand, effectively lower wages
doesn't seem particullary good for anyone involved.
And increased insecurity leads to excess savings, see
China and US current account deficit, which leads to
deficent demand.

I am in favor of the Scandinavian model, that does
seem to lead to very high employment, that is you
protect workers and not jobs (this is part of the
general concensus Blanchard outlines). High
unemployment benefits coupled with both reguirement to
seek a job, and help finding it, and if needed
training. The continental model of making lay offs
hard simply gets the problem wrong, that people loose
jobs is not that bad, that they can't find another is.
But the current French proposal doesn't really address
this in a meaningful way.


Cheers,
Teemu
Helsinki, Finland

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