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Posts Tagged ‘Unemployment’

The Power and the Potential of India’s Economic Change

Posted by Admin on February 4, 2012

http://www.nytimes.com/2007/01/17/books/17grim.html?ex=1188014400&en=6236c430ccc01fd5&ei=5070

Published: January 17, 2007
All eyes are on China as it races to become the world’s next great power. Smart bettors would be wise to put some money on India to get there first, and Edward Luce explains why in “In Spite of the Gods: The Strange Rise of Modern India,” his highly informative, wide-ranging survey.

Mr. Luce, who reported from New Delhi for The Financial Times from 2001 to 2005, offers an Imax view of a nation so enormous that it embraces every possible contradiction. Always it seems to be teetering on the edge of either greatness or the abyss. Right now the future looks inviting.

India’s dizzying economic ascent began in 1991, when the government abruptly dismantled the “license raj,” a system of tight controls and permits in place since independence in 1947. Mr. Luce, as you might expect from a Financial Times reporter, does a superb job of explaining the new Indian economy and why its transformation qualifies as strange.

Unlike China, India has not undergone an industrial revolution. Its economy is powered not by manufacturing but by its service industries. In a vast subcontinent of poor farmers whose tiny holdings shrink by the decade, a highly competitive, if small, technology sector and a welter of service businesses have helped create a middle class, materialistic and acquisitive, along with some spectacularly rich entrepreneurs.

“If Gandhi had not been cremated,” Mr. Luce writes, “he would be turning in his grave.”

Mr. Luce, notebook in hand, matches faces to trends as he tours India from the affluent, relatively well-governed south to the poor, hopelessly mismanaged north, where the age-old problems of illiteracy, poverty, government corruption and caste divisions persist.

Much of the book consists of interviews and colorful vignettes intended to illustrate the myriad statistics that, out of context, can numb the mind. The blend of anecdote, history and economic analysis makes “In Spite of the Gods” an endlessly fascinating, highly pleasurable way to catch up on a very big story.

As Mr. Luce dryly observes, “India never lacks for scale.” This is a country where 300 million people live in absolute poverty, most of them in its 680,000 villages, but where cellphone users have jumped from 3 million in 2000 to 100 million in 2005, and the number of television channels from 1 in 1991 to more than 150 last year.

India’s economy has grown by 6 percent annually since 1991, a rate exceeded only by China’s, yet there are a mere 35 million taxpayers in a country with a population of 1.1 billion. Only 10 percent of India’s workers have jobs in the formal economy. Its excellent engineering schools turn out a million graduates each year, 10 times the number for the United States and Europe combined, yet 35 percent of the country remains illiterate.

Despite its robust democracy and honest elections, India faces the future saddled with one of the most corrupt government bureaucracies on earth. Mr. Luce encounters a woman in Sunder Nagri, a New Delhi slum, whose quest for a ration card entitling her to subsidized wheat and other staples involved bribing an official to get an application form. The form was in English, which she could not read, so she had to pay a second official to fill it out. When she turned up to claim her wheat, it was moldy and crawling with insects. The store owner had evidently sold his good government wheat on the black market.

In the northern state of Bihar, Mr. Luce writes, more than 80 percent of subsidized government food is stolen. Most ration cards are obtained through bribery, by Indians who are not poor. It’s the same story in nearly every area of an economy touched by the groping tentacles of a government that “is never absent from your life, except when you actually need it.”

As a former cabinet official tells Mr. Luce, corruption is not simply a nuisance or an added burden on the system. Rather, he says, “in many respects and in many parts of India it is the system.”

Mr. Luce, traveling the country’s rickety rail system, covers an enormous amount of ground. He inquires into the Kashmir dispute while dissecting India’s fraught relationship with Pakistan; marvels over New Delhi’s spanking-new subway system; describes the middle class rage for megaweddings; pays a visit to Bollywood and, in some of his most absorbing chapters, analyzes the changing caste system, the status of India’s Muslims and the alarming rise of Hindu nationalism.

All this and a visit to C2W.com, a Mumbai company that markets brands through the Internet, cellphones and interactive television shows. Its founder, Alok Kejriwal, is still in his 30s, and to Mr. Luce represents the new India.

“I am greedy,” he tells the author. “I have no trouble admitting to that.”

At one point, Mr. Luce ponders India’s constant state of chaos and compares it to a swarm of bees. From inside the swarm, things look random, but from the outside, the bees hold formation and move forward coherently.

Sometime in the 2020s, at current growth rates, India will overtake Japan to become the world’s third-largest economy. Greatness lies within its grasp, Mr. Luce argues, if it can figure out a way to restructure its inefficient agriculture, put millions of desperately poor people in jobs that pay more than a pittance, wake up to a potential H.I.V.-AIDS crisis and root out government corruption.

Mr. Luce takes a cautiously optimistic view. “India is not on an autopilot to greatness,” he writes. “But it would take an incompetent pilot to crash the plane.”

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Unemployment Dilemma Goes Beyond Supply and Demand

Posted by Admin on October 8, 2010

by: Paul Krugman, Krugman & Co. | Op-Ed

 

 

 

 

photo
Ronald D. Choler, 47, gets feedback at a jobs fair near Chicago. The unemployment rate in the United States is above 9 percent. (Photo: Sally Ryan for The New York Times)

The economic slump continues in the United States, as does the debate over where all the jobs have gone, and when — or if — they might return.

Mike Konczal, a fellow at the Roosevelt Institute, recently posted an excellent piece on his blog in which he examined why unemployment remains so high. He points out: “There are two theories at work. The first is a story of aggregate demand. The second theory is one of a mismatch in skills.”

What he doesn’t say explicitly — although it’s clearly implied — is that these two theories have very different policy implications. If the issue is aggregate demand (which is the total amount of goods and services that will be purchased in a given time frame) we should be doing everything we can to raise demand, including embarking on fiscal expansion and unconventional monetary policy. If it’s a mismatch in skills in the labor market, we should do nothing, because any effort to create jobs leaves part of the work of depressions undone. In this case, an economic slump actually serves a useful purpose, by ushering in economic change — which would mean that stimulating the economy, even through monetary policy, would be a mistake. So how do we decide which theory applies?

The answer is to look at the evidence — specifically, to ask whether what we see bears the signature of one story or the other. The aggregate demand story suggests that we should see depressed employment in all industries as workers of every skill type face a poor job market. The mismatch story says that we should see surpluses of labor in some places and shortages in others.

And Mr. Konczal shows that the data overwhelmingly fits the demand story, not the mismatch story. Every major industry in the United States has seen a rise in involuntary part-time work; so has every key occupation. There is no hint that labor in any sector is in short supply.

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Let’s look at another piece of evidence — something I have touched on in recent columns. A September survey from the National Federation of Independent Business shows that smaller companies are much more concerned about weak sales than taxes or regulation, and concerns about the quality of available labor have plunged.

This strongly suggests that the labor market is weak in all sectors, and businesses are having no trouble finding the workers they need. But once they find those workers, given weak demand, the businesses just don’t know what to do with them.

——————————

Backstory: The Roots of Joblessness

The National Bureau of Economic Research issued a welcome report on Sept. 20: the recession that began in December 2007 in the United States ended in June 2009.

This does not mean that economic indicators have quickly bounced back to pre-2007 levels. While the United States’s gross domestic product has grown since June 2009, the unemployment rate has remained high, and it now stands at about 9.6 percent. Economists are attempting to determine whether or not the underlying cause of the unemployment is structural in nature — affecting some parts of the economy but not others — or if it is cyclical.

The question is not merely academic, since a structural shift in the economy would mean that some jobs will never return. In this case, the composition of the entire workforce would have to change in order for the United States to remain economically vibrant and competitive.

While some economists have warned that the United States is undergoing a structural shift, skeptics point out that job losses have been spread across all sectors and regions, with all types of workers facing layoffs, no matter their age, occupation or level of education. Jobs have not returned due to the recovery’s feebleness, they say, rather than to any permanent change in the job market.

Still, there are no simple solutions. The economy would need to grow at an annual rate of 2.5 percent just to keep unemployment at its current high level, according to economists. Unfortunately, in the second quarter of this year, the annualized rate of growth was only 1.6 percent, with a similar rate projected for the third.

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Paul Krugman joined The New York Times in 1999 as a columnist on the Op-Ed page and continues as a professor of economics and international affairs at Princeton University. He was awarded the Nobel in economic science in 2008.

Mr Krugman is the author or editor of 20 books and more than 200 papers in professional journals and edited volumes, including “The Return of Depression Economics” (2008) and “The Conscience of a Liberal” (2007).

Copyright 2010 The New York Times Company.

All republished content that appears on Truthout has been obtained by permission or license.

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Spanish Economy Continues to Falter

Posted by Admin on June 20, 2010

9 Reasons Why Spain Is A Dead Economy Walking

JUNE 16, 2010

in ANALYSIS,INTERNATIONAL ECONOMY

By Michael Snyder

Barring an economic bailout of mammoth proportions, the economy of Spain is completely and totally doomed.  The socialist government of Spain is drowning in debt, unemployment is running rampant and everywhere you turn there are major economic problems.  So will Spain be the next Greece?  No.  When the economy of Spain implodes it is going to be a whole lot worse for the world economy.  The economy of Spain is more than four times the size of the economy of Greece.  Spain accounts for 11.5 percent of eurozone GDP while Greece only accounts for approximately 2.5 percent.  Spain is the 4th largest economy in the 16 nation eurozone and it is the 10th largest economy in the world.  If the economy of Spain fails it will cause a shockwave that will be felt in every corner of the globe.  In fact, there are quite a few analysts that believe if Spain defaults it would ultimately lead to the breakup of the eurozone.

So will the EU step up and bail out Spain?  Well, there are rumors that EU officials have begun work on a bailout package for Spain which is likely to run into the hundreds of billions of dollars, but on Monday the European Commission, the Spanish government and the German government all denied that the European Union was preparing a bailout for the Spanish economy.

Of course we all know that politicians don’t always tell us the truth.

So who knows what is going on over there right now.

But the reality is that the economy of Spain is not going to make it much longer without serious help, and some EU officials are already using apocalyptic language to describe what an economic collapse in Spain would mean.

For example, EU Commission President Jose Manuel Barroso recently warned that democracy could completely collapse in Greece, Spain and Portugal unless urgent action is taken to tackle the burgeoning European debt crisis.

So could democracy actually fail in those nations?

Well, considering the fact that Greece, Spain and Portugal only became democracies in the 1970s, and that all three of those countries have a history of military coups, such a scenario is not that far-fetched.

Without a doubt there would be serious public unrest in those nations if public services collapsed because their governments ran out of money.

So are there signs that the economy of Spain is about to collapse?

Well, yes, there are quite a few of them.

The following are 9 reasons why Spain is a dead economy walking….

#1) Even before this most recent crisis, unemployment in Spain was approaching Great Depression levels.  Spain now has the highest unemployment rate in the entire European Union. More than 20 percent of working age Spaniards were unemployed during the first quarter of 2010.  If people aren’t working they can’t pay taxes and they can’t provide for their families.

#2) In an effort to stimulate the economy, Spain’s socialist government has been spending unprecedented amounts of money and that skyrocketed the government budget deficit to a stunning 11.4 percent of GDP in 2009.  That is completely unsustainable by any definition.

#3) The total of all public and private debt in Spain has now reached 270 percent of GDP.

#4) The Spanish government has accumulated way more debt than it can possibly handle, and this has forced two international ratings agencies, Fitch and Standard & Poor’s, to lower Spain’s long-term sovereign credit rating.  These downgrades are making it much more expensive for Spain to finance its debt at a time when they simply can’t afford to pay more interest on their debt.

#5) There are 1.6 million unsold properties in Spain.  That is six times the level per capita in the United States.  Considering how bad the U.S. real estate market is, that statistic is incredibly alarming.

#6) The new “green economy” in Spain has been a total flop.  Socialist leaders promised that implementing hardcore restrictions on carbon emissions and forcing the nation over to a “green economy” would result in a flood of “green jobs”.  But that simply did not happen.  In fact, a leaked internal assessment produced by the government of Spain reveals that the “green economy” has been an absolute economic nightmare for that nation.  Energy prices have skyrocketed in Spain and the new “green economy” in that nation has actually lost more than two jobs for every job that it has created.  But Spain so far seems unwilling to undo all of the crazy regulations that they have implemented.

#7) Spain’s national debt is so onerous that they are now caught in a debt spiral where anything they do will harm the economy.  If they cut government expenditures in an effort to get debt under control it will devastate economic growth and crush badly needed tax revenues.  But if the Spanish government keeps borrowing money their credit rating will continue to decline and they will almost certainly default.  The truth is that the Spanish government is caught in a “no win” situation.

#8) But even now the IMF is projecting that the Spanish economy is going nowhere fast.  The International Monetary Fund says there will be no positive GDP growth in Spain until 2011, at which point it will still be below one percent.  As bleak as that forecast is, many analysts believe that it is way too optimistic considering the fact that Spain’s economy declined by about 3.6 percent in 2009 and things are rapidly getting worse.

#9) The Spanish population has gotten used to socialist handouts and they are not going to accept public sector pay cuts, budget cuts to social programs and hefty tax increases easily.  In fact, there is likely to be some very serious social unrest before all of this is said and done.  On May 21st, thousands of public sector workers took to the streets of Spain to protest the government’s austerity plan.  But that was only an appetizer.  Spain’s two main unions are calling for a major one day general strike to protest the government’s planned reforms of the country’s labor market.  The truth is that financial shock therapy does not go down very well in highly socialized nations such as Greece and Spain.  In fact, the austerity measures that Spain has been pressured to implement by the IMF have proven so unpopular that many are now projecting that Spain’s socialist government will be forced to call early elections.

So what is going to happen in Spain?

The truth is that nobody can predict for sure how things are going to play out over the coming weeks and months.

But what everyone can agree on is that the stakes are incredibly high.

Speaking at the World Economic Forum in Davos, Switzerland, world famous economist Nouriel Roubini put it this way: “If Greece goes under, that’s a problem for the eurozone. If Spain goes under, it’s a disaster.”

But right now the entire population of Spain (along with much of the rest of the world) is completely distracted by the World Cup.  As long as the Spanish team does well, that is likely to keep the Spanish population sedated.  But if the Spanish team gets knocked out of the tournament early that will put the entire Spanish population in a really, really bad mood and that could mean a really chaotic summer for the nation of Spain.

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No Labor Market Recession For America’s Affluent

Posted by Admin on February 13, 2010

Jobs

It’s truly been a tale of two unemployment crises.

Though the national unemployment rate dipped slightly in January to 9.7 percent, a new study suggests that not only have low-income workers been the hardest hit by the jobs crisis — but, shockingly, there has been “no labor market recession for America’s affluent.”

The study from Andrew Sum, Ishwar Khatiwada and Sheila Palma at Northeastern University’s Center for Labor Market Studies suggests that the unemployment problem is largely a problem for low-wage workers (hat tip to the Curious Capitalist).

From the study:

At the end of calendar year 2009, as the national economy was recovering from the recession of 2007-2009, workers in different segments of the income distribution clearly found themselves in radically different labor market conditions. A true labor market depression faced those in the bottom two deciles of the income distribution, a deep labor market recession prevailed among those in the middle of the distribution, and close to a full employment environment prevailed at the top. There was no labor market recession for America’s affluent.

At the New York Times, Bob Herbert delved into the study and noted, “The point here is that those in the lower-income groups are in a much, much deeper hole than the general commentary on the recession would lead people to believe.” Here’s more from Herbert:

The highest group, with household incomes of $150,000 or more, had an unemployment rate during that quarter of 3.2 percent. The next highest, with incomes of $100,000 to 149,999, had an unemployment rate of 4 percent.
Contrast those figures with the unemployment rate of the lowest group, which had annual household incomes of $12,499 or less. The unemployment rate of that group during the fourth quarter of last year was a staggering 30.8 percent. That’s more than five points higher than the overall jobless rate at the height of the Depression.

According to the study, approximately 50 percent of households in the bottom decile of American income distribution are underemployed; in the second lowest decile, 37 percent of households can’t find enough work. The authors write: “These extraordinarily high rates of labor underutilization among these two income groups would have to be classified as symbolic of a True Great Depression.”

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