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Thursday, 27 September 2012

CO2 #3 Jamie Galbraith on Inequality and Instability (via Naked Capitalism)

Real News Network interviewed Jamie Galbraith on his new book, Inequality and Instability, in which he argues the two phenomena are linked. This extract will give you a flavor of the discussion. Per Galbraith:
There has been a prevailing doctrine, a dogma in Europe, which holds that Europe, which has suffered from relatively high unemployment since the early 1970s compared to the United States, was suffering that unemployment because it was holding on to strongly egalitarian policies, strongly social democratic or even socialist economic institutions.
And we looked at that problem from a couple of different perspectives. One was to look at the relationship between unemployment and inequality inside the European countries. And what we found is that in fact there’s just no basis for the claim that I just described….And the fact on the ground is that countries which are more unequal in Europe have higher unemployment, much higher unemployment than the more egalitarian countries…

And then the question was: well, what about the comparison between Europe as a whole and the United States? The Europeans have been lectured for decades by their orthodox economists that what they need is a more flexible labor market like the United States and then they will have lower unemployment. And what we found, in contrast, is that this overlooks the fact that Europe has been integrating and has been coming together as a single continental economy. And when you do that, when you take what had been isolated labor market situations and bring them into direct interaction with each other, you have to measure the inequality on the new basis, on the new foundation. And nobody had done that. And what we found was that in fact when you do that, European inequality, taking into account the differences that exist between, let’s say, Germany and Poland or between Norway and Portugal, is actually larger in wages than it is in the United States. And that was a very interesting, striking finding, which then basically said that the data between the United States and Europe further support the argument, the basic argument that I would make, the basic argument that we would come to, which is that the more egalitarian system measured at the right level will tend to have lower unemployment.
Watch the video about Galbraith's new book - Inequality and Instability - here: Inequality&Instability 

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