Posts Tagged ‘recession’

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Greece is a perfect example of how to turn a bad economic situation into something even worse. As Reuters reports,

Rescue funds from the European Union and International Monetary Fund saved Greece from bankruptcy, but the austerity and reform policies the lenders attached as conditions have helped to turn recession into a depression.

As a result, the poverty rate in Greece almost doubled (between 2008 and 2015), rising from 11.2 percent to 22.2 percent.

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And average (per adult) GDP has fallen below what it was three decades ago.

Meanwhile, IMF and European institutions are demanding further austerity measures (equivalent to 2 percent of gross domestic product) before agreeing on a new deal to aid Greece.

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If you look very closely, you’ll see an ever-so-slight turnaround in the capital and labor shares in the past year.

The profit share of national income has fallen (from 15.4 percent in the second quarter to 13.7 percent in the last quarter of 2015) while the wage share has risen (from 49.6 percent in 2014 to 50.4 percent in 2015).

So, Neil Irwin is correct:

In the last two or three years, as the economy has firmed up, workers have regained some of that bargaining power they lost in the recession. But they have not, not at this point at least, gained the power they lost over the last three decades.

Indeed, the profit share remains much higher than it was 30 years ago (6.8 percent in the third quarter of 1986) and the wage share much lower (it was 54.6 percent in 1986).

Remember, then, before releasing those balloons, the history of capitalist instability. It tells us that an economic downturn will—once again, with a regularity that continues to escape the notice or understanding of mainstream economists and politicians—reverse those temporary capital losses and labor gains.

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Cartoon of the day

Posted: 24 February 2016 in Uncategorized
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