April 10, 2013

It's Official: Austerity Economics Doesn't Work : The New Yorker With all the theatrics going on in Washington, you might well have missed the most important political and economic news of the week: an official confirmation from the United Kingdom that austerity policies don’t work. In making his annual Autumn Statement to the House of Commons on Wednesday, George Osborne, the Chancellor of the Exchequer, was forced to admit that his government has failed to meet a series of targets it set for itself back in June of 2010, when it slashed the budgets of various government departments by up to thirty per cent. Back then, Osborne said that his austerity policies would cut his country’s budget deficit to zero within four years, enable Britain to begin relieving itself of its public debt, and generate healthy economic growth. None of these things have happened. Britain’s deficit remains stubbornly high, its people have been suffering through a double-dip recession, and many observers now expect the country to lose its “AAA” credit rating. One of the frustrations of economics is that it is hard to carry out scientific experiments and prove things beyond reasonable doubt. But not in this case. Thanks to Osborne’s stubborn refusal to change course—“Turning back would be a disaster,” he told Parliament—what has been happening in Britain amounts to a “natural experiment” to test the efficacy of austerity economics. For the sixty-odd million inhabitants of the U.K., living through it hasn’t been a pleasant experience—no university institutional-review board would have allowed this kind of brutal human experimentation. But...
The 37 Percent Mystery: Where Did All the Workers Go? - Derek Thompson - The Atlantic But the recession's effect is more complicated than you might think. According to a new paper by Kerwin Kofi Charles, Erik Hurst, and Matthew J. Notowidigdo, what we're really seeing is the decline of manufacturing, which is only being felt now because the band-aid provided by a temporary construction bubble was ripped clean off the labor market. Nearly 40 percent of the increase in non-working Americans between 2000 and 2011 "can be attributed to manufacturing decline," they wrote. The housing boom shifted some of these jobs to construction. But after the bust, the crutch was gone -- and so were the workers. *** It's about time for an upshot. So, where did all the workers go? Four answers, in order of importance. (1) They retired. The country is getting older, and older countries have a smaller share of workers. (2) They went to school. More young people are going to college, and young people in college are less likely to look for work. (3) They just stayed home -- they stopped looking for work and decided instead to raise their kids; they sat on the couch waiting for the market to thaw; they filed for disability insurance. The recession discouraged them from seeking a job. (4) And the factories closed. Behind all of these stories lurks the long decline of manufacturing, which has very little to do with the Great Recession, or college attendance, or demographics, but nonetheless explains a significant portion of falling participation rates among prime-age workers. So...

Jodi Dean

Jodi Dean is a political theorist.

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