It calls into question the facile appeals to the "Anglo-Saxon" model (whatever that means) as the only way to deal with unemployment. It might also mean that the "Dutch miracle" was not all it was cracked up to be (Jerome has argued that it also depended on a real estate bubble, now where have we heard that before).
But I don't think that necessarily invalidates anything that Blanchard says in his paper.
The shocks to the global economy of the 1970s - slow productivity growth, commodity price shocks, and I would add globalization and increased international competition to the list - were real, and they affected the whole world, not just Europe.
In the US , what happened was that the economic problems discredited Keynesian economics and much of the New Deal/Great Society industrial, labor and financial regulatory structure and social welfare programs. Especially those that helped the most marginalized people - the poor, the unemployed, etc. Something similar happened in Britain under Thatcher, but to a lesser extent than here in the US.
The result of the loss of these social supports has been more inequality and poverty in the US, but less of an unemployment problem. The economic problems are here (it's not like there aren't any "outsiders" in the US, for God's sake) they just show up differently than on the continent. There are more Walmart low-wage service jobs or black market jobs or prison cells for our socially excluded.
On the continent these things didn't happen so much, since labor is stronger and liberal ideology is much weaker there. So they have more protections for the poor and unemployed, and less poverty and inequality, but more unemployment.
Of course, the problem that remains is political.
"Unemployment" (long term unemployed listed in France or Germany) is seen as the terrible curse of sclerottic socialist states, whilst "poverty and inequality" (the US arrangement) are simply the necessity for functioning efficiently in a modern globalised economy.
Now having seen long-term unemployment close up I don't wish to sound like I am minimising it, but I am groping towards a conclusion (which I hope to diarise with reference to Jerome's diary on the Chinese labour force) that we have entered the fabled era of plenty.
Frankly, productivity has, as a whole, moved beyond consumer desire. You could quite convincingly supply the whole world (yes, including all the starving in Africa, etc.) with all the material goods they really have time to consume from pretty much the existing labour force in Asia and the US (for example).
Of course, in this case capital shortages perhaps merely reflect energy shortages.
Anyway, that is a long discussion point and there are lots of holes that need covering, so again, let's just say that given this possibility we need to realise that:
Given the possibility that our economic system massively undervalues services unless they are provided to the ultra-rich (e.g. no economic weight at all to a local community football club, whilst the Fillipino maid working at the CEO's wife is part of increased GDP) it should be realised that we may have a systematic inability to employ people. They will not be needed in manufacturing and we don't have the psychology/economics to be able to justify various non-material economic activities on a large scale.
Thus, arranging society to look after those who do not have the privilege of formal work is going to be an increasing concern.
This connects back to the question. Paying people to do nothing can be terrible for their morale and their mental health etc. Thus, it is not a good solution. However, I do have to question whether being stuck in genuine poverty, working in a semi-legal manner or going to prison are better ways of managing the problem of excess labour.
