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If the EU were a sensible body interested in creating convergence towards a higher standard of living, the concern would be about how to increase productivity.

Talos

it's difficult I note to be productive when there are no jobs out there

But every time you lay off a worker or cut his wages you increase "productivity". Could part of the problem be the way in which we understand, conceptualize and use the term "productivity".?

Wiki:

For example, labor productivity is typically measured as a ratio of output per labor-hour, an input.

So, according to this definition, widely used by "mainstream economics" by saving GM and Chrysler a large increase in productivity was foregone. This is a fallacy of composition error. It fails to take into account the knock on effects of losing the US parts manufactures, which could have seriously damaged Ford, the one auto manufacturer that did not require a bail out. Optimize productivity and you end up with no industry in high wage countries.

The Sacred Chalice of Productivity needs to be prominently labeled as "POISON, USE WITH CAUTION!".

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed May 18th, 2011 at 11:59:06 AM EST
[ Parent ]
To be clear.

The measure of productivity I'm using is not related to distribution.

It's simply GDP (PPP) divided by the number of hours worked in the country. Wages are presumably somewhat substantially lower than this figure.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Wed May 18th, 2011 at 12:31:33 PM EST
[ Parent ]
As I presumed, and I am certainly not faulting your analysis. You are using the standard tools. My criticism is of the particular tool of productivity, which must be used with care. As used by international financial capitalism it will reliably poison your economy when policy decisions privilege productivity over other vital factors for an economy and society.

By breaking down low profitability manufacturing companies and shipping the tools and expertise to China we certainly improved the productivity of the process from the perspective of those who undertook it. But from many other perspectives it has been a disaster. That is why I would like to see the whole concept of "productivity", like its companion "reform" stigmatized in the public mind. The way they have been and are being used is destructive to almost all but a tiny few.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed May 18th, 2011 at 05:36:41 PM EST
[ Parent ]
Nor, to my knowledge, does the use of productivity in the standard sense, by itself, take into consideration the effect on the size of the over all economy and provide any rationale for assessing trade-offs. I would be pleased to find that there is a flourishing literature on the effects of this trade-off.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed May 18th, 2011 at 05:47:41 PM EST
[ Parent ]

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