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Shouldn't we be asking how it is that the Germans are able to be so "lazy" and still well paid, with low unemployment?

I suspect that Merkel's to attached at the hip to her FDP buddies to recognize that the answer isn't "free markets."

It's a sad thing that the Germans aren't promoting the policies and economic arrangements, e.g. the social market economy, that have worked so well for them for the EU as a whole.

For each hour worked, the German economy got $47.56 (2005 constant PPP), while the Greeks only got $30.45, the Spanish $40.34, and in Portugal each hour worked produced $22.18.

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.  Together with an agreement to restructure debt into GDP linked bonds (only principal) this could have a a real impact.

Fix the real problems in these economies, and give them debt restructuring in return.    

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 10:31:21 AM EST
I am increasingly convinced that the low "productivity" (defined as euros of output per euro of wages or hour of work) is the result of chronic underinvestment in physical plant. German wages are higher than peripheral wages, so the high productivity is obtained with an even higher value of output.

The point is that a worker working with their bare hands is going to produce less output than a worker working with proper tools. So underinvestment in physical capital results in low labour productivity.

But all the Serious People think the problem is the workers.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Wed May 18th, 2011 at 10:41:23 AM EST
[ Parent ]
This is an important point. I'd rate it equally with the failure to provide educational opportunity and also to provide the motivation for education (which of course is a complex issue).

And tools includes IT.

I note in a recent world survey (citation needed) that 41% of English workers thought their immediate bosses to be totally incompetent. The figure was less in France - maybe 19% as I recall).

You can't be me, I'm taken

by Sven Triloqvist on Wed May 18th, 2011 at 11:00:20 AM EST
[ Parent ]
The "peripherals" are well educated. A whole generation of Greeks has studied abroad and is comfortable with new technologies. The Spanish problem is what to do with a "best-educated generation ever" which appears condemned to a combination of unemployment, menial work and mileurism with the IMF recently warning of the risk of a "lost generation".

No, the problem is the bosses.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Wed May 18th, 2011 at 11:07:11 AM EST
[ Parent ]
Exactly.

Spain has educated workers. The real problem is that Spanish businesses often seek to compete on low wages instead of good management and investment strategies.

The Basque Country has been a notable, if partial, exception.

There this is more competition based on quality and specialization, with the attendant investment in plant and vocational skills.  The uncoordinated use of universities to provide workers marketable skills ends badly.  Student leave with a general education and little of actual use in getting a job.

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 11:16:20 AM EST
[ Parent ]
Spain has educated workers. The real problem is that Spanish businesses often seek to compete on low wages instead of good management and investment strategies.

That's not the story that the Spanish serious people are telling in serious publications such as this one.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Wed May 18th, 2011 at 11:42:09 AM EST
[ Parent ]
Might that be because they are neo-liberal pieces of puta mierda?

Seriously. This is around the area of my dissertation.  Spain, varieties of capitalism, etc.

Part of my argument is that at least one part of Spain, e.g. the Basque Country, has been moving closer to the German model, and away from the more liberal UK model. And if you look at the numbers, the Basque country have fared much better in this recession than the rest of Spain.  It's one of, if not the only, part of the industrialized world in which industry as a % of GDP is on the rise.

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 12:07:51 PM EST
[ Parent ]
When are you next visiting for field work?

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Wed May 18th, 2011 at 12:15:12 PM EST
[ Parent ]
I don't really know if I'm going to be able to do field work.  No money, no time.  The university has decided that they aren't going to honor their agreement to 6 years of funding.  So I have a year, and then I have to find a job. I will have to find work then, but I'm not sure if I will have the dissertation done. I've thought about trying to find work in Spain, but academic pay there is ridiculously low.  As I'm certain you know.  I had a friend offered a full time position in Barcelona for 1500 euro a month. With rents being what they are that's an issue.

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 12:29:08 PM EST
[ Parent ]
Gotta love the apuntes liberales de un chico de derechas blog.

I need a shower.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Wed May 18th, 2011 at 12:16:32 PM EST
[ Parent ]
I was in no way impugning Spanish education - merely pointing out that in a Just Society various priorities have to be straight.

Education and tools are two priorities. The others are: health and welfare support, low salary differentials, a justice system that treats all equally, regardless of income, and free speech and the right to congregate.

These are the MINIMUM conditions. There's lots more.

You can't be me, I'm taken

by Sven Triloqvist on Wed May 18th, 2011 at 12:08:08 PM EST
[ Parent ]
Nah, profits and the real value of net worths need to be protected. That's the only priority at play here.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Wed May 18th, 2011 at 12:10:57 PM EST
[ Parent ]
Migreu:
No, the problem is the bosses.

The problem is also those who select the bosses and the financial and business paradigms under which they labor. The problem is "capital", which is, at its basis, political in nature -- the ability to order and reorder the structure of society in the interests of the ruling elite. Those interests in The WestTM, (the former First World), seem now to be wealth extraction and not wealth creation. And the even larger problem is the evil spell of wealth serving economic theory that has been cast over most of the population of The WestTM so as, as Frank S. noted, to enchant them to become the instruments of their own oppression through the Democratic selection of their leaders.  

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 12:14:54 PM EST
[ Parent ]
It is ironic to note that this ongoing process is strongly supporting the emergence of China as the dominant power in the 21 Century and certainly hastening the relative rise of the BRICs. This is almost entirely because we privilege our elites to put the profit to themselves and their international firms far above the interests of the societies and nations in which they operate.

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 12:18:18 PM EST
[ Parent ]
Can we take a moment to remind ourselves that the rise in power of states containing, what, half of humanity is a good thing?
by Colman (colman at eurotrib.com) on Wed May 18th, 2011 at 12:22:24 PM EST
[ Parent ]
It's a good thing in that the Chinese seem - so far - to be more pragmatic and less ideological about their economics.

(Ironically.)

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed May 18th, 2011 at 12:29:23 PM EST
[ Parent ]

  And the "so far" is all-important.

"In such an environment it is not surprising that the ills of technology should seem curable only through the application of more technology..." John W Aldridge
by proximity1 on Wed May 18th, 2011 at 02:36:12 PM EST
[ Parent ]
Coleman, I agree that the rise of ALL of the BRICs is a good thing, the most positive thing to come out of this debacle. But accelerating that process by looting and tanking the economies of the former First World is not a good thing -- especially for the residents of those societies, the vast majority of which did not benefit from the process.

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 05:25:43 PM EST
[ Parent ]
To ask another question - how much productivity is enough?

At what point will the serious people accept that workers in any country are pulling their weight?

It may be true that undercapitalisation leads to poor productivity, but it's also true that as long as workers elsewhere are being "more productive", comparisons can be used as a stick with which to beat those lower down the hierarchy.

I'm beginning to suspect the only way to stop this nonsense isn't direct action or protest - that's not working so well in Greece - but a persistent and lasting mass international blogger campaign of calling the serious people on their bullshit in every single online and offline forum that's available.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed May 18th, 2011 at 11:03:19 AM EST
[ Parent ]
Bingo!

I am increasingly convinced that the low "productivity" (defined as euros of output per euro of wages or hour of work) is the result of chronic underinvestment in physical plant.

Low wages are an inefficient subsidy to management because they discourage investment needed to make best use of employee's working hours. Think of a fast food restaurant.  If wages are high, things become automated.  For example instead of having a fryer manned by a low wage worker, you have machines that only need to be loaded and unloaded. Same thing with filling drinks. But these things cost money. Labor saving devices only make business sense if their purchase and upkeep costs less than paying someone to do it manually.  

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 11:10:16 AM EST
[ Parent ]
I read the following the other day from a surprising source:

Allianz CEO warns against Greece default - paper

BERLIN, May 23 (Reuters) - The chief executive of Europe's largest insurer, Allianz, warned governments not to push Athens toward insolvency by blocking further aid to Greece.

...'Greece cannot save itself alone through a debt restructuring. The country must not decouple itself from capital markets,' Diekmann said. 'We need an industrialisation plan for Greece, a type of Marshall Plan. European labour and production need to be shifted to the country.'

A translation of the more detailed original, without linking to the Axel Springer source:

Mit einer Umschuldung allein ist Griechenland nicht zu retten. Das Land darf nicht vom Kapitalmarkt abgekoppelt werden, die Wirtschaft muss in der Lage sein zu gesunden und zu wachsen. Mit Geld allein ist das griechische Problem nicht zu lösen. Wir brauchen einen Industrialisierungsplan für Griechenland, eine Art Marshall-Plan. Es müsste Arbeit und Produktion aus ganz Europa in das Land verlagert werden. Was spricht dagegen, Fabriken nach Griechenland statt nach Osteuropa oder Asien auszulagern. Das würde den Griechen enorm helfen, um wieder auf die Beine zu kommen.Greece can not be saved with a debt rescheduling only. The country should not be decoupled from the capital market, the economy must be able to recuperate and grow. With money only, the Greek problem cannot be solved. We need an industrialization plan for Greece, a kind of Marshall Plan. Labour and production from all across Europe should be relocated to the country. What argument is there against outsourcing factories to Greece rather than Eastern Europe or Asia? This would greatly help the Greeks to get back on their feet.

(The same guy is advocating retirement at 69 in Germany, so he didn't suddenly became a leftie.)

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Mon May 23rd, 2011 at 10:47:10 AM EST
[ Parent ]
Diekmann must actually believe in the EU, unlike Merkel.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Mon May 23rd, 2011 at 10:48:48 AM EST
[ Parent ]
MfM
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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