I read an interesting idea recently (here?), that state aid should be issued as vouchers that can only be spent in specific ways. I'm not competent to evaluate the idea economically or the full ramifications of it, but it appears to offer a method of directing and monitoring how capital injections are used.

You can't be me, I'm taken

Have all economists really been looking at just the supply side of the economy for the last however many decades, and have they really been saying that everything is fine and dandy as long as costs are kept down sufficiently? Havent they been shouting that sooner or later that If you drive costs down by exporting jobs and cutting wages, then you're going to end up with noone left to buy anything?

Any idiot can face a crisis - it's day to day living that wears you out.

European Tribune - Community, Politics & Progress.

as it means Americans with less junk and Germans with more (presumably making both unhappy)

So zee solution is vor zee Chermans to give zee americans all zer junk and efferbody will be happy, No? Jah - a ferry gut idea...

notes from no w here

Debt created the appearance of prosperity. We should not try to restore that fake, unsustainable "growth" which brought us the current crisis (as had been announced for a long time by a few lonely voices); we need to focus on re-creating real prosperity, and that means the policies that were proven to work in the second half of the 20th centuries: strong regulation of banks and labor markets, with actual enforcement, wages following productivity growth, and public investment in education, healthcare and social safety nets. Add to this today a drive to invest in a new energy infrastructure, and a construction sector bailout focused on refurbishing existing buildings to improve energy efficiency, and you get a comprehensive package that will actually work.

Say it again now, inequality is inefficient.

For the better part of the last 40 years, we've been feed this line that wages must be suppressed or the economy will shrink, but it was all bullshit. The deadweight loss models used by the Right to brand living wages as anti-social are nothing less than a projection of the anti-social tendencies of neo-liberals onto their real, and imagined, enemies.

It's the Anglo Disease at work.  

BTW, Jerome, did you by chance get my email?

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

I agree with you: the world economy should go into debt rehab and set-up preventive mechanisms/regulations to avoid to return to debt binge, especially in  the countries with huge deficits and we should not drag countries with surpluses into the debt trap. And, yes, raising the incomes and closing the income gap should be a key feature of any policy, together with implementing a strong redistributive tax policy. Some remarks:

• What should be put under control is the overall debt (public+private). However, in the short term, as Michel Aglietta advocated it in a recent conference, public debt should replace private debt.,

• Not all countries have the same saving rates, deficits and debt, so it can't be one size fits all,

• Government spending on productive, sustainable material (energy-conservation, renewable energy, public transports, R&D...) and social infrastructures (education, healthcare, fundamental research, culture, community-building...) is the right policy,

• However, government spending (as well as boosting demand) will not automatically translate into wage increase: in a situation where unemployment is rising and insecurity is growing, the bargaining power of employees is not strong enough, especially in countries where unionisation is low. That means governments should use the power given to them by their position as the biggest investors to set-up tripartite collective agreements (government, employers, unions) or "economic re-development pacts" including wage increases. Although it might happen in some countries where social-democrats are in charge or where the industrial relations are strong, I don't see it happen easily in most of them, particularly in the US and the UK (and France). In my opinion, for some countries, it will only become possible if widespread social unrest (à la 68) forces the government to set-up such pacts.

Furthermore, if we want the policies/solutions implemented to be really sustainable, the collective agreements should involve first and foremost the unions and employers, but also other stakeholders like consumers and environment-oriented NGOs...

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet

I agree. Redistribution of the wealth is needed.Simple as that. It's not socialism or anything...it's only that states should make some fair-play rules in to this game called "economy".There is nothing even similar to freedom in a fact that 1-2% of people own 90%(or so) of wealth.Actually it's against nature...

Science without religion is lame, religion without science is blind...Albert Einstein

I take exception to the idea that the developed nations need more "growth". If we look at the average standard of living, people have as much (or more) than the need to live a decent life.

We have inequality, so that there are many who don't have enough, but this is a distribution issue not a lack of wealth. The panic in these countries is that enough demand can't be created to absorb all the output from factories which can make more than is needed.

The Consumer Electronics Show starts today in Las Vegas and the discussion is all about what gimmick can be found to revive the electronics industry. Obviously people have been getting along without it, whatever it is.

If we could achieve a balanced society then we wouldn't need to generate all that "growth" and the resources saved could be used to improve the lives of the bottom billion.

As long as there is no model other than capitalism there will be no solutions which don't involve increased resource consumption and cycles of boom and bust.

We should aspire to continual improvements in quality, not quantity.

Policies not Politics
---- Daily Landscape

Inequality is inefficient.  Why?

Because the suppression of wages for labor is a rent seeking behavior.  In English, this means that in order for the part of the pie going to employers to increase in size, the size of the pie must shrink.

It's the mirror image of what we've been told is happening.

Now, typically, the story that's been told over the past 40 years is that demanding a living wage is anti-social, because increasing the slice of the pie going to workers means shrinking the pie.  There's even a neat little graphic that can be used to demonstrate the concept.

In the case of the labor market, workers are producers, while employers are consumers. I've mark the producer surplus in blue, and the consumer surplus in red.  So think of the blue as the wages paid to workers, and the red as the profits made by companies.

Now if the market is providing the maximum benefit to society, it should look like this.

But, the story that we've been told is that because wages are inflated by minimum wage laws and unions demanding wage hikes, what we get is something like this.

So what you see is that the red area shrinks.  The purple area represents money that previously went as profits to companies, but is now paid out in increased wages.  But the real trick is in the pink and light blue areas.  Because workers and unions have engaged in rent seeking they have denied the economic benefit of these areas to society, and have reduced the total amount of labor consumed.  So basically, increased wages have increased unemployment.

But, the truth of the Anglo disease is the mirror opposite of this.  Part of the money made by the financial sector is just total bullshit. But, another part of the disease is rent seeking behavior..... by capital.  By employers supressing wages. So we get this.

So again we see that employment is reduced.  In this case because the reduced wages fail to draw people into the labor market, and the same social loss occurs.

The big difference is that in this case the purple area is consumer surplus.  This is money taken from workers wages and shifted to employers profits.

So yes, the economy is suffering from rent seeking behavior, but the businessmen pointing to labor are projecting their own deficiencies on people who actually work for a living.

The bottom line is that a redistribution of wealth has shrunk the economy.  But it's been a redistribution of wealth from workers to employers. From labor to capital.

Inequality is inefficient.

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

Joseph Stiglitz: The US Federal Reserve is drink-driving on America's road to recovery | Comment is free | guardian.co.uk

In some ways, the Fed resembles a drunk driver who, suddenly realising that he is heading off the road starts careening from side to side. The response to the lack of liquidity is ever more liquidity. When the economy starts recovering, and banks start lending, will they be able to drain the liquidity smoothly out of the system? Will America face a bout of inflation? Or, more likely, in another moment of excess, will the Fed over-react, nipping the recovery in the bud? Given the unsteady hand exhibited so far, we cannot have much confidence in what awaits us.

...

Moreover, growing inequality in most countries of the world has meant that money has gone from those who would spend it to those who are so well off that, try as they might, they can't spend it all.

...

America's government will, for a time, partly make up for the increasing savings of US consumers. But if America's consumers go from their near-zero savings to a modest 4% or 5% of GDP, then the depressing effect on demand (in addition to that resulting from declines in investment, exports and state and local government expenditures) will not be fully offset by even the largest government expenditure programmes. In two years, governments, mindful of the huge increases in the debt burden resulting from the mega-bailouts and the mind-boggling deficits, will be under pressure to run primary surpluses (where government spending net of interest payments is less than revenues).

...

First, we need to reverse the worrying trends of growing inequality. More progressive income taxation will also help stabilise the economy, through what economists call "automatic stabilisers". It would also help if the advanced developed countries fulfilled their commitments to helping the world's poorest by increasing their foreign-aid budgets to 0.7% of GDP.

Second, the world needs enormous investments if it is to respond to the challenges of global warming. Transportation systems and living patterns must be changed dramatically.

Third, a global reserve system is needed. It makes little sense for the world's poorest countries to lend money to the richest at low interest rates. The system is unstable. The dollar reserve system is fraying, but is likely to be replaced with a dollar/euro or dollar/euro/yen system that is even more unstable. Annual emissions of a global reserve currency (what Keynes called Bancor, the IMF calls SDRs) could help fuel global aggregate demand and be used to promote development and address the problems of global warming.

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet

The problem IMO is not only the low incomes. It is also the high costs of necessary goods. Here i mean mainly the housing costs. People pay a lot of money for the land where they have place to live. Also there are a lot of costs for raw-materials and oligopolistic construction business. Land costs in farming, roads etc. When economy grows, grows also land value and raw-material costs, which eat the results of capital and labour use. Zero amount of labour and capital is tied to land and raw-materials. They are not products of the markets. Land is not capital nor it is product of labour. When money goes to land and other natural resources it doesn't create any demand, labour or capital. Before this issue is addressed, i believe nothing will change, because wealth does not trickle down and improve household self-sufficiency. Wealth just moves from one land owner to another.