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Good interview on The Real News Network...
http://therealnews.com/t2/index.php?...4&jumival=8857
JAY: I did a little experiment at the Toronto G-20. I went through the final declaration and I tried to find the word wages. I couldn't find the word once in the whole declaration, which was supposed to be this vision for the decade on how to get out of the crisis. This isn't even on the agenda of the policymakers, that wages should go up, except maybe they hint at it occasionally that the Chinese should have wages go up, but certainly not in their own countries. What are you finding when you talk to policymakers about this?
FLASSBECK: Well, it's difficult to talk to policymakers, no doubt because—and we have just experienced here in Geneva—it's very difficult to make them understand what's going on, because they're all grown up with the idea the labor market is a market, is a normal market. But if you explain to them that it's not a normal market, then they are shocked. And that is what all good economists, as I said, tell them all the time, that the labor market is a market, and if unemployment goes up, there has to be pressure on wages. It's clearly wrong this time, but it's very difficult to emancipate from this old idea that's been engraved, so to say, in the brains of economists for 100 years that the labor market is instable, it's terribly instable. And this is what we have to understand. The government has to do something about it.
But if the government blocks its own instruments, fiscal policy and monetary policy, then there's only direct intervention into the labor markets, call it incomes policy or whatever, how the government can stabilize the economy. Otherwise, it would go into deeper recession, I would say, and stagnation, as I said.
http://therealnews.com/t2/index.php?...4&jumival=8857
JAY: I did a little experiment at the Toronto G-20. I went through the final declaration and I tried to find the word wages. I couldn't find the word once in the whole declaration, which was supposed to be this vision for the decade on how to get out of the crisis. This isn't even on the agenda of the policymakers, that wages should go up, except maybe they hint at it occasionally that the Chinese should have wages go up, but certainly not in their own countries. What are you finding when you talk to policymakers about this?
FLASSBECK: Well, it's difficult to talk to policymakers, no doubt because—and we have just experienced here in Geneva—it's very difficult to make them understand what's going on, because they're all grown up with the idea the labor market is a market, is a normal market. But if you explain to them that it's not a normal market, then they are shocked. And that is what all good economists, as I said, tell them all the time, that the labor market is a market, and if unemployment goes up, there has to be pressure on wages. It's clearly wrong this time, but it's very difficult to emancipate from this old idea that's been engraved, so to say, in the brains of economists for 100 years that the labor market is instable, it's terribly instable. And this is what we have to understand. The government has to do something about it.
But if the government blocks its own instruments, fiscal policy and monetary policy, then there's only direct intervention into the labor markets, call it incomes policy or whatever, how the government can stabilize the economy. Otherwise, it would go into deeper recession, I would say, and stagnation, as I said.