UN Says Austerity Won't Boost Global Economy

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GoonSquad
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13 Sep 2012, 1:54 pm

Quote:

Lisa Schlein

September 12, 2012
GENEVA — A new United Nations report warns fiscal austerity measures have not - and will not - lead to global economic growth.

Heiner Flassbeck is a director at the U.N. Conference on trade and Development (UNCTAD), which issued the report. For him, the debate over austerity versus stimulus is over.

“Stop austerity,” said Flassbeck, who runs UNCTAD's Division on Globalization and Development Strategies.

Flassbeck says austerity is clearly the wrong way to go to promote growth. He notes private companies in Europe, Japan and the United States are saving their money and not spending because they fear the future economic outlook will continue to be bad.

“They have no expectation that their income will rise," he said. "So, if everybody saves, and the government says we are doing austerity so we are going to be savers also. So, what is going to happen?

"The result is very simple, the economy will collapse," Flassbeck said. "The only way out of the slump and to avoid a recession is more stimulus. If we do not get incentives for investment, if we do not get stimulus for investment and if we do not get better conditions for consumption, and if governments are going on with austerity, the situation can only deteriorate.”

But not everyone agrees with the UNCTAD conclusion. Terry Miller, director of the Center for International Trade and Economics at the Heritage Foundation, a conservative research group in Washington, says the U.N. agency is considering a "false question" about austerity or stimulus.

Miller says the austerity measures adopted by some governments, particularly in Europe, are designed to reduce sovereign debt, not inhibit economic growth. He says that reduction of such debt in turn cuts the borrowing costs for governments to finance their operations, as well as for private interests in regional economies to grow their businesses.

He says that "sensible policies" of government austerity "let the private sector get back to the job of investment and job creation." He said countries "that have spent more have had lower rates of growth."

The UNCTAD report, however, warns that growth is slowing in all regions of the world. Global growth fell from more than four percent in 2010 to 2.7 percent last year. And UNCTAD expects a further decline to below 2.5 percent in 2012.

The report says economic expansion in developing and transition economies is expected to grow by five and four percent respectively in 2012. Although this is stronger than in the advanced economies, it notes those growth rates are also slower than previous years.

UNCTAD economists explain developing countries are doing better because they are less dependent on the large economies than they used to be, and they have more resilient domestic demand.

The report criticizes governments for following wage-compression policies. Flassbeck says the data show lowering people's wages has done nothing to bring down the rates of unemployment. He says governments must reverse these policies.

“Only the government can overcome this situation where the market gives the wrong signal. Markets give the wrong signal that wages should fall further," he said. "But, if wages should fall further, you can be sure that consumption will be falling. When consumption falls, investment falls and then growth falls.”

UNCTAD economists predict there will be no significant recovery from the recession until low-and middle-income groups earn enough money to spend on consumption. They argue that reducing the widening gap in wealth and income is not only fair, it also has social benefits and will lead to higher economic growth.

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It's called Fordism people.

Learn it. Live it. Love it.

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John_Browning
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13 Sep 2012, 5:17 pm

Governments can't keep on spending forever. What everyone needs to do is relax environmental laws and cut red tape that stunts business growth. Governments created this mess, so who would trust governments to provide the answer?

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xenon13
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13 Sep 2012, 5:41 pm

Governments can keep spending forever and poisoning the environment is not the answer.

DC
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13 Sep 2012, 5:46 pm

There is a very simple way to stimulate the economy without increasing the deficit. A wonderful new invention, it turns out that government spending doesn't have to borrowed all the time apparently there is something called 'tax' which solves all the problems.

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13 Sep 2012, 6:06 pm

John_Browning wrote:

That's the kool-aid they want you to believe.

GoonSquad
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13 Sep 2012, 6:30 pm

John_Browning wrote:

That might be what happened on Conservatron.... but here on Earth, greedy, stupid bankers crashed the economy.

Government did fail by not regulating them.... not by stunting anything with environmental laws or red tape.

To grow the economy, government needs to TAX the WEALTH SINKS--i.e. all the greedy, scared rich folks/companies sitting on their money and get it back in the hands of spenders.

That will fix the economy without going back to the days when American rivers caught on fire. :lol:

...or the days before America had a middle class. :roll:

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Tensu
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13 Sep 2012, 8:11 pm

John_Browning wrote:

First off, I do not understand how after seeing the BP disaster anyone can claim that the idea that relaxing environmental protection is good for the economy is in any way grounded in reality.

What about all the jobs that depend on a healthy environment? people like my dad who work for stores that sell outdoor sporting goods, like hunting and fishing equipment, the people who work in the factories that make said goods, hotels near beaches, lakes, rivers, forests, etc. that rely on clean water and/or acid rain not killing all the trees, the restaurants, stores, and recreation centers that profit from tourists visiting these areas, the airports and travel agencies that get people to these areas, the restaurants and gas stations people visit traveling to these areas, the dive shops and tour guides that profit from outdoor tourism, the fishermen that need not-poison bodies of water to catch fish and the restaurants and grocers that sell said fish. Why does nobody seem to give a **** about any of these people's jobs?

Republicans only oppose environmental policy because democrats support it, and probably because they get campaign funding from what corporations don't need environmental protection as well. They don't care about fiscal responsibility or conservatism. Having convictions takes thought. They just disagree with the democrats. If it weren't for the republicans pisspoor environmental stances I probably would have voted for McCain last election. I actually tend to side with them more than the democrats. But until they're willing to actually think about what is in truth fiscally responsible and not just assume anything the dems want will destroy the economy, I can't vote republican in good conscience.

It's not environmental protection and it's not unions (although our policy on unions may need to be reformed to keep them from using corrupt practices) It's our refusal to protect American jobs with tariffs. I'm not sure if that's because the WTO is pretending to have some sort of right to infringe on our national sovereignty or if congress is too busy arguing about wars and healthcare plans and other things we can't afford to actually do something that might actually improve the economy.

That said, I was under the impression that while greedy bankers crashed the economy, the government set up the banks they were running, and made them obey a set of rules that meant the only way they could make money was by doing things that would ultimately crash the economy.

marshall
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13 Sep 2012, 8:20 pm

GoonSquad wrote:

John_Browning wrote:

...or the days before America had a middle class. :roll:

Government created this mess by forcing banks to give loans to black people!

ChekaMan
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13 Sep 2012, 8:53 pm

You're partly right Marshall-but the goverment didn't force the banks to then lend to anyone including those who can't afford it. And if the ecomony is numb what it needs is a banging and massaging to get the feeling back.

GoonSquad
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14 Sep 2012, 11:31 pm

Higher Wages to Rebuild American Dream <--click

Quote:

Are you better off today than four years ago?

That's a question frequently posed on the campaign trail these days as the country heads towards its next presidential election.

But perhaps there is a much better question to be asking yourselves: Are you better off than you were 16 years ago?

[Related: Paul Ryan a Bold VP Choice but Romney/Ryan Plan Will Hammer the Middle Class]

That's when the median annual household income of Americans peaked at $54,932. By 2011, it had fallen 9% from its height, according to the latest data from the Census Bureau released Wednesday.

"The middle class has stagnated," says Hedrick Smith, former Pulitzer Prize-winning New York Times reporter, now author of "Who Stole the American Dream?" "The average pay of a male worker in America was a little lower in 2011 than in 1978, that's three decades of going nowhere."

[Related: The Betrayal of the American Dream]

This decline of the standard of living for the middle class is hurting the broader economy, says Smith. "We're looking at a slow recovery from our economic collapse of 2008, and one of the main reasons is there's no consumer demand driving growth, causing companies to hire and to expand…people are not being paid enough and haven't been paid well enough for the last three decades." As a result, companies "sitting on a couple of trillion dollars….(are) not investing it," he tells The Daily Ticker's Henry Blodget in the accompanying interview.

[Related: Dear Walmart, McDonald's, Starbucks: How Do You Feel About Paying Your Employees So Little That Most Of Them Are Poor?]

What companies should be doing, says Smith, is paying their workers more. They shouldn't impose a wage freeze like Caterpillar did at a hydraulic parts factory earlier this year despite record profits, says Smith. Unionized workers at the plant then went on strike, but after 3-1/2 months settled for a contract that included a 6-year wage freeze for veteran workers and reduced health care and pension benefits.

"The economy would grow faster if workers were paid more," he says.

[Related: Apple Store Workers Get 25% Raise: Company 'Finally Recognizing Value We Provide,' Employee Says]

It might also grow faster if more of the U.S. economy was based on manufacturing rather than services. Smith cites Germany where 21% of its labor force works in manufacturing compared to 9% in the U.S. and where workers pay over the past 25 years rose five times as fast as in the U.S.

Germany also had a $2 trillion trade surplus while the U.S. had a $6 trillion trade deficit.

"Manufacturing is what powers the economy and provides good jobs," says Smith, adding that lowering taxes is not the solution. Tax collection is at its lowest level in 60 years, he notes.

However, Smith does support a change to the corporate tax structure so that companies don't pay a lower tax rate on foreign operations than on U.S. operations as they currently do.

"The tax system needs to change to bring jobs back to the U.S.," he says.

These are not new ideas. Henry Ford BUILT his own market using these principles. If today's companies cannot see the necessity in investing back into their own markets to sustain growth and prosperity it is the DUTY of government to step in and do it for them.

Bottom feeding, least common denominator economics will never get us back on track.

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Inuyasha
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14 Sep 2012, 11:43 pm

I don't see why anyone should care what the UN says about economics, considering they are the same organization involved in the Oil for Food scandal and have the worst violators of human rights sitting on their human rights commission.

ruveyn
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15 Sep 2012, 9:53 am

Inuyasha wrote:

Besides which, those bastards owe New York City a billion dollars in unpaid fines for illegal parking.

ruveyn

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15 Sep 2012, 11:12 am

There is no way we can impoverish ourselves to prosperity.

In order to get, one must give. In order to earn, one must spend.

ruveyn

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15 Sep 2012, 1:49 pm

ruveyn wrote:

There is no way we can impoverish ourselves to prosperity.

In order to get, one must give. In order to earn, one must spend.

ruveyn

My God! You sound like you're playing for my team, now!

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ruveyn
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15 Sep 2012, 5:48 pm

Kraichgauer wrote:

ruveyn wrote:

There is no way we can impoverish ourselves to prosperity.

In order to get, one must give. In order to earn, one must spend.

ruveyn

My God! You sound like you're playing for my team, now!

-Bill, otherwise known as Kraichgauer

I am stating the obvious.

ruveyn

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15 Sep 2012, 8:34 pm

Did someone cut back their UN donation?

Since politics has replaced economics, both sides are wrong.

Spending is not a good measure, when most is on defense, which is not working, when it takes a million dollar Hellfire to blow up a mud hut. On top of that is the backup that costs millions more to target that drone.

The other party, domestic spending, has reduced teachers to having 16 students, and even hiring twice as many Union teachers that vote, will do nothing to improve our world standing in education.

Germany is mentioned as a working economy, and it took a decade of austerity to keep their system solvent. They do pay to have young workers educated to the needs of industry, which is judged by industry, and if the students are not educated for the jobs, the teachers are fired.

German companies get a tax friendly deal if they do not send the work out to Eastern Europe. American companies get a tax deal for exporting jobs.

I spend when I can get something better, mostly buy better tools, which recover the cost. I do not spend when I am out of money, debt is not good, and unlike Government, I cannot demand a share of my neighbors income.

Government is the problem, taking cash donations to reduce taxes for some, and running up debt to get votes from others.

We have a problem, even if government was limited to spending 90% of income, it would take about a hundred years to pay off the debt. At 50%, about twenty years.

Nationalizing all Oil and Gas, about five years. Norway did, they have savings of $200,000 per citizen to provide for health, education, and a booming economy.

If you think you can tax corporations, you do not understand business, and those Capital Gains are not being taxed a second time, they are getting by for less than half one time. Capital needs to pay self employment tax just like everyone else. Our big issue is Social Security, and if all income pays the same, Social Security will soon own the National Debt.

Then the National Debt can be paid off long term by funding current Social Security payments.

We have the income, we just have an Organized Crime Family called Congress running things. They have short term goals, a Nation must have long term goals, pick one.

The UN is an intergovernmental welfare program that funds useless drones from all over the world.

The real problem is computers and robots have made humans useless, anything can be over produced, and will have to be priced below costs.

Humans cannot survive on what they are worth. A child born today will cost more than they could ever earn. We need to pay people to never leave school, student till they die, and they might produce something. As more jobs are taken by the machine, knowledge and creativity are the last uses for people.

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